Sovran Self Storage Reports Second Quarter Results; Same Store Revenues Increase 8.9%; 2013 Guidance

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Sovran Self Storage Reports Second Quarter Results; Same Store Revenues Increase 8.9%; 2013 Guidance Raised

BUFFALO, N.Y.--(BUSINESS WIRE)-- Sovran Self Storage, Inc. (NYS: SSS) , a self storage real estate investment trust (REIT), reported operating results for the quarter ended June 30, 2013.

Uncle Bob's Self Storage recently expanded its facility at 2802 Transit Rd., Buffalo, NY 14224 (Phot ...

Uncle Bob's Self Storage recently expanded its facility at 2802 Transit Rd., Buffalo, NY 14224 (Photo: Business Wire)

Net income available to common shareholders for the second quarter of 2013 was $17.9 million or $0.57 per fully diluted share. For the same period in 2012, net income available to common shareholders was $11.7 million, or $0.40 per fully diluted common share.

Funds from operations (FFO) for the quarter were $0.94 per fully diluted common share compared to $0.77 for the same period last year. The Company did not incur acquisition costs in the second quarter of 2013; in the second quarter of 2012, it incurred net acquisition costs of $1.3 million in connection with property acquisitions. Absent these acquisition charges, FFO per share was $0.94 and $0.82 for the second quarter of 2013 and 2012, respectively.

Continuing occupancy growth and higher net rental rates contributed to the increase in FFO for the second quarter of 2013.

David Rogers, the Company's CEO, commented, "We had another outstanding quarter. Same store occupancy grew to 91% at the end of June, and we've been able to gain pricing power by increasing rates and reducing discounts. The summer season has been a good one and we're well positioned to push strong revenue growth into next year."


Revenues for the 362 stores wholly owned by the Company for the entire quarter of each year increased 8.9% from those of the second quarter of 2012, the result of a 380 basis point increase in average occupancy to 89.7%, increased rental rates and strong growth in insurance commissions.

Same store operating expenses increased 2.4% for the second quarter of 2013 compared to the prior year period, mainly as a result of increased insurance costs and property taxes.

Consequently, same store net operating income increased 12.2% this period over the second quarter of 2012.

Total revenues increased 18.4% over last year's second quarter, while operating costs increased 12.7%, resulting in an NOI (3) increase of 21.1%. Overall occupancy averaged 88.3% for the period and rental rates improved 5.6% to an average of $10.89 per sq. ft.

General and administrative expenses grew by approximately $1.0 million over the same period in 2012, primarily due to increased salaries and internet advertising associated with the net 25 stores added to the Company's platform since April 1 of last year.

During the second quarter of 2013, the Company experienced positive same store revenue growth in all but one of the states in which it operates. The stores with the strongest revenue impact include those in Texas, Florida, New York and North Carolina.


The company currently has three properties under contract for a total of $27.9 million. The facilities are all located in markets where the Company already has a presence; two in Long Island, New York, and one in Colorado. Providing the properties pass due diligence, the Company expects to purchase the assets late in the third quarter.

The Company did not acquire any additional stores in the second quarter.


Subsequent to quarter end, the Company announced a 10.4% increase in its quarterly dividend from $0.48 to $0.53 per share or $1.92 to $2.12 annualized. The increase was effective with the quarterly dividend paid on July 26, 2013 and was the second such raise in 2013.


Illustrated below are key financial ratios at June 30, 2013:


Debt to Enterprise Value (at $64.79/share)




Debt to Book Cost of Storage Facilities



Debt to EBITDA Ratio



Debt Service Coverage



At June 30, 2013, the Company had approximately $9.6 million of cash on hand, and $111 million available on its line of credit (without considering the additional $75 million available under the expansion feature).

In April, the Company issued 23,755 shares at an average price of $63.61 through its new Dividend Reinvestment Plan. The Company did not issue any shares of its common stock via its previously announced ATM program during the quarter.

As previously announced, the Company refinanced its bank term loan and line of credit totaling $500 million. As a result, the Company expects full year interest expense savings of approximately $4.1 million. A summary is as follows:


Previous Credit Facility


New Credit Facility

Amount       Amount Maturity       LIBOR Maturity       LIBOR







Line of credit $175 million $64 million August 2016 2.00%(2) June 2018 1.50%(2)
Term note $225 million $225 million August 2018 2.00% June 2020 1.65%

Term note (delayed draw)

$100 million

N/A (1)

N/A (1)


June 2020


(1)   $100 million new delayed draw term note will be drawn in September 2013 to fund term note maturities. The rate on the delayed draw term note has been fixed at 3.02% through September 4, 2018.
(2) The previous and new lines of credit also require a 0.20% facility fee.


Management is encouraged by strong customer traffic and increasing rental rates in most markets. The following assumptions covering operations have been utilized in formulating updated guidance for the third quarter and full year 2013:

              Same Store

Projected Increases Over 2012

3Q 2013


Full Year 2013

Revenue 7.0 - 8.0% 7.0 - 8.0%
Operating Cost (excluding property taxes) 3.5 - 4.5% 3.0 - 4.0%
Property Taxes

3.5 - 4.0%

4.5 - 5.0%

Total Operating Expenses 3.5 - 4.5% 3.75 - 4.5%
Net Operating Income

8.5 - 9.5%

8.5 - 9.5%

The Company intends to spend up to $25 million on its expansion and enhancement program. It has also budgeted $15 million to provide for recurring capitalized expenditures including roofing, paving, and office renovations.

Prospective purchases of properties made for the remainder of 2013 are not expected to significantly impact guidance inasmuch as the Company expects to invest in both low occupancy turn-around opportunities as well as stabilized properties. Accordingly, neither the net operating income nor the acquisition costs relating to any acquisitions that may be made in the last two quarters of 2013 are included in guidance.

General and administrative expenses are expected to increase to approximately $36 million due to the need for additional personnel required for recent acquisitions, income taxes on its taxable REIT subsidiaries, and the Company's plans to continue expanding its internet marketing presence and revenue management program.

At June 30, 2013, all but $64 million of the Company's debt is either fixed rate or covered by rate swap contracts that essentially fix the rate. Subsequent borrowings that may occur will be pursuant to the Company's line of Credit agreement at a floating rate of LIBOR plus 1.5%.

At June 30, 2013, the Company had 31.4 million shares of common stock outstanding and 0.2 million Operating Partnership Units outstanding.

As a result of the above assumptions, management expects funds from operations for the full year 2013 to be approximately $3.70 to $3.74 per share, and between $0.96 and $0.98 per share for the third quarter of 2013.


When used within this news release, the words "intends," "believes," "expects," "anticipates," and similar expressions are intended to identify "forward looking statements" within the meaning of that term in Section 27A of the Securities Act of 1933, and in Section 21E of the Securities Exchange Act of 1934. Such forward-looking statements involve known and unknown risks, uncertainties and other factors, which may cause the actual results, performance or achievements of the Company to be materially different from those expressed or implied by such forward looking statements. Such factors include, but are not limited to, the effect of competition from new self storage facilities, which could cause rents and occupancy rates to decline; the Company's ability to evaluate, finance and integrate acquired businesses into the Company's existing business and operations; the Company's existing indebtedness may mature in an unfavorable credit environment, preventing refinancing or forcing refinancing of the indebtedness on terms that are not as favorable as the existing terms; interest rates may fluctuate, impacting costs associated with the Company's outstanding floating rate debt; the Company's ability to comply with debt covenants; the future ratings on the Company's debt instruments; the regional concentration of the Company's business may subject it to economic downturns in the states of Florida and Texas; the Company's ability to effectively compete in the industries in which it does business; the Company's reliance on its call center; the Company's cash flow may be insufficient to meet required payments of principal, interest and dividends; and tax law changes which may change the taxability of future income.


Sovran Self Storage will hold its Second Quarter Earnings Release Conference Call at 9:00 a.m. Eastern Time on Thursday, August 1, 2013. To access the conference call, dial 877.407.8033 (domestic), or 201.689.8033 (international). Management will accept questions from registered financial analysts after prepared remarks; all others are encouraged to listen to the call via webcast by accessing the investor relations tab at

The webcast will be archived for a period of 90 days; a telephone replay will also be available for 72 hours by calling 877.660.6853 and entering conference ID 417384.

Sovran Self Storage, Inc. is a self-administered and self-managed equity REIT that is in the business of acquiring and managing self storage facilities. The Company operates 471 self storage facilities in 25 states under the name "Uncle Bob's Self Storage"®. For more information, visit, like us on Facebook, or follow us on Twitter.



June 30, December 31,
(dollars in thousands)     2013 2012
Investment in storage facilities:
Land $ 302,930 $ 299,544
Building, equipment and construction in progress   1,480,736     1,456,410  
1,783,666 1,755,954
Less: accumulated depreciation   (349,527 )   (328,952 )
Investment in storage facilities, net 1,434,139 1,427,002
Cash and cash equivalents 9,641 7,255
Accounts receivable 3,456 3,450
Receivable from joint venture 655 856
Investment in joint venture 36,571 34,255
Prepaid expenses 5,704 4,947
Intangible asset - in-place customer leases (net of accumulated
amortization of $12,113 in 2013 and $10,337 in 2012) 1,367 2,891
Fair value of interest rate swap agreements 889 -
Other assets   4,992     3,785  
Total Assets $ 1,497,414   $ 1,484,441  
Line of credit $ 64,000 $ 105,000
Term notes 575,000 575,000
Accounts payable and accrued liabilities 28,665 36,667
Deferred revenue 7,094 6,416
Fair value of interest rate swap agreements 7,850 15,707
Mortgages payable   4,161     4,251  
Total Liabilities 686,770 743,041
Noncontrolling redeemable Operating Partnership Units at redemption value 12,893 12,670
Common stock 326 316
Additional paid-in capital 1,001,821 943,604
Accumulated deficit (170,740 ) (172,773 )
Accumulated other comprehensive loss (6,481 ) (15,242 )
Treasury stock at cost   (27,175 )   (27,175 )
Total Shareholders' Equity   797,751     728,730  
Total Liabilities and Equity $ 1,497,414   $ 1,484,441  




April 1, 2013 April 1, 2012
to to
(dollars in thousands, except share data) June 30, 2013       June 30, 2012
Rental income $ 62,601 $ 53,070
Other operating income 3,951 3,189
Management fee income   1,063     869  
Total operating revenues 67,615 57,128
Property operations and maintenance 14,734 13,240
Real estate taxes 6,404 5,523
General and administrative 8,988 7,970
Acquisition related costs - 1,300
Depreciation and amortization 10,493 9,199
Amortization of in-place customer leases   954     940  
Total operating expenses   41,573     38,172  
Income from operations 26,042 18,956
Other income (expense)
Interest expense (A) (8,446 ) (8,311 )
Interest income 1 -
Equity in income of joint ventures   455     205  
Income from continuing operations 18,052 10,850
Income from discontinued operations   -     1,010  
Net income 18,052 11,860
Net income attributable to noncontrolling interests
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