Sovran Self Storage Reports First Quarter Results; Acquires $22 Million of Properties; Increases Gui
Sovran Self Storage Reports First Quarter Results; Acquires $22 Million of Properties; Increases Guidance for 2013
Uncle Bob's Self Storage operates 21 self storage facilities in Atlanta, GA (Photo: Business Wire)
Net income available to common shareholders for the first quarter of 2013 was $14.3 million or $0.47 per fully diluted share. For the same period in 2012, net income available to common shareholders was $11.1 million, or $0.39 per fully diluted common share.
Funds from operations (FFO) for the quarter were $0.82 per fully diluted common share compared to $0.75 for the same period last year. The Company incurred net acquisition costs of $0.5 million in connection with its property purchases in the first quarter of 2013; in the first quarter of 2012, it incurred an immaterial amount of acquisition costs. Absent these acquisition charges, FFO per share was $0.84 and $0.75 for the first quarter of 2013 and 2012, respectively.
Improved occupancies and the reduced use of move-in incentives contributed to the increase in FFO for the first quarter of 2013.
David Rogers, the Company's CEO, commented, "We enjoyed another strong quarter. Occupancy levels grew even during our traditionally slowest season as a result of our web marketing initiatives, revenue management system and our focus on the customer experience. As we enter the peak rental season, we feel increasingly optimistic that 2013 should continue to be a prosperous one."
Revenues for the 362 stores wholly owned by the Company for the entire quarter of each year increased 8.1% from those of the first quarter of 2012, the result of a 530 basis point increase in average occupancy to 87.4%, reduced move-in incentives and strong growth in insurance commissions.
Same store operating expenses increased 3.3% for the first quarter of 2013 compared to the prior year period, mainly as a result of increased snow removal costs, property taxes and credit card fees.
Consequently, same store net operating income increased 10.6% this period over the first quarter of 2012.
Total revenues increased 17% over last year's first quarter, while operating costs increased 14.9%, resulting in an NOI(3) increase of 18.1%. Overall occupancy averaged 85.7% for the period and rental rates improved to an average of $10.76 per sq. ft.
General and administrative expenses grew by approximately $1.2 million over the same period in 2012, primarily due to increased salaries and internet advertising associated with the net 35 stores added to the Company's platform since January 1st of last year.
During the first 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 acquired three self storage properties late in the first quarter of 2013: one each in San Antonio, TX; Boston, MA; and Long Island, NY. The stores were acquired via two separate transactions at a total cost of $22 million and were funded with the proceeds of the Company's "at the market" (ATM) offering.
The properties total approximately 131,000 square feet and complement the Company's existing portfolio as all are located in markets in which the Company already has a presence.
During the three months ended March 31, 2013, the Company also added seven stores to its Uncle Bob's Management platform.
In February, 2013, the Company sold its equity interest and mortgage note in a formerly consolidated joint venture for $4.4 million, resulting in a gain on the sale of $0.4 million. This joint venture's assets consisted of one storage facility.
Illustrated below are key financial ratios at March 31, 2013:
|-||Debt to Enterprise Value (at $64.49/share)||24.3||%|
|-||Debt to Book Cost of Storage Facilities||36.9||%|
|-||Debt to EBITDA Ratio||4.7x|
|-||Debt Service Coverage||3.1x|
At March 31, 2013, the Company had approximately $6.9 million of cash on hand, and $99 million available on its line of credit (without considering the additional $75 million available under the expansion feature).
During the quarter, the Company issued 822,000 shares of its common stock via its previously announced ATM program. The shares were sold at an average price of $62.04 and the net proceeds of $50.2 million were used to fund the aforementioned property purchases and to pay down its line of credit balance.
YEAR 2013 EARNINGS GUIDANCE:
Management is encouraged by greater customer traffic and increasing rental rates in most markets. The following assumptions covering operations have been utilized in formulating updated guidance for the second quarter and full year 2013:
Projected Increases Over 2012
Full Year 2013
|Revenue||6.5 - 7.5%||5.25 - 6.25%|
|Operating Cost (excluding property taxes)||4.0 - 5.0%||3.5 - 4.5%|
3.5 - 4.0%
4.5 - 5.0%
|Total Operating Expenses||4.0 - 5.0%||4.0 - 4.75%|
|Net Operating Income||8.0 - 9.0%||6.0 - 7.0%|
The Company intends to spend up to $25 million on its expansion and enhancement program. It has also budgeted $13 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 three quarters of 2013 are included in guidance.
General and administrative expenses are expected to increase to approximately $34 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 March 31, 2013, all but $76 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 2.0%.
At March 31, 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 $3.54 to $3.58 per share, and between $0.88 and $0.90 per share for the second quarter of 2013.
FORWARD LOOKING STATEMENTS:
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 First Quarter Earnings Release Conference Call at 9:00 a.m. Eastern Time on Thursday, May 2, 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 www.unclebobs.com/company/.
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 412346.
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 www.unclebobs.com, like us on Facebook, or follow us on Twitter.
|SOVRAN SELF STORAGE, INC.|
|BALANCE SHEET DATA|
|March 31,||December 31,|
|(dollars in thousands)||2013||2012|
|Investment in storage facilities:|
|Building, equipment and construction in progress||1,473,722||1,456,410|
|Less: accumulated depreciation||(339,102||)||(328,952||)|
|Investment in storage facilities, net||1,437,550||1,427,002|
|Cash and cash equivalents||6,916||7,255|
|Receivable from joint venture||740||856|
|Investment in joint venture||34,263||34,255|
|Intangible asset - in-place customer leases (net of accumulated|
|amortization of $11,159 in 2013 and $10,337 in 2012)||2,321||2,891|
|Line of credit||$||76,000||$||105,000|
|Accounts payable and accrued liabilities||22,031||36,667|
|Fair value of interest rate swap agreements||14,013||15,707|
|Noncontrolling redeemable Operating Partnership Units at redemption value||12,591||12,670|
|Additional paid-in capital||998,739||943,604|
|Accumulated other comprehensive loss||(13,703||)||(15,242||)|
|Treasury stock at cost||(27,175||)||(27,175||)|
|Total Shareholders' Equity||784,852||728,730|
|Total Liabilities and Equity||$||1,495,540||$||1,484,441|
|CONSOLIDATED STATEMENTS OF OPERATIONS|
|January 1, 2013||January 1, 2012|
|(dollars in thousands, except share data)||March 31, 2013||March 31, 2012|
|Other operating income||3,367||2,808|
|Management fee income||973||806|
|Acquisition fee income||-||146|
|Total operating revenues||64,335||54,973|
|Property operations and maintenance||15,283||13,435|
|Real estate taxes||6,461||5,484|
|General and administrative||8,793||7,565|
|Acquisition related costs||486||7|
|Depreciation and amortization||10,359||9,012|
|Amortization of in-place customer leases||931||882|
|Total operating expenses||42,313||36,385|
|Income from operations||22,022||18,588|
|Other income (expense)|
|Interest expense (A)||(8,457||)||(8,253||)|
|Gain on sale of real estate||421||-|
|Equity in income of joint ventures||386||68|
|Income from continuing operations||14,372||10,406|
|Income from discontinued operations||-||863|
|Net income attributable to noncontrolling interests||(92||)||(131||)|
|Net income attributable to common shareholders||$||14,280||$||11,138|
|Earnings per common share attributable to common shareholders - basic|
|Earnings per share - basic||$||0.47||$||0.39|
|Earnings per common share at
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