As filed with the Securities and Exchange Commission on June 29, 1998
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_________________________
FORM 10/A-1
GENERAL FORM FOR REGISTRATION OF SECURITIES
PURSUANT TO SECTION 12(b) or 12(g) OF
THE SECURITIES EXCHANGE ACT OF 1934
_________________________
SOVRAN ACQUISITION LIMITED PARTNERSHIP
(Exact Name of Registrant As Specified in its Charter)
_________________________
Delaware 16-1481551
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
5166 Main Street
Williamsville, New York 14221
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (716) 633-1850
_________________________
Securities to be registered pursuant to Section 12(b) of the Act:
Title of Each Class Name of Each Exchange on which
to be so Registered Each Class is to be Registered
Not Applicable Not Applicable
Securities to be registered pursuant to Section 12(g) of the Act:
Units of Limited Partnership Interest
(Title of Class)
<PAGE>
TABLE OF CONTENTS
Page No.
ITEM 1. BUSINESS
ITEM 2. FINANCIAL INFORMATION
ITEM 3. PROPERTIES
ITEM 4. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT
ITEM 5. DIRECTORS AND EXECUTIVE OFFICERS
ITEM 6. EXECUTIVE COMPENSATION
ITEM 7. CERTAIN TRANSACTIONS
ITEM 8. LEGAL PROCEEDINGS
ITEM 9. MARKET PRICE AND DISTRIBUTIONS AND RELATED SECURITY
HOLDER MATTERS
ITEM 10. RECENT SALES OF UNREGISTERED SECURITIES
ITEM 11. DESCRIPTION OF REGISTRANT'S SECURITIES TO BE REGISTERED
ITEM 12. INDEMNIFICATION OF DIRECTORS AND OFFICERS
ITEM 13. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
ITEM 14. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
ITEM 15. FINANCIAL STATEMENTS AND EXHIBITS
<PAGE>
ITEM 1. BUSINESS
General
Sovran Acquisition Limited Partnership (the "Operating
Partnership") is the entity through which Sovran Self Storage, Inc. (the
"Company"), a self-administered and self-managed real estate investment
trust ("REIT"), conducts substantially all of the Company's business and
owns substantially all of the Company's assets. The Operating Partnership
is one of the largest owners and operators of self-storage properties in
the Eastern United States and Texas. In 1995, the Company was formed under
Maryland law and the Operating Partnership was organized as a Delaware
limited partnership to continue and to expand the self-storage operations
of the Company's privately owned predecessor organizations. The term
"Company Predecessors" as used herein refers to the Company's predecessor
organizations prior to the Company's initial public offering in June, 1995
(the "Initial Offering") and the concurrent completion of the various
transactions that occurred simultaneously therewith (the "Formation
Transactions"). The term "Company" as used herein means Sovran Self
Storage, Inc. and its subsidiaries on a consolidated basis (including the
Operating Partnership) or, where the context so requires, Sovran Self
Storage, Inc. only, and, as the context may require, the Company
Predecessors. The term "Operating Partnership" as used herein means Sovran
Acquisition Limited Partnership and, as the context may require, the
Company Predecessors.
As of June 15, 1998, the Company was a 96.5% economic owner of
the Operating Partnership and controls it through Sovran Holdings, Inc.
("Holdings"), a wholly-owned subsidiary of the Company incorporated in
Delaware and the sole general partner of the Operating Partnership. This
structure is commonly referred to as an umbrella partnership REIT or
"UPREIT". The Board of Directors of Holdings, the members of which are the
same as the members of the Board of Directors of the Company, manages the
affairs of the Operating Partnership by directing the affairs of Holdings.
The Company's limited partner and indirect general partner interests in the
Operating Partnership entitle it to share in cash distributions from, and
in the profits and losses of, the Operating Partnership in proportion to
its ownership interest therein and entitle the Company to vote on all
matters requiring a vote of the limited partners.
The other limited partners of the Operating Partnership are
persons who contributed their direct or indirect interests in certain self-
storage properties to the Operating Partnership. The Operating Partnership
is obligated to redeem each unit of limited partnership ("Unit") at the
request of the holder thereof for cash equal to the fair market value of a
share of the Company's common stock, par value $.01 per share ("Common
Shares"), at the time of such redemption, provided that the Company at its
option may elect to acquire any such Unit presented for redemption for one
Common Share or cash. With each such redemption or acquisition by the
Company, the Company's percentage ownership interest in the Operating
Partnership will increase. In addition, whenever the Company issues Common
Shares, the Company is obligated to contribute any net proceeds therefrom
to the Operating Partnership and the Operating Partnership is obligated to
issue an equivalent number of Units to the Company.
The Operating Partnership may issue additional Units to acquire
additional self-storage properties in transactions that in certain
<PAGE>
circumstances defer some or all of the sellers' tax consequences. The
Operating Partnership believes that many potential sellers of self-storage
properties have a low tax basis in their properties and would be more
willing to sell the properties in transactions that defer Federal income
taxes. Offering Units instead of cash for properties may provide potential
sellers partial Federal income tax deferral.
As of June 15, 1998 the Operating Partnership owned and operated
186 self-storage properties (individually, a "Property" and collectively,
the "Properties") consisting of approximately 10.2 million net rentable
square feet, situated in 19 states, primarily the Eastern United States and
Texas. As of March 31, 1998, the Properties had a weighted average
occupancy of 84.1% and a weighted average annual rent per occupied square
foot of $7.62. The Operating Partnership believes that it is one of the
largest operators of self-storage properties in the United States based on
square footage.
The Operating Partnership seeks to increase cash flow and enhance
investor value through aggressive management of the Properties and
selective acquisitions of new self-storage properties. Aggressive property
management entails increasing rents, increasing occupancy levels, strictly
controlling costs, maximizing collections, strategically expanding and
improving the Properties and, should economic conditions warrant,
developing new properties. The Operating Partnership believes that there
continues to be significant opportunities for growth through acquisitions,
and constantly seeks to acquire self-storage properties located primarily
in the Eastern United States that are susceptible to realization of
increased economies of scale and enhanced performance through application
of the Operating Partnership's management expertise.
The Operating Partnership's principal executive offices are
located at 5166 Main Street, Williamsville, New York 14221, and its
telephone number is (716) 633-1850. The Operating Partnership also
maintains a regional office in Atlanta, Georgia.
Industry Overview
Self storage facilities offer inexpensive storage space to
residential and commercial users. In addition to fully enclosed and secure
storage space, some operators, including the Operating Partnership, also
offer outside storage for automobiles, recreational vehicles and boats.
The storage sites are usually fenced and well lighted with gates that are
either manually operated or automated. Most facilities have a full time
manager who resides in an apartment located on the property. Customers
have access to their storage area during business hours and in certain
circumstances are provided with 24 hour access. Individual storage units
are secured by the customer's lock, which may be purchased from the
Operating Partnership, but the customer has control of access to the unit.
The Operating Partnership believes that the self-storage industry
is characterized by a trend toward consolidation, continuing increase in
demand, relatively slow growth in supply and a targeted market of primarily
residential customers.
According to published data, of the approximately 26,000
facilities in the United States, only 12% are managed by the ten largest
operators. The remainder of the industry is characterized by numerous
<PAGE>
small, local operators. The shortage of skilled operators, the scarcity of
financing available to small operators for acquisitions and expansions and
the potential for savings through economies of scale are factors which are
leading to a consolidation in the industry. The Operating Partnership
believes that as a result of this trend, significant growth opportunities
exist for operators with proven management systems and sufficient capital
resources.
The self-storage industry has also experienced relatively slow
growth in supply in recent years due to the scarcity of financing available
to small operators, restrictive zoning and other regulations and the
substantial start up costs associated with the construction and lease-up of
new facilities. Demand for self-storage service has increased
significantly as indicated by an increase in industry-wide average rents
and in industry average occupancy. It is expected to remain strong because
it is slow to react to changing conditions and because of various other
factors, including, population growth, increased mobility, expansion of
condominium, townhouse and apartment living, and increasing consumer
awareness, particularly by commercial users. Commercial customers tend to
rent larger areas for longer terms, are more reliable payers and are less
sensitive to price increases. The Operating Partnership estimates that
commercial users account for approximately 30-35% of its total occupancy,
which is substantially higher than the reported industry average of
approximately 20%.
Property Management
The Operating Partnership believes that it has developed
substantial expertise in managing self-storage facilities. Key elements of
the Operating Partnership's management system include:
- Recruiting, training and retaining capable, aggressive on-
site Property Managers;
- Motivating Property Managers by providing incentive-based
compensation;
- Developing and maintaining an integrated marketing plan for
each Property;
- Minimizing maintenance costs; and
- Linking all facilities to a central customized management
information system.
Each Property is generally managed by a full-time Property
Manager and one or more assistant managers. The Property Manager typically
resides on-site in an apartment furnished by the Operating Partnership.
Each Property Manager is responsible for most operational decisions with
respect to his or her Property, including rent charges and maintenance,
subject to certain monetary limits. Assistant managers enable Property
Managers to have sufficient time to perform marketing functions. Each
Property Manager reports to an Area Manager who in turn reports to a
Regional Vice President. The Operating Partnership currently employs four
Regional Vice Presidents who primarily focus on marketing and overall
supervision of the Area Managers. The Area Managers are responsible for
overseeing site operations.
<PAGE>
Property Managers attend a thorough orientation program and
undergo continuous training which emphasizes telephone skills, closing
techniques, identification of selected marketing opportunities, networking
with possible referral sources, and familiarization with the Operating
Partnership's customized management information system. In addition to
frequent contact with Area Managers and other Operating Partnership
personnel, Property Managers receive periodic newsletters regarding a
variety of operational issues, and from time to time attend "roundtable"
seminars with other Property Managers.
The Operating Partnership annually develops a written marketing
plan for each of its Properties the content of which is highly dependent
upon local conditions. The focus of each marketing plan is, in part,
determined by occupancy rates. If all storage units of a same size at a
Property are at or near 90% occupancy, then the plan will generally include
increases in rental rates. If a Property has excess capacity, then the
marketing plan will target selected markets such as local military bases,
colleges, apartment and condominium complexes, industrial parks, medical
centers, retail shopping malls and office suites. The Operating
Partnership primarily uses telephone directories to advertise its services,
including a map and when possible, listing Properties in the same
marketplace in a single advertisement. The Operating Partnership also
conducts quarterly surveys of its competitors' practices, which include
"shopping" competing facilities.
The Operating Partnership's customized computer system performs
billing, collections and reservation functions for each Property, and also
tracks information used in developing marketing plans regarding occupancy
levels, and tenant demographics and histories. The system generates daily,
weekly and monthly financial reports for each Property that are immediately
transmitted to the Operating Partnership's principal office each night.
The system also requires a Property Manager to input a descriptive
explanation for all debit and credit transactions, paid-to-date changes,
and all other discretionary activities, which allows the accounting staff
at the Operating Partnership's principal office to promptly review all such
transactions. Late charges are automatically imposed. More sensitive
activities such as rental rate changes and unit size or number changes are
completed only by Area Managers. The Operating Partnership's customized
management information system permits it to add new facilities to its
portfolio with minimal additional overhead expense.
The Operating Partnership's Regional Vice Presidents, Area
Managers and Property Managers are compensated with a base salary and may,
in addition, earn incentive compensation. The Operating Partnership
annually establishes a target gross income and net operating income for
each Property. As incentive compensation, Property Managers earn a
percentage of all gross income in excess of the target level; and Regional
Vice Presidents earn a percentage of the combined net operating incomes in
excess of the targeted levels for all facilities reporting to them. The
Area Managers may receive bonuses from the Regional Vice President they
work under. This incentive compensation program is not subject to any caps
or increment requirements. It is not unusual for any manager to earn in
excess of 25% of the base salary as incentive compensation. The Operating
Partnership believes that the structure of these programs causes its
managers to exercise their operational autonomy in a manner to maximize
income through increased rental rates.
<PAGE>
Environmental and Other Regulations
The Operating Partnership is subject to federal, state, and local
environmental regulations that apply generally to the ownership of real
property and the operation of self-storage facilities. The Operating
Partnership has not received notice from any governmental authority or
private party of any material environmental noncompliance, claim, or
liability in connection with any of the Properties, and is not aware of any
environmental condition with respect to any of the Properties that could
have a material adverse effect on the Operating Partnership's financial
condition or results of operations.
The Properties are also generally subject to the same types of
local regulations governing other real property, including zoning
ordinances. The Operating Partnership believes that the Properties are in
material compliance with all such regulations.
Insurance
Each of the Properties is covered by fire, flood and property
insurance, including comprehensive liability, all-risk property insurance,
provided by reputable companies and with commercially reasonable terms. In
addition, the Operating Partnership maintains a policy insuring against
environmental liabilities resulting from tenant storage on terms customary
for the industry, and title insurance insuring fee title to the Properties
in an aggregate amount believed to be adequate.
Competition
The primary factors upon which competition in the self-storage
industry is based are location, rental rates, suitability of a property's
design to prospective tenants' needs, and the manner in which the property
is operated and marketed. The Operating Partnership believes it competes
successfully on these bases. The extent of competition depends in
significant part on local market conditions. The Operating Partnership
seeks to locate its facilities so as not to cause its own Properties to
compete with one another for customers, but the number of self-storage
facilities in a particular area could have a material adverse effect on the
performance of any of the Properties.
Several of the Operating Partnership's competitors, including
Public Storage Management, Inc., Shurgard Incorporated, U-Haul
International, Storage Trust Realty and Storage USA, Inc., are larger and
have substantially greater financial resources than the Operating
Partnership. These larger operators may, among other possible advantages,
be capable of greater leverage and the payment of higher prices for
acquisitions.
Investment Policy
While the Operating Partnership emphasizes equity real estate
investments, it may, in its discretion, invest in mortgages and other real
estate interests related to self-storage properties consistent with the
Company's qualification as a REIT. The Operating Partnership may also
retain a purchase money mortgage for a portion of the sale price in
connection with the disposition of properties from time to time. Also,
while the Operating Partnership does not have any current intention of
<PAGE>
acquiring any interests other than direct ownership in self-storage
facilities, subject to the percentage of ownership limitations and gross
income tests necessary for the Company's REIT qualification, the Operating
Partnership also may invest in securities of entities engaged in real
estate activities or securities of other issuers, including for the purpose
of exercising control over such entities.
Disposition Policy
Management periodically reviews the assets comprising the
Operating Partnership's portfolio. The Operating Partnership has no
current intention to dispose of any of the Properties, although it reserves
the right to do so. Any disposition decision will be based on a variety of
factors, including, but not limited to, the (i) potential to continue to
increase cash flow and value, (ii) sale price, (iii) strategic fit with the
rest of the Operating Partnership's portfolio, (iv) potential for, or
existence of, environmental or regulatory issues, (v) alternative uses of
capital, and (vi) maintaining the Company's qualification as a REIT.
Employees
The Operating Partnership currently employs a total of 506
employees, including 185 Property Managers, 8 Area Managers, 4 Regional
Vice Presidents and 269 part time employees. At the Operating
Partnership's headquarters, in addition to the Company's 3 senior executive
officers, the Operating Partnership employs 37 people engaged in various
support activities such as accounting and management information systems.
None of the Operating Partnership's employees is covered by a collective
bargaining agreement. The Operating Partnership considers its employee
relations to be excellent.
ITEM 2. FINANCIAL INFORMATION
Selected Financial and Operating Information
SELECTED FINANCIAL DATA
The following table sets forth selected financial and other data on a
historical basis for the Operating Partnership and on a combined historical
basis for the Partnership's Predecessor. The following information should
be read in conjunction with all of the financial statements and notes
thereto incorporated by reference herein. The selected financial data for
the three months ended March 31, 1998 has been derived from the unaudited
financial statements of the Operating Partnership. The selected financial
data of the Operating Partnership for the years ended December 31, 1997,
and 1996 and for the period from June 26, 1995 to December 31, 1995 have
been derived from the financial statements audited by Ernst & Young LLP,
independent auditors, whose report with respect thereto is included
elsewhere herein. The combined selected financial data for the period
ended June 25, 1995 and the years ended December 31, 1994 and 1993 has been
derived from audited combined financial statements of the Company
Predecessors not included in such report.
<PAGE>
<TABLE>
<CAPTION>
SELECTED FINANCIAL DATA
Operating Partnership Predecessor
At or forAt or for At or for At or for For Period For Period At or for
three monthsthree months Year Year from from Year Ended
Ended Ended Ended Ended 6/26/95 to 1/1/95 to December 31,
(Dollars in thousands, 3/31/98 3/31/97 12/31/97 12/31/96 12/31/95 6/25/95 1994 1993
except Unit data)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Operating Data:
Operating revenues $ 14,375 $ 10,732 $ 49,354 $ 33,597 $ 12,942 $ 9,532 $18,530 $13,660
Income (loss) before
extraordinary item 6,203 4,935 23,763 15,682 6,744 311 1,836 (825)
Earnings (losses) 5,853 4,935 23,763 15,682 6,744 311 1,836 (825)
Net income per Unit-
basic .46 .46 1.97 1.88 0.91 - - -
Net income per Unit-
diluted .46 .46 1.96 1.87 0.91 - - -
Distributions declared
per Unit .54 .52 2.12 2.05 1.04 - - -
Weighted average units:
Basic 12,773,076 10,839,168 12,090,141 8,344,065 7,429,872 - - -
Diluted 12,785,861 10,870,390 12,152,166 8,379,350 7,439,415 - - -
Balance Sheet Data:
Storage facilities
before accumulated
depreciation $390,349 $280,112 $333,036 $220,711 $159,461 $114,008 $91,889 $83,727
Total Assets 384,467 279,170 327,073 235,415 160,437 84,527 82,733 78,918
Total Debt 91,059 35,559 39,559 - 5,000 69,102 66,340 61,550
Total Liabilities 105,419 45,243 50,319 8,131 10,697 71,311 69,014 64,096
Limited partners' capital
interest 13,170 11,564 14,454 4,435 - - - -
Partners' capital 265,878 222,363 262,300 222,849 149,740 13,216 13,719 14,822
Other Data:
Net cash provided by
operating activities $ 10,476 $ 7,865 $31,159 $20,152 $7,188 $2,003 $5,428 $1,470
Net cash used in
investing activities (54,717) (48,547) (98,765) (59,146) (157,965) (3,340) (6,609) (15,217)
Net cash provided by
financing activities 44,661 26,391 53,486 54,949 151,509 507 1,030 14,283
Funds from operations(b) 8,242 6,364 30,294 19,816 9,904 - - -
Number of facilities 173 138 155 111 82 74 60 54
Weighted average occupancy 84.1% 85.2% 85.1% 86.0% 86.1% 86.6% 88.7% 86.7%
<PAGE>
(a) The Operating Partnership began operations on June 26, 1995, and had no historical results of operations before that
date. Results of operations prior to June 26, 1995 relate to Sovran Capital, Inc. and the Sovran Partnerships (Company
Predecessors).
(b) Funds from operations ("FFO") means income (loss)(computed in accordance with generally accepted accounting principles)
plus depreciation of real estate assets and amortization of intangible assets exclusive of deferred financing costs. FFO is
a supplemental performance measure for REITs as defined by the National Association of Real Estate Investment Trusts, Inc.
FFO is presented because analysts consider FFO to be one measure of the performance of the Operating Partnership. FFO does
not take into consideration scheduled principal payments on debt, capital improvements and other obligations. Accordingly,
FFO is not a substitute for the Operating Partnership's cash flow or net income as a measure of the Operating Partnership
liquidity or operating performance or ability to pay distributions.
</TABLE>
<PAGE>
SELECTED PRO FORMA FINANCIAL DATA
The following table sets forth selected unaudited pro forma operating
and other data for the Operating Partnership as if (i) the acquisition of
44 Properties in 1997 and 30 Properties in 1998 had occurred as of the
beginning of 1997, and (ii) the proceeds of the Company's April 1997 common
stock offering were received at the beginning of 1997. The table also
includes pro forma balance sheet data which was prepared as if the 12
Properties acquired since March 31, 1998 had all been acquired at March 31,
1998. The following information should be read in conjunction with all of
the financial statements and notes thereto included herein. The pro forma
financial information is not necessarily indicative of what the actual
financial position and results of operations of the Operating Partnership
would have been as of the dates or for the periods indicated, nor does it
purport to represent the Operating Partnership's future financial position
and results of operations.
Pro Forma Pro Forma
At or for At or for
Three Months Year Ended
(Dollars in thousands, ended 3/31/98 12/31/97
except Unit data) (unaudited) (unaudited)
Operating Data:
Operating revenues $ 16,775 $ 66,228
Income (loss) before
extraordinary item 6,443 26,169
Earnings (losses) 6,093 26,169
Net income per Unit-
basic .48 2.05
Net income per Unit-
diluted .47 2.04
Distributions declared
per Unit .54 2.12
Weighted average units:
Basic 12,784,572 12,784,572
Diluted 12,837,357 12,846,597
Balance Sheet Data:
Storage facilities
before accumulated
depreciation $ 432,395
Total Assets 426,537
Total Debt 132,347
Total Liabilities 147,216
Limited partners' capital
interest 13,443
Partners' capital 265,878
Other Data:
Net cash provided by
operating activities $ 11,073 $36,231
Net cash used in
investing activities (96,005) (188,969)
Net cash provided by
financing activities 85,352 138,618
Funds from operations(b) 8,839 35,366
Number of facilities 186 186
Weighted average occupancy 84.1% 85.1%
<PAGE>
Management Discussion and Analysis for Financial Conditions
and Results of Operations
The following discussion and analysis of the financial condition and
results of operations should be read in conjunction with the financial
statements and notes incorporated by reference in this Prospectus.
The following discussion is based on the financial statements of the
Operating Partnership as of March 31, 1998, December 31, 1997, December 31,
1996, December 31, 1995, and for the period from June 26, 1995
(commencement of operations) to December 31, 1995; and the combined
statements of the Company Predecessors for the period from January 1, 1995
to June 25, 1995. The combined financial statements of the Company
Predecessors are presented for comparative purposes.
This Form 10 contains forward-looking statements within the meaning of
Section 27A of the Securities Act of 1933, as amended, and Section 21E of
the Securities Exchange Act of 1934, as amended. The foregoing provisions
by their express terms do not apply to forward-looking statements made in
connection with an initial public offering. The words "believe," "expect,"
"anticipate," "intend," "estimate," "assume" and other similar expressions
which are predictions of or indicate future events and trends and which do
not relate solely to historical matters identify forward-looking
statements. Reliance should not be placed on forward-looking statements
because they involve known and unknown risks, uncertainties and other
factors, which are in some cases beyond the control of the Company (as
defined herein) and may cause the actual results, performance or
achievements of the Company to differ materially from anticipated future
results, performance or achievements expressed or implied by such forward-
looking statements.
Factors that might cause such a difference include, but are not
limited to, the following: occupancy rates and market rents may be
adversely affected by local economic and market conditions which are beyond
management's control; financing may not be available, or may not be
available on favorable terms; the Company's cash flow may be insufficient
to meet required payments of principal and interest; and existing
indebtedness may mature in an unfavorable credit environment, preventing
such indebtedness from being refinanced, or, if refinanced, causing such
refinancing to occur on terms that are not as favorable as the terms of
existing indebtedness.
Results of Operations
For the period January 1, 1998 through March 31, 1998
The Operating Partnership reported revenues of $14.4 million during
the period and incurred $4 million in direct operating expenses, resulting
in net operating income of $10.4 million. The net operating margin of 72%
is one of the highest in the industry and reflects a corporate-wide effort
to operate the business efficiently. General and administrative expenses
of $0.9 million, interest expense of $1.2 million and depreciation and
amortization expenses of $2.1 million resulted in income of $6.2 million
before extraordinary item. An extraordinary loss of $0.35 million resulted
from the write-off of the unamortized financing costs of the revolving
credit facility that was replaced in February 1998. Net income amounted to
$5.9 million.
<PAGE>
Three months ended March 31, 1998, compared to Three months ended March 31,
1997
The following discussion compares the activities of the Operating
Partnership for the three months ended March 31, 1998 with the activities
of the Operating Partnership for the three months ended March 31, 1997.
Total revenues increased from $10.7 million for the three months ended
March 31, 1997 to $14.4 for the three months ended March 31, 1998, an
increase of $3.7 million or 34%. Of this, $3.4 million resulted from the
acquisition of 62 properties during the period January 1, 1997 through
March 31, 1998 and $0.3 million was realized as a result of increased
rental rates at the 111 properties owned by the Operating Partnership at
December 31, 1996. Interest income decreased slightly. Overall, same-
store revenues grew 3.7% for the three month period ended March 31, 1998 as
compared to the same period in 1997.
Property operating and real estate tax expense increased $1 million or
33% during the period. $0.9 million was a result of absorbing additional
expenses from operating the newly acquired Properties, and $0.1 million
related to the operations of Properties operated more than one year.
General and administrative expenses, which includes losses of
$0.1 million realized as the result of replacement of equipment, increased
$0.1 million principally as a result of the need for additional personnel
and increased administrative costs associated with managing the 62
additional properties.
Interest expense increased $0.7 million due to the $52 million drawn
on the Operating Partnership's line of credit during the first three months
of 1998.
Earnings before minority interest, extraordinary item, interest
expense, and depreciation and amortization increased from $7.0 million to
$9.5 million, an increase of $2.5 million or 36%.
Year Ended December 31, 1997 compared to Year Ended December 31, 1996
Rental revenues improved from $32.9 million for the year ended
December 31, 1996 to $48.6 million for the year ended December 31, 1997, an
increase of $15.7 million, or 48%. Of this, $10.4 million resulted from
the acquisition of 44 properties during 1997, $4.3 million resulted from
having the 1996 acquisitions included for a full year of operations, and
$1 million resulted from increased revenues at the eighty-two core
properties considered in same store sales. For this core group, revenues
increased 3.5%, primarily as the result of rental rate increases, as
average occupancy was unchanged from 1996's level of 87.8%. Interest and
other income increased just slightly to $0.8 million in 1997.
Property operating and real estate tax expense increased $4.5 million
or 49% during the period. Of this, $3.1 million was incurred by the
facilities acquired in 1997, $1.3 million resulted from the having the 1996
acquisitions included for a full year of operations, and $0.1 million
additional cost was incurred in the operation of the eighty-two core
properties.
General and administrative expenses increased $0.5 million, primarily
as a result of increased supervisory and accounting costs associated with
the operation of an increased number of properties.
<PAGE>
Interest expense of $2.2 million in 1997 resulted primarily from
borrowings on the Operating Partnership's line of credit facility (a
mortgage loan assumed in an acquisition transaction required interest
payments of $0.2 million). The Operating Partnership had borrowings
outstanding of $42 million before paying off the balance with the proceeds
of a Company common stock offering in April 1997. The credit facility was
then utilized throughout the balance of the year to fund further
acquisitions, so that by the end of the year, the amount outstanding on the
line was $36 million.
Depreciation and amortization expense increased to $7 million from
$4.6 million, primarily as a result of the additional depreciation taken on
the $112 million of real estate assets acquired in 1997 and a full year of
depreciation on 1996 acquisitions.
Earnings before minority interest, interest expense, and depreciation
and amortization increased $10.7 million or 48%, in 1997 as a result of the
aforementioned items.
Year Ended December 31, 1996 compared to Year Ended December 31, 1995
Rental revenues improved from $21.8 million for the year ended
December 31, 1995 to $32.9 million for the year ended December 31, 1996, an
increase of $11.1 million, or 51%. Of this, $5.1 million resulted from the
acquisition of twenty-nine properties during 1996, $ 4.9 million resulted
from having 1995 acquisitions included for a full year of operations, and
$1.1 million resulted from increased occupancy levels and rental rates.
Interest and other income remained unchanged at approximately $0.7 million.
Property operating and real estate tax expense increased $3 million or
48% during the period. Of this, $1.5 million was incurred by the facilities
acquired in 1996, $1.4 million resulted from having the 1995 acquisitions
included for a full year of operations, and $0.1 million of additional cost
was incurred in the operation of the sixty facilities owned by the
Operating Partnership since January 1, 1995.
General and administrative expenses decreased $0.3 million, primarily
as a result of non-recurring legal, accounting and other professional fees
associated with the winding up of partnership activities and the merger and
formation transactions.
Interest expenses of $1.9 million in 1996 resulted exclusively from
borrowings on the Operating Partnership's line of credit facility. The
Operating Partnership had borrowings outstanding of $59.3 million before
paying off the balance with the proceeds of a Company common stock offering
in October 1996. Interest expense in 1995 was $3.4 million, or $1.5
million higher than in 1996. This was primarily due to the fact that until
the Initial Offering in June 1995, the Predecessors had incurred
substantial mortgage debt as a means to finance its acquisitions, and paid
approximately $3.3 million to carry that debt through June 1995. Upon
completion of the Initial Offering, this mortgage debt was paid in full,
and there was only a line of credit borrowing of $5 million outstanding at
the end of 1995.
Depreciation and amortization expense increased to $4.6 million from
$3.3 million, primarily as a result of the additional depreciation taken on
the $60 million or real estate assets acquired in 1996.
<PAGE>
Earnings before interest, and depreciation and amortization increased
$8.4 million or 61% in 1996 as a result of the aforementioned items.
Liquidity and Capital Resources
Capital Resources and Establishment of Line of Credit
The Company and the Operating Partnership have relied principally
on equity capital since inception and have raised net proceeds of $269
million from the Initial Offering on June 25, 1995, and additional
offerings of Company Common Stock in 1996 and 1997. The Operating
Partnership used the proceeds of the offerings to repay indebtedness, to
purchase additional properties, and to acquire limited partners' interest
in the Sovran Partnerships.
The equity offerings have been supplemented with borrowings on
the $75 million line of credit which was replaced on February 20, 1998, by
a three-year, $150 million unsecured line. The commitment fee on the new
line was $750,000, and interest is payable monthly at 125 basis points
above LIBOR.
In addition to the equity and debt capital, the Operating
Partnership issued $3.6 million and $9.2 million of Units in 1996 and 1997,
respectively, in exchange for self storage facilities at the request of
sellers.
As a result of its limited use of debt and the replacement of the
secured credit facility with the unsecured line of credit, the Operating
Partnership believes it has achieved a level of market capitalization and
critical mass to enable it to access the senior debt markets to fund 1998
growth.
Acquisition of Properties
Since the Initial Offering, the Operating Partnership used the
balance of the proceeds from the underwriter's over-allotment option, the
follow-on public offerings, issuance of Units and borrowings pursuant to
the line of credit to acquire properties from unaffiliated storage
operators in Virginia, Florida, Georgia, New York, Pennsylvania, Texas,
Alabama, Maryland, Massachusetts, Michigan, Ohio and Louisiana. In 1995,
following the Initial Offering, the Operating Partnership added 8
facilities and 550,000 square feet of storage space to its portfolio. In
1996, twenty-nine facilities comprising 1,490,000 square feet, and in
1997, forty-four facilities totaling 2.5 million square feet were
acquired. Through June 15, 1998, an additional 30 Properties totaling 1.9
million square feet were acquired bringing the total Properties owned to
186 with 10.2 million square feet of net rentable storage space.
Internal Property Acquisition Costs
As a result of a recent consensus reached by the Financial
Accounting Standards Board Emerging Issues Task Force, the Operating
Partnership will no longer capitalize internal costs related to the
acquisition of operating properties. The amount of such costs capitalized
in 1997 and 1996 were $728,000 and $755,000, respectively.
<PAGE>
Future Acquisition and Development Plans
The Operating Partnership's external growth strategy is to
increase the number of facilities it owns by acquiring suitable facilities
in markets in which it already has operations, or to expand in new markets
by acquiring several facilities at once in those new markets.
Since the Initial Offering, the Operating Partnership has
increased its presence in the Boston, Washington, Cleveland, Atlanta,
Norfolk, Charlotte, Greensboro, Orlando, Jacksonville, Pensacola, Orlando
and Ft. Lauderdale/Palm Beach markets. Properties acquired in these cities
were added to improve the Operating Partnership's presence and enhance
visibility of its operations. Economies of scale are enjoyed via this
strategy, as yellow-page costs, maintenance expenses and relief payroll
costs can be shared among numerous facilities.
The Operating Partnership has also entered new markets with great
impact. Sixteen Properties were acquired in Texas, giving the Operating
Partnership a strong presence in San Antonio, Dallas and Houston. Six
Properties were acquired in Tampa, five in Northern Michigan, four each in
Ft. Myers and St. Petersburg, three each in Birmingham and Montgomery, and
two each in Newport News, Pittsburgh, Baton Rouge, Syracuse and Jackson.
The Operating Partnership will continue to aggressively pursue
the acquisition of quality self-storage properties in markets where it
already operates, and in strategic new markets where a substantial property
base can be quickly established.
The Operating Partnership also intends to expand and enhance
certain of its existing facilities by building additional storage buildings
on presently vacant land and by installing climate control and enhanced
security systems at selected sites.
Distribution Requirements of the Company and Impact on the Operating
Partnership
As a REIT, the Company is not required to pay Federal income tax
on income that it distributes to its shareholders, provided that the amount
distributed is equal to at least 95% of taxable income. These
distributions must be made in the year to which they relate, or in the
following year if declared before the Company files its Federal income tax
return, and if it is paid before the first regular distribution of the
following year. The first distribution of 1998 may be applied toward the
Company's 1997 distribution requirement. The Company's source of funds for
such distributions are solely and directly from the Operating Partnership.
As a REIT, the Company must derive at least 95% of its total
gross income from income related to real property, and from dividends,
interest and gain from the sale or disposition of stock or securities. In
1997, the Company's percentage of revenue from such sources exceeded 97%,
thereby passing the 95% test, and no special measures are expected to be
required to enable the Company to maintain its REIT designation.
Inflation
The Operating Partnership does not believe that inflation has had
or will have a direct effect on its operations. Substantially all of the
<PAGE>
leases at the facilities allow for monthly rent increases, which provide
the Operating Partnership with the opportunity to achieve increases in
rental income as each lease matures.
Seasonality
The Operating Partnership's revenues typically have been higher
in the third and fourth quarter, primarily because the Operating
Partnership increases its rental rates on most of its storage units at the
beginning of May and, to a lesser extent, because self-storage facilities
tend to experience greater occupancy during the late spring, summer and
early fall months due to the greater incidence of residential moves during
these periods. However, the Operating Partnership believes that its tenant
mix, diverse geographic locations, rental structure and expense structure
provide adequate protection against undue fluctuations in cash flows and
net revenues during off-peak seasons. Thus, the Operating Partnership does
not expect seasonality to affect materially distributions to unitholders.
Impact of Year 2000
Based on a preliminary assessment and limited testing, the
Operating Partnership believes it has made all changes to its software so
that its computer system will function properly with respect to dates in
the year 2000 and thereafter. The Operating Partnership presently believes
that with these modifications, the Year 2000 issue will not pose
significant operational problems for its computer systems.
The Operating Partnership has initiated formal communications
with third parties to determine the extent to which the Operating
Partnership's interface systems are vulnerable to those third parties'
failure to remediate their own Year 2000 issues.
The Operating Partnership anticipates completing the Year 2000
project in 1998, which is prior to any expected impact on its operating
system. The Operating Partnership's total Year 2000 project costs, which
are expected to be immaterial, and the anticipated time frame, are based on
presently available information. These estimates were derived utilizing
numerous assumptions of future events, including the availability of
certain resources, third-party modification plans and other factors.
However, there can be no guarantee that the estimated time of completion
will be achieved and actual results could differ materially from those
anticipated.
ITEM 3. PROPERTIES
Overview
At June 15, 1998, the Operating Partnership owned 100% fee simple
interests in, and operated, a total of 186 Properties, consisting of
approximately 10.2 million net rentable square feet, situated in nineteen
states primarily in the Eastern United States and Texas. As of March 31,
1998, the Properties had a weighted average occupancy of 84.1% and a
weighted average annual rent per square foot of $7.62. The Operating
Partnership believes that it is one of the largest operators of self-
storage properties in the United States based on facilities owned.
<PAGE>
The Operating Partnership's self-storage facilities offer
inexpensive, easily-accessible, enclosed storage space to residential and
commercial users on a month-to-month basis. Most of the Operating
Partnership's Properties are fenced with computerized gates and are well
lighted. All but twenty-two of the Properties are single-story, thereby
providing customers with the convenience of direct vehicle access to their
storage units. All Properties have a Property Manager on-site during
business hours and, in most cases, the Property Manager resides in an
apartment at the facility. Customers have access to their storage areas
during business hours, and some commercial customers are provided 24-hour
access. Individual storage units are secured by a lock furnished by the
customer to provide the customer with control of access to the unit.
Currently, 153 of the Properties conduct business under the user-
friendly trade name "Uncle BoB's Self-Storage" and the remainder are
operated under various names acquired with the Properties. The Operating
Partnership intends to convert all of the Properties to the "Uncle BoB's"
trade name.
<PAGE>
<TABLE>
<CAPTION>
The table below provides certain information regarding the Properties:
Uncle
BoB's Occupancy
Year Trade at Mgr.
Location Built Sq. Ft. Name 12/31/97 Acres Units Bldgs. Floors Apt. Construction
_______________________________________________________________________________________________________________________________
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Alabama
Birmingham I 1990 37,075 Y 80% 2.7 297 9 1 Y Masonry/Steel Roof
Birmingham II 1990 52,155 Y 92% 4.7 414 8 1 Y Masonry/Steel Roof
Montgomery I 1982 75,000 Y 81% 5.0 625 16 1 Y Masonry/Steel Roof
Birmingham III 1970 72,050 Y 80% 4.3 409 6 1 N Masonry/Steel Roof
Montgomery II 1984 42,100 Y 93% 2.7 300 10 1 N Masonry/Steel Roof
Montgomery III 1988 41,550 Y 92% 2.4 392 9 1 Y Steel Bldg./Steel Roof
Birmingham-Walt 1984 62,776 N N/A 3.3 397 6 1 Y Masonry Wall/Metal Roof
Connecticut
New Haven 1985 36,000 Y 96% 3.9 340 5 1 N Masonry Wall/Steel Roof
Hartford-Metro I 1988 47,650 Y 96% 10.0 339 10 1 N Steel Bldg./Steel Roof
Hartford-Metro II 1992 40,275 Y 95% 6.0 313 7 1 N Steel Bldg./Steel Roof
Florida
Lakeland I 1985 45,725 Y 94% 3.5 444 11 1 Y Masonry Wall/Steel Roof
Tallahassee I 1973 149,600 Y 82% 18.7 730 21 1 Y Masonry Wall/Tar & Gravel Roof
Tallahassee II 1975 43,600 Y 98% 4.0 236 7 1 Y Masonry Wall/Tar & Gravel Roof
Port St. Lucie 1985 60,000 Y 77% 4.0 599 12 1 N Steel Bldg./Steel Roof
Deltona 1984 60,000 Y 84% 5.0 452 5 1 Y Masonry Wall/Shingle Roof
Jacksonville I 1985 40,000 Y 93% 2.7 296 14 1 Y Masonry Wall/Tar & Gravel Roof
Orlando I 1988 53,875 Y 90% 2.8 603 3 2 Y Steel Bldg./Steel Roof
Ft. Lauderdale 1985 103,000 Y 91% 7.6 646 7 1 Y Steel Bldg./Steel Roof
West Palm l 1985 49,000 Y 84% 3.2 412 6 1 N Steel Bldg./Steel Roof
Melbourne I 1986 61,787 Y 95% 8.3 605 11 1 Y Masonry Wall/Shingled Roof
Pensacola I 1983 105,127 Y 80% 7.5 976 13 1 Y Steel Bldg./Steel Roof
Pensacola II 1986 57,355 Y 88% 3.4 509 9 1 Y Steel Bldg./Steel Roof
Melbourne II 1986 55,755 Y 93% 3.4 657 11 1 N Steel Bldg./Steel Roof
Jacksonville II 1987 53,225 Y 100% 4.4 465 11 1 Y Masonry/Steel Roof
Pensacola III 1986 63,250 Y 81% 6.1 510 12 1 N Steel Bldg./Steel Roof
Pensacola IV 1990 39,825 Y 91% 2.7 280 9 1 Y Masonry/Steel Roof
Pensacola V 1990 38,850 Y 66% 2.6 324 4 1 Y Masonry/Steel Roof
<PAGE>
Tampa I 1989 60,202 Y 93% 3.3 889 6 1 N Masonry/Steel Roof
Tampa II 1985 55,911 Y 86% 2.9 794 10 1 N Masonry/Steel Roof
Tampa III 1988 45,507 Y 91% 2.2 689 14 1 N Masonry/Steel Roof
Orlando II 1986 135,000 Y 74% 8.5 1,359 20 1 Y Masonry Wall/Steel Roof
Ft. Myers I 1988 28,068 Y 78% 1.1 272 6 2 Y Steel Bldg./Steel Roof
Ft. Myers II 1991/94 23,053 Y 81% 1.9 314 2 1 Y Masonry/Steel Roof
Tampa IV 1985 60,675 Y 77% 4.0 633 10 1 Y Masonry/Steel Roof
West Palm II 1986 33,120 Y 89% 2.3 395 9 1 Y Masonry/Steel Roof
Ft. Myers III 1986 35,435 Y 84% 2.4 261 9 1 Y Masonry/Steel Roof
Lakeland II 1988 41,860 Y 96% 4.0 446 9 1 N Masonry Wall/Steel Roof
Ft. Myers IV 1987 60,000 Y 94% 4.5 289 4 1 Y Masonry/Steel Roof
Jacksonville III 1987 102,500 Y 78% 5.9 786 13 1 Y Masonry Wall/Shingle Roof
Jacksonville IV 1985 43,865 Y 83% 2.7 527 7 1 Y Steel Bldg./Steel Roof
Jacksonville V 1987/92 55,400 Y 97% 2.9 514 13 2 Y Steel Bldg./Masonry Wall/Steel
Roof
Ft. Myers-Mall 1991/94 19,901 Y N/A 1.3 274 4 1 Y Masonry/Steel Roof
Orlando III 1975 60,000 Y 89% 3.2 487 8 2 N Masonry Wall/Steel Roof
Orlando IV 1984 37,372 Y 90% 2.8 341 6 1 Y Steel Bldg/Steel Roof
Delray I-Mini 1969 50,395 Y 99% 3.5 495 3 1 Y Masonry Wall/Concrete Roof
Delray II-Safeway 1980 71,218 Y 94% 4.3 774 17 1 Y Masonry Wall/Concrete Roof
Tampa-E. Hillsborough 1985 84,740 N N/A 5.3 733 16 1 Y Masonry Wall/Metal Roof
Titusville 1986/90 54,390 N N/A 6.0 417 9 1 Y Metal Wall/Shingle Roof
Indian Harbor Beach 1985 66,588 Y N/A 4.0 729 15 1 N Masonry Wall/Metal Roof
Vero Beach 1997 34,450 N N/A 1.9 316 4 1 N Masonry Wall/Metal Roof
Georgia
Savannah 1981 58,781 Y 82% 5.4 527 11 1 Y Masonry Wall/Steel Roof
Atlanta-Metro I 1988 69,075 Y 81% 3.9 539 5 1 Y Steel Bldg./Steel Roof
Atlanta-Metro II 1988 45,100 Y 82% 3.9 375 6 1 Y Steel Bldg./Steel Roof
Atlanta-Metro III 1988 55,475 Y 84% 5.3 483 9 1 Y Steel Bldg./Steel Roof
Atlanta-Metro IV 1989 41,724 Y 92% 3.5 304 7 1 Y Steel Bldg./Steel Roof
Atlanta-Metro V 1988 38,082 Y 84% 4.2 372 3 1 Y Masonry Wall/Tar & Gravel Roof
Atlanta-Metro VI 1986 51,375 Y 79% 3.6 458 7 1 Y Steel Bldg./Steel Roof
Atlanta-Metro VII 1981 43,400 Y 77% 2.5 324 9 2 Y Masonry Wall/Tar & Gravel Roof
Atlanta-Metro VIII 1975 41,400 Y 85% 3.3 452 6 2 Y Masonry Wall/Tar & Gravel Roof
Augusta I 1988 52,300 Y 85% 4.0 407 13 1 Y Steel Bldg./Steel Roof
Macon I 1989 40,700 Y 92% 3.2 356 14 1 Y Steel Bldg./Steel Roof
Augusta II 1987 45,700 Y 87% 3.5 377 4 1 Y Masonry Wall/Steel Roof
Atlanta-Metro IX 1988 56,725 Y 81% 4.6 409 6 1 Y Steel Bldg./Steel Roof
Atlanta-Metro X 1988 45,425 Y 88% 6.8 391 9 1 N Steel Bldg./Steel Roof
Macon II 1989/94 58,750 Y 88% 14.0 535 11 1 Y Steel Bldg./Steel Roof
Savannah II 1988 50,975 Y 75% 2.6 484 8 1 Y Masonry Wall/Steel Roof
<PAGE>
Atlanta-Alpharetta 1994 80,265 Y 76% 5.8 555 8 1&2 Y Steel Bldg./Steel Roof
Atlanta-Marietta 1996 59,450 Y 95% 6.0 451 8 1&2 Y Steel Bldg./Steel Roof
Atlanta-Doraville 1995 67,275 N 90% 4.9 632 8 1&2 Y St&Masonry Bldg/Steel Roof
Ft. Oglethorpe 1989 45,290 N N/A 3.3 448 6 1 Y Masonry Wall/Metal Roof
Louisiana
Baton Rouge-1 1982 72,100 N 97% 2.5 419 12 1 Y Masonry Wall/Metal Roof
Baton Rouge-2 1985 44,735 N 98% 2.8 443 9 1 N Masonry Wall/Steel Roof
Maryland
Salisbury 1979 34,350 Y 70% 3.0 418 10 1 N Masonry Wall/Tar & Gravel Roof
Baltimore I 1984 22,233 Y 85% 1.9 347 2 3 N Masonry Wall/Shingled Roof
Baltimore II 1988 63,915 Y 93% 2.2 526 2 4 Y Masonry Wall/Tar & Gravel Roof
Baltimore III 1990 53,171 Y 80% 3.1 686 8 1 Y Steel Bldg./Steel Roof
Massachusetts
New Bedford 1982 41,980 Y 90% 3.4 408 7 1 Y Steel Bldg./Steel Roof
Springfield 1986 41,339 Y 80% 4.7 337 5 1 N Masonry Wall/Shingle Roof
Boston-Metro I 1980 37,575 Y 92% 2.0 403 3 2 N Masonry Wall/Tar & Gravel Roof
Boston-Metro II 1986 36,900 Y 97% 3.6 428 8 2 N Masonry Wall/Tar & Gravel Roof
Northbridge 1988 39,175 N N/A 3.5 283 10 1 N Metal Wall/Metal Roof
Salem 1979 53,400 N N/A 2.0 496 2 2 Y Steel Wall/Metal Roof
Michigan
Grand Rapids 1976 57,900 Y 85% 5.4 526 9 1 Y Masonry Wall/Steel Roof
Grand Rapids II 1983 32,300 Y 83% 8.0 296 6 1 N Masonry & Steel Walls
Kalamazoo 1978 58,214 Y 78% 11.6 607 14 1 Y Steel Bldg/Steel & Shingle Roof
Lansing 1987 43,943 Y 87% 3.8 426 9 1 Y Steel Bldg/Steel Roof
Holland 1978 95,088 Y 76% 13.6 676 18 1 Y Masonry Wall/Steel Roof
Waterford-Highland 1978 140,850 N N/A 16.6 1739 16 1 Y Masonry Wall/Metal Roof
Mississippi
Jackson I 1990 41,900 Y 92% 2.0 344 6 1 Y Masonry/Steel Roof
Jackson II 1990 38,775 Y 86% 2.1 308 9 1 Y Masonry/Steel Roof
Jackson III 1995 62,052 N N/A 1.3 426 2 1 N Metal Wall/Metal Roof
North Carolina
Charlotte 1986 37,051 Y 86% 2.9 337 6 1 Y Steel Bldg./Steel Roof
Fayetteville 1980 92,800 Y 66% 6.2 1,160 2 1 Y Steel Bldg./Steel Roof
Greensboro 1986 42,900 Y 66% 3.4 415 5 1 Y Steel Bldg./Mas. Wall/Steel Roof
Raleigh I 1985 57,750 Y 84% 5.0 569 8 2 Y Steel Bldg./Steel Roof
Raleigh II 1985 33,150 Y 77% 2.5 329 8 1 Y Steel Bldg./Steel Roof
<PAGE>
Charlotte II 1995 48,750 Y 58% 5.6 494 7 1 Y Masonry Wall/Steel Roof
Charlotte III 1995 31,200 Y 73% 2.9 346 6 1 Y Masonry Wall/Steel Roof
Greensboro I 1995 32,198 Y 83% 1.0 312 7 1 N Metal Wall/Metal Roof
Greensboro II 1997 9,755 Y 74% 2.5 92 2 1 N Metal Wall/Metal Roof
Greensboro-High Point 1993 58,035 N N/A 2.5 538 9 1 N Steel Wall/Metal Roof
Durham-Cornwallis 1990/96 79,260 N N/A 4.7 666 9 1 Y Masonry Wall/Metal Roof
Durham-Hillsborough 1988/91 67,941 N N/A 5.0 624 5 1 Y Metal Wall/Metal Roof
New Hampshire
Salem-Policy 1980 62,075 N N/A 8.7 546 9 1 Y Masonry Wall/Gravel/MetalRoof
New York
Middletown 1988 30,000 Y 95% 2.8 281 4 1 N Steel Bldg./Steel Roof
Buffalo I 1981 76,000 Y 93% 5.1 541 10 1 Y Steel Bldg./Steel Roof
Rochester I 1981 43,000 Y 82% 2.9 407 5 1 Y Steel Bldg./Steel Roof
Rochester II 1980 39,000 Y 88% 3.5 250 9 1 N Masonry Wall/Shingle Roof
Buffalo II 1984 53,525 Y 96% 6.2 430 12 1 Y Steel Bldg./Steel Roof
Syracuse l 1987 70,200 Y 83% 7.5 767 16 1 N Steel Bldg./Steel Roof
Syracuse II 1983 54,590 Y 78% 3.6 422 10 1 Y Steel Bldg./Shingled Roof
Rochester III 1990 51,826 Y 92% 2.7 421 1 1 N Masonry Wall/Shingle Roof
Harriman 1989/95 66,230 N N/A 6.1 649 10 1 Y Metal Wall/Metal Roof
Ohio
Youngstown 1980 48,825 Y 94% 5.8 380 5 1 Y Steel Bldg./Steel Roof
Cleveland- I 1980 48,250 Y 73% 6.4 359 9 1 Y Steel Bldg./Steel Roof
Cleveland II 1987 60,500 Y 86% 4.8 453 4 1 Y Steel Bldg./Steel Roof
Cincinnati 1988 48,830 Y 94% 2.8 496 7 1 Y Masonry Wall/Steel Roof
Dayton 1988 61,875 Y 87% 3.6 615 8 1 Y Masonry Wall/Steel Roof
Youngstown II 1988 55,525 Y 69% 3.9 497 7 1 N Masonry Wall/Steel Roof
Akron 1990 37,720 Y 90% 3.4 296 12 1 Y Masonry Wall/Steel Roof
Cleveland III 1986 68,110 Y 89% 3.4 570 12 1 Y Masonry Wall/Steel Roof
Cleveland IV 1978 65,125 Y 97% 3.5 554 5 1 Y Masonry Wall/Steel Roof
Cleveland V 1979 73,450 Y 89% 3.1 646 9 1&2 Y Masonry Wall/Rolled Roof
Cleveland VI 1979 46,625 Y 91% 2.6 361 8 1 Y Masonry Wall/Concrete Roof
Cleveland VII 1977 69,750 Y 92% 4.3 628 13 1 Y Masonry Wall/Steel Roof
Cleveland VIII 1970 45,275 Y 80% 5.7 395 6 1 Y Masonry Wall/Steel Roof
Cleveland IX 1982 53,748 Y 80% 4.4 291 5 1 Y Masonry Wall/Steel Roof
Cleveland X 1989 47,050 Y 84% 5.8 380 6 1 N Metal Wall/Metal Roof
Warren-Elm 1986 60,230 N N/A 7.3 498 8 1 Y Masonry Wall/Metal Roof
Warren-Youngstown 1986 59,137 N N/A 5.0 550 11 1 N Masonry Wall/Metal Roof
<PAGE>
Pennsylvania
Allentown 1983 30,000 Y 98% 6.3 277 7 1 Y Masonry Wall/Shingle Roof
Sharon 1975 37,200 Y 91% 3.0 314 5 1 Y Steel Bldg./Steel Roof
Harrisburg I 1983 48,746 Y 92% 4.1 475 9 1 Y Masonry Wall/Steel Roof
Harrisburg II 1985 58,800 Y 89% 9.2 299 10 1 Y Masonry Wall/Steel Roof
Pittsburgh 1990 57,375 Y 87% 3.4 551 6 1 Y Steel Bldg./Steel Roof
Pittsburgh II 1983 75,875 Y 84% 4.8 732 4 2 Y Masonry Wall/Shingled Roof
Harrisburg III 1984 63,740 N 95% 4.1 614 9 1 Y Masonry Wall/Metal Roof
Rhode Island
Providence 1984 37,825 Y 84% 3.7 397 7 1 Y Masonry Wall/Tar & Gravel Roof
East Greenwich 1984/88 71,190 N N/A 4.9 670 9 1 Metal Wall/Metal Roof
South Carolina
Charleston I 1985 51,445 Y 87% 3.3 421 11 1 Y Steel Bldg./Mas. Wall/Steel Roof
Columbia I 1985 47,650 Y 69% 3.3 410 7 1 Y Steel Bldg./Steel Roof
Columbia II 1987 59,000 Y 81% 6.0 464 8 1 N Steel Bldg./Steel Roof
Columbia III 1989 41,200 Y 77% 3.5 354 5 2 Y Steel Bldg./Steel Roof
Columbia IV 1986 56,000 Y 83% 5.6 446 7 1 Y Steel Bldg./Steel Roof
Spartanburg 1989 49,500 Y 83% 3.6 350 6 1 Y Steel Bldg./Steel Roof
Charleston II 1985 41,038 Y 96% 2.2 335 10 1 Y Masonry Wall/Steel Roof
Tennessee
Hixon 1985 42,175 N N/A 2.7 345 3 1 Y Masonry Wall/Metal Roof
Chattonooga-Lee Hwy 1987 37,250 N N/A 3.3 390 6 1 Y Masonry Wall/Metal Roof
Chattanooga-Hwy 58 1985 35,405 N N/A 2.4 325 4 1 Y Masonry Wall/Metal Roof
Hendersonville 1986/97 93,665 N N/A 5.7 652 16 1 Y Masonry or Metal Wall/Metal Roof
Texas
Arlington I 1987 45,965 Y 92% 2.3 411 7 1 Y Masonry Wall/Steel Roof
Arlington II 1986 67,100 Y 75% 3.8 330 11 1 Y Masonry Wall/Steel Roof
Ft. Worth 1986 40,825 Y 86% 2.4 356 3 1 Y Masonry Wall/Asphalt Roof
San Antonio I 1986 48,280 Y 84% 3.9 486 12 1 Y Masonry Wall/Steel Roof
San Antonio II 1986 40,550 Y 81% 1.9 287 7 1 Y Masonry Wall/Steel Roof
San Antonio III 1981 48,782 Y 84% 2.6 495 5 1 Y Masonry Wall/Steel Roof
Universal 1985 35,100 Y 87% 2.4 427 8 1 Y Masonry Wall/Steel Roof
San Antonio IV 1995 44,600 Y 67% 5.4 372 11 1 Y Steel Bldg/Steel Roof
Houston I 1993/95 69,650 Y 70% 6.4 543 5 1 Y Metal Wall/Steel Roof
Houston II 1995 61,861 Y 86% 6.3 541 1 1 Y Metal Wall/Steel Roof
Houston III 1995 35,600 Y 69% 1.8 332 1 1 Y Metal Wall/Steel Roof
<PAGE>
Dallas-Skillman 1975 121,707 Y 85% 5.9 1,111 8 1&2 Y Masonry Wall/Steel Roof
Dallas-Cent. 1977 104,303 Y 84% 6.7 1,125 8 1&2 Y Masonry Wall/Steel Roof
Dallas-Samuell 1975 79,056 Y 93% 3.8 796 6 1&2 Y Masonry Wall/Steel Roof
Dallas-Hargrove 1975 71,938 Y 88% 3.1 747 5 1&2 Y Masonry Wall/Steel Roof
Houston IV 1984 75,500 Y 85% 4.1 670 9 1 Y Metal Wall/Metal Roof
Katy 1994 44,175 N N/A 8.6 439 10 1 Y Metal Wall/Metal Roof
Humble 1986 61,864 N N/A 2.3 599 6 1 Y Masonry Wall/Metal Roof
Virginia
Newport News I 1988 52,944 Y 93% 3.2 451 7 1 Y Steel Bldg./Steel Roof
Alexandria 1984 77,310 Y 78% 3.2 1,105 4 2 Y Masonry Wall/Tar & Gravel Roof
Norfolk I 1984 49,950 Y 89% 2.7 357 7 1 Y Steel Bldg./Steel Roof
Norfolk II 1989 45,375 Y 91% 2.1 363 4 1 Y Masonry Wall/Steel Roof
Richmond 1987 52,035 Y 84% 2.7 524 5 1 Y Masonry Wall/Steel Roof
Newport News II 1988/93 63,125 Y 95% 4.7 384 8 1 Y Steel Bldg./Steel Roof
Lynchburg I 1982 47,200 Y 85% 5.3 429 10 1 Y Masonry Wall/Steel Roof
Lynchburg II 1985 41,250 Y 66% 2.3 380 4 1 Y Masonry Wall/Steel Roof
Lynchburg III 1987 22,000 Y 81% 1.5 182 3 1 N Masonry Wall/Metal Roof
Christiansburg 1985/90 36,673 Y 84% 3.2 327 6 1 Y Masonry Wall/Metal Roof
Chesapeake 1988/95 35,901 Y 81% 12.0 271 7 1 Y Metal Wall/Steel Roof
Danville 1988 49,776 Y 81% 3.2 408 8 1 N Steel Wall/Metal Roof
Chesapeake-Military 1996 59,355 N N/A 3.0 600 3 1 N Masonry Wall/Metal Roof
Chesapeake-Volvo 1995 63,918 N N/A 4.0 544 4 1 N Masonry Wall/Metal Roof
Virginia Beach-Shell 1991 52,571 N N/A 2.5 587 5 1 N Masonry Wall/Metal Roof
Virginia Beach-Central 1993/95 97,522 N N/A 5.0 990 6 1 N Masonry Wall/Metal Roof
Norfolk-Naval Base 1975 126,691 N N/A 5.2 1,259 11 1 N Masonry Wall/Metal Roof
Lynchburg-Timberlake 1990/96 48,773 N N/A 5.2 450 7 1 N Masonry Wall/Metal Roof
Total for all Properties 10,246,982 807.4 1,477
91,789
</TABLE>
<PAGE>
ITEM 4. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT
Through Holdings, a wholly-owned subsidiary of the Company and
the sole general partner of the Operating Partnership, the Company manages
the business of the Operating Partnership. The Operating Partnership has
no directors or officers. No director or officer of the Company or
Holdings beneficially owns any Units.
The Company beneficially owns 12,330,963 Units which constitute
96.45% of all outstanding Units. No other person holds more than a 5%
beneficial ownership in the Operating Partnership.
ITEM 5. DIRECTORS AND EXECUTIVE OFFICERS
Through Holdings, a wholly-owned subsidiary of the Company and
the sole general partner of the Operating Partnership, the Company controls
the Operating Partnership. The Board of Directors of Holdings, the members
of which are the same as the members of the Board of Directors of the
Company, manages the affairs of the Operating Partnership by directing the
affairs of the general partner of the Operating Partnership. The Operating
Partnership has no directors, or executive officers. Consequently, this
Item 5 reflects information with respect to the directors and executive
officers of the Company and Holdings.
Robert J. Attea (Age 56): Chairman of the Board and Chief
Executive Officer of the Company and Holdings. Director of the Company and
Holdings since the completion of the Initial Offering on June 25, 1995.
From 1988 to 1995 Mr. Attea served as President and Chief Executive Officer
of the Company and was re-appointed Chief Executive Officer of the Company
and Holdings in March, 1997. From 1985 to 1988, he served as Director of
Acquisitions and Vice President of Property Management.
Kenneth F. Myszka (Age 49): President and Chief Operating
Officer of the Company and Holdings. Director of the Company and Holdings
since the completion of the Initial Offering on June 25, 1995. From
completion of the Initial Offering to the present, Mr. Myszka has served as
President and was the Chief Executive Officer of the Company and Holdings
until March 1997 at which time he became the Chief Operating Officer. From
1982 to 1995, Mr. Myszka served as Senior Vice President of the Company's
predecessor.
Charles E. Lannon (Age 50): Director of the Company and Holdings
since the completion of the Initial Offering on June 25, 1995. Mr. Lannon
was the predecessor company's Senior Vice President--Marketing from 1982 to
1995. Mr. Lannon left the employ of the Company to become the Chief
Executive Officer of an unrelated business owned by Mr. Lannon and other
Company founders.
John E. Burns (Age 51): Director of the Company since the
completion of the Initial Offering on June 25, 1995. Director of Holdings
since April 1, 1998. Since 1980, John Burns has been President and founder
of Sterling Ltd. Co., an Ohio based tax and financial counseling firm of
which he also currently serves as Chairman. Mr. Burns also serves as
Chairman and founder of Sterling Asset Management, Co., managing client
assets in excess of $130 million and President of SLC Capital, Inc., a
general partner of several investment partnerships. In addition, Mr. Burns
serves as Chairman of Fitworks Holding, LLC and is Chairman of the Champion
Boxed Beef Co.
<PAGE>
Michael A. Elia (Age 46): Director of the Company since the
completion of the Initial Offering on June 25, 1995. Director of Holdings
since April 1, 1998. Since 1984 Michael Elia has been President, Chief
Executive Officer and a director of Sevenson Environmental Services, Inc.,
an environmental remediation contractor. He is also President and a
director of Sevenson International Services, Inc. and a director of
Sevenson Industrial Services, Inc., affiliates of Sevenson Environmental
Services, Inc.
Anthony P. Gammie (Age 63): Director of the Company since the
completion of the Initial Offering on June 25, 1995. Director of Holdings
since April 1, 1998. From 1985 through 1996, Mr. Gammie was Chairman of
the Board of Bowater Incorporated. During the past 5 years he has served
as a director of Alumax, Inc., The Bank of New York and The American Forest
& Paper Association. He is currently a director of Lipper/Leumi High
Income Bond Fund, Inc. located in Curacao, Netherlands Antilles.
David L. Rogers (Age 42): From June 25, 1995 to the present,
David L. Rogers has served as the Company's and Holding's Chief Financial
Officer and Secretary. From 1988 to 1995, Mr. Rogers served as the
Company's Vice President of Finance. From 1984 to 1988, Mr. Rogers served
as Controller and Due Diligence Officer.
ITEM 6. EXECUTIVE COMPENSATION
Through Holdings, a wholly-owned subsidiary of the Company and
the sole general partner of the Operating Partnership, the Company controls
the Operating Partnership. The Board of Directors of Holdings, the members
of which are the same as the members of the Board of Directors of the
Company, manages the affairs of the Operating Partnership by directing the
affairs of the general partner of the Operating Partnership. The Directors
and Officers of Holdings receive their compensation from the Company and
are not separately compensated by Holdings. Consequently, the information
provided in this Item 6 reflects compensation paid to the Directors and
executive officers of the Company.
Compensation of Directors
The Company pays its Directors who are not also officers of the
Company an annual fee of $12,500 in cash. Outside Directors are also paid
a meeting fee of $1,000 for each special meeting attended. In addition,
the Company will reimburse all Directors for expenses incurred in attending
meetings. Pursuant to the Directors' Option Plan, each Director who is not
an officer or employee of the Company is granted, effective as of the
Director's initial election or appointment, a ten year option to acquire
2,500 Common Shares at the fair market value on the date of grant, and
will, as of the close of each annual shareholders' meeting thereafter, be
granted a ten-year option to acquire an additional 2,500 Common Shares at
the fair market value of the Common Stock on the date of grant. The
initial options for 2,500 Common Shares were exercisable one year from the
date of grant, June 22, 1996; the Directors' options awarded thereafter
vest immediately. The exercise price is payable in cash.
Executive Officers
The following table sets forth the compensation awarded to each
of the Executive Officers of the Company during each of the fiscal years
ended December 31, 1997, 1996 and 1995.
<PAGE>
SUMMARY COMPENSATION TABLE
Long-Term
Compensation
Annual Compensation Awards
Securities
Restricted Underlying
Fiscal Base Stock Option/SARS
Name and Principal Position Year Salary($) Bonus($) Award(s) (#)
Robert J. Attea 1997 $131,250 $ 0 $0 0
Chairman of the Board and 1996 110,000 40,000 0 0
Chief Executive Officer 1995 98,425 12,500 0 45,000
Kenneth F. Myszka 1997 131,250 0 0 0
President and 1996 110,000 40,000 0 0
Chief Operating Officer 1995 98,425 12,500 0 45,000
David L. Rogers 1997 131,250 0 0 0
Chief Financial Officer 1996 110,000 40,000 0 0
and Secretary 1995 98,425 12,500 83,486 45,000
FISCAL YEAR END OPTION VALUES
Number of Unexercised Value of Options at
Options at Year End (#) Year-End($)(1)
Name Exercisable Unexercisable Exercisable Unexercisable
Robert J. Attea 22,500 22,500 $212,344 $212,344
Kenneth F. Myszka 22,500 22,500 $212,344 $212,344
David L. Rogers 22,500 22,500 $212,344 $212,344
______________
(1) Based upon the closing price of the Company's Stock on the New York
Stock Exchange on December 31, 1997 at $32.4375 per share and the
grant price of $23.00 per share.
<PAGE>
Employment Agreements
Concurrently with the Initial Offering, the Company entered into
employment agreements with Messrs. Attea, Myszka and Rogers that require
each of them to devote their full business time to the Company. Each
employment agreement has a three year term with an automatic extension each
year for an additional year. The employment agreements provide for certain
severance payments in the event of the executive's death or disability, his
termination without cause or his resignation with good reason. Each
employment agreement prohibits the executive, during employment and during
the two year period following termination of employment, from engaging in
the self storage business.
ITEM 7. CERTAIN TRANSACTIONS
The Company has a Facilities Services Agreement with several
businesses owned by the executive officers and Mr. Lannon, whereby such
businesses pay for the use of certain common facilities in the Company's
offices based upon an arm's-length charge. Charges under the Facilities
Services Agreement are periodically reviewed by the Audit Committee of the
Company's Board of Directors.
The law firm of Phillips, Lytle, Hitchcock, Blaine & Huber LLP
has represented and is currently representing the Company and the Operating
Partnership. Robert J. Attea is the brother of a partner of Phillips,
Lytle, Hitchcock, Blaine & Huber LLP.
ITEM 8. LEGAL PROCEEDINGS
Robert J. Amsdell, a former business associate of certain
officers and directors of the Company, including Robert J. Attea,
Charles E. Lannon, Kenneth F. Myszka and David L. Rogers, filed a lawsuit
against the Company on June 13, 1995 in the United States District Court
for the Northern District of Ohio in connection with the formation of the
Company as a REIT and related transactions, as well as the Initial
Offering. On April 29, 1996, Mr. Amsdell filed a first amended complaint
and on September 24, 1997, a second amended complaint was filed. The
complaint alleges, among other things, breach of fiduciary duty, breach of
contract, breach of general partnership/joint venture arrangement, fraud
and deceit, breach of duty of good faith and other causes of action
including a declaratory judgment as to Mr. Amsdell's continuing interest in
the Company. Mr. Amsdell is seeking money damages in excess of $15
million, as well as punitive damages and declaratory and injunctive relief
(including the imposition of a constructive trust on assets of the Company
in which Mr. Amsdell claims to have a continuing interest) and an
accounting. The first amended complaint also added Messrs. Attea, Lannon,
Myszka and Rogers as additional defendants. The parties are currently
involved in discovery. The Company intends to vigorously defend the
lawsuit. Messers. Attea, Lannon, Myszka and Rogers have agreed to
indemnify the Company for any loss arising from the lawsuit. The Operating
Partnership believes that the actual amount of Mr. Amsdell's recovery in
this matter, if any, would be within the ability of these individuals to
provide indemnification. The Operating Partnership does not believe that
the lawsuit will have a material adverse effect upon the Operating
Partnership.
<PAGE>
ITEM 9. MARKET PRICE AND DISTRIBUTIONS AND RELATED SECURITY
HOLDER MATTERS
There is no established public trading market for the Units. As
of June 15, 1998, there were 14 holders of record of Units.
The following table sets forth the quarterly distributions per
Unit paid by the Operating Partnership to holders of its Units with respect
to each such period.
Quarter Ended Distributions Per Unit
June 30, 1995 $.025
September 30, 1995 .505
December 31, 1995 .505
March 31, 1996 .505
June 30, 1996 .505
September 30, 1996 .520
December 31, 1996 .520
March 31, 1997 .520
June 30, 1997 .520
September 30, 1997 .540
December 31, 1997 .540
March 31, 1998 .540
The partnership agreement of the Operating Partnership (the
"Partnership Agreement") provides that the Operating Partnership will
distribute all available cash (as defined in the Partnership Agreement) on
at least a quarterly basis, in amounts determined by the general partner in
its sole discretion, to the partners in accordance with their respective
percentage interest in the Operating Partnership. Distributions are
declared at the discretion of the Board of Directors of Holdings, the
general partner of the Operating Partnership and a wholly-owned subsidiary
of the Company, and will depend on actual funds from operations of the
Operating Partnership, its financial condition, capital requirements, the
annual distribution requirements under the REIT provisions of the Internal
Revenue Code of 1986, as amended, and such other factors as the Board of
Directors may deem relevant. The Board of Directors of Holdings may modify
the Operating Partnership's distribution policy from time to time, subject
to the terms of the Partnership Agreement.
The Operating Partnership's line of credit contains customary
representations, covenants and events of default, including covenants which
restrict the ability of the Operating Partnership to make distributions in
excess of stated amounts. In general, during any four consecutive fiscal
quarters the Operating Partnership may only distribute up to 90% of the
Operating Partnership's funds from operations (as defined in the related
agreement). The line of credit contains exceptions to these limitations to
allow the Operating Partnership to make any distributions necessary to
allow the Company to maintain its status as a REIT. The Operating
Partnership does not anticipate that this provision will adversely effect
the ability of the Operating Partnership to make distributions, as
currently anticipated.
ITEM 10. RECENT SALES OF UNREGISTERED SECURITIES
During the past three years, the Operating Partnership has issued
Units in private placements in reliance on the exemption from registration
<PAGE>
under Section 4(2) of the Securities Act of 1933, as amended, in the
amounts and for the consideration set forth below:
- On June 26 and July 25, 1995, the Company transferred
$148,244,000 to the Operating Partnership in exchange for
7,466,749.29 Units and Holdings transferred $1,496,000 to
the Operating Partnership in exchange for 75,421.71 general
partnership units.
- On January 20, 1996, in connection with the Sovran Self
Storage, Inc. 1995 Award and Option Plan, the Operating
Partnership issued 1980 Units to the Company and 20 general
partnership units to Holdings.
- On July 25, 1996, Thomas Hinkel and Hinkel Investment
Limited Partnership transferred their interest in a self-
storage facility to the Operating Partnership in exchange
for 6,327.8 and 12,459.37 Units, respectively.
- On October 1, 1996, the Company transferred $65,959,000 to
the Operating Partnership in exchange for 2,710,000 Units
and Holdings transferred $974,000 to the Operating
Partnership in exchange for 40,000 general partnership
units.
- On October 8, 1996, the Company transferred $9,940,000 to
the Operating Partnership in exchange for 408,375 Units and
Holdings transferred $100,000 to the Operating Partnership
in exchange for 4,125 general partnership units.
- On December 18, 1996, Harold Samloff and Laurence Glaser
transferred their interest in a self-storage facility to the
Operating Partnership in exchange for 60,571.425 Units for
each of them.
- On February 26, 1997, the Company transferred $34,500 to the
Operating Partnership in exchange for 1,500 Units in
connection with the Sovran Self Storage, Inc. 1995 Award and
Option Plan.
- On March 31, 1977, Montague-Betts Company and D.W.B.
Associates transferred their interests in certain self-
storage properties to the Operating Partnership in exchange
for 214,974.46 and 28,953.02 Units, respectively.
- On April 22, 1997, the Company transferred $39,148,000 to
the Operating Partnership in exchange for 1,400,000 Units
and Holdings transferred $2,796,000 to the Operating
Partnership in exchange for 100,000 general partnership
units.
- On May 21, 1997, in connection with the Sovran Self Storage,
Inc. 1995 Award and Option Plan, the Company transferred
$51,750 to the Operating Partnership in exchange for 2,250
units.
- On June 22, 1997, in connection with the Sovran Self
Storage, Inc. 1995 Award and Option Plan, the Company
<PAGE>
transferred $34,500 to the Operating Partnership in exchange
for 1,500 Units.
- On June 23, 1997, in connection with the Sovran Self
Storage, Inc. 1995 Award and Option Plan, the Company
transferred $69,000 to the Operating Partnership in exchange
for 3,000 Units.
- On June 24, 1997, in connection with the Sovran Self
Storage, Inc. 1995 Award and Option Plan, the Company
transferred $69,000 to the Operating Partnership in exchange
for 3,000 Units.
- On June 26, 1997, in connection with the Sovran Self
Storage, Inc. 1995 Award and Option Plan, the Company
transferred $69,000 to the Operating Partnership in exchange
for 3,000 Units.
- On November 12, 1997, in connection with the Sovran Self
Storage, Inc. 1995 Award and Option Plan, the Operating
Partnership issued 200 Units to the Company.
- On December 2, 1997 Frank Bingman, Joseph & Beverly Snyder,
Morgan Whiteley and Marlene Whiteley transferred their
interest in a self-storage facility to the Operating
Partnership in exchange for 19,917.0124, 19,917.0124,
9,958.5062 and 9,958.5062 Units, respectively.
- On February 4, 1998, the Company transferred its interest in
a self-storage facility to the Operating Partnership in
exchange for 109,841.25 Units.
- On June 12, 1998, Lawrence Moss and William Caldwell
transferred their interest in a self-storage facility to the
Operating Partnership in exchange for 10,000 units.
ITEM 11. DESCRIPTION OF REGISTRANT'S SECURITIES TO BE REGISTERED
General
The following description is only a summary of certain provisions
of the Partnership Agreement and is subject to, and qualified in its
entirety by, the Partnership Agreement, a copy of which has been filed with
the Securities and Exchange Commission.
Voting Rights
Under the Partnership Agreement, the Operating Partnership's
limited partners (the "Limited Partners") do not have voting rights
relating to the operation and management of the Operating Partnership
except in connection with certain amendments to the Partnership Agreement,
dissolution of the Operating Partnership and the sale or exchange of all or
substantially all of the Operating Partnership's assets, including mergers
or other combinations.
<PAGE>
Vote Required to Dissolve the Operating Partnership
Under Delaware law and the terms of the Partnership Agreement,
the Operating Partnership may be dissolved upon the consent of the general
partner of the Operating Partnership (the "General Partner") and the vote
of Limited Partners (including the Company) holding at least 75% of the
percentage interests of the Limited Partners.
Vote Required to Sell Assets or Merge
Under the Partnership Agreement, except in certain circumstances,
the Operating Partnership may not sell, exchange, transfer or otherwise
dispose of all or substantially all of its assets, including by way of
merger or consolidation or other combination of the Operating Partnership,
without the consent of the Limited Partners (including the Company) holding
75% or more of the percentage interests of the Limited Partners.
Currently, the Company holds 94.7% of the percentage interests of the
Limited Partners.
Meetings of the Partners
Meetings of the partners may be called by the General Partner and
must be called by the General Partner upon receipt of a written request by
Limited Partners holding 20% or more of the partnership interests. The
notice must state the nature of the business to be transacted, and must be
given to all partners not less than seven (7) days nor more than thirty
(30) days prior to the date of such meeting. Partners may vote in person
or by proxy at such meeting. Partners can act without a meeting with the
written consent of holders of 75% or more of the percentage interests of
the partners.
Transferability of Interests
Holdings may not transfer any of its general partner interest or
withdraw as the general partner of the Operating Partnership or transfer
any of its general partnership units, and the Company may not transfer any
of its Units, except in certain specifically identified types of
transactions, including under certain circumstances in the event of a
merger, consolidation or sale of all or substantially all of the assets of
the Company or the General Partner.
The Limited Partners (other than the Company) generally may
transfer their interests in the Operating Partnership, in whole or in part,
without the consent of the General Partner. No Limited Partner has the
right to substitute a transferee as a Limited Partner in its place without
the consent of the General Partner, which consent may be withheld in the
sole discretion of the General Partner. If the General Partner does not
consent to the admission of a permitted transferee, the transferee shall be
considered an assignee of an economic interest in the Operating Partnership
but will not be a holder of Units for any other purpose; as such the
assignee will not be permitted to vote on any affairs or issues on which a
Limited Partner may vote.
Issuance of Additional Units
The Operating Partnership is authorized to issue Units and other
partnership interests to its partners or to other persons for such
consideration and on such terms and conditions as the General Partner, in
<PAGE>
its sole discretion, may deem appropriate. In addition, the Company may
cause the Operating Partnership to issue to the Company additional Units,
or other partnership interests in different series or classes which may be
senior to the Units, in conjunction with an offering of securities of the
Company having substantially similar rights and in which the proceeds
thereof are contributed to the Operating Partnership. No Limited Partner
has any preemptive, preferential or similar rights with respect to
additional capital contributions to the Operating Partnership or the
issuance or sale of any interests therein.
Redemption Rights
Pursuant to the Partnership Agreement, the Limited Partners
(other than the Company) have redemption rights which, subject to certain
limitations, enable them to cause the Operating Partnership to redeem each
Unit for cash equal to the market value of a Common Share or, at the
Company's election, the Company may purchase each Unit offered for
redemption for cash or one Common Share (the "Redemption Rights").
Management Liability and Indemnification
The Partnership Agreement generally provides that the General
Partner will incur no liability to the Operating Partnership or any Limited
Partner for losses sustained or liabilities incurred as a result of errors
in judgment or of any act or omission if the General Partner acted in good
faith. In addition, the General Partner is not responsible for any
misconduct or negligence on the part of its agents provided the General
Partner appointed such agents in good faith. The General Partner may
consult with legal counsel, accountants, appraisers, management
consultants, investment bankers and other consultants and advisors, and any
action it take or omits to take in reliance upon the opinion of such
persons, as to matters which the General Partner reasonably believes to be
within their professional or expert competence, shall be conclusively
presumed to have been done or omitted in good faith and in accordance with
such opinion. The Partnership Agreement also provides for indemnification
of the General Partner, the directors and officers of the General Partner,
and such other persons as the General Partner may from time to time
designate, against any and all losses, claims, damages, liabilities, joint
or several, expenses (including, without limitation, attorney's fees and
other legal fees and expenses), judgments, fines, settlements and other
amounts arising from any and all claims, demands, actions, suits or
proceedings, civil, criminal, administrative or investigative, that relate
to the operations of the Operating Partnership in which such person may be
involved.
Amendment
Amendments to the Partnership Agreement may be proposed by the
General Partner or by Limited Partners holding twenty percent (20%) or more
of the partnership interests and generally require approval of Limited
Partners (including the Company) holding a majority of the outstanding
Limited Partner interests. Certain amendments that would, among other
things, convert a Limited Partner's interest to a General Partner interest,
modify the limited liability of a Limited Partner in a manner adverse to
such Limited Partner, alter rights of a Limited Partner to receive
distributions or allocations, alter or modify the Redemption Rights in a
manner adverse to a Limited Partner, or cause the termination of the
<PAGE>
Operating Partnership prior to the expiration of the term of the
Partnership Agreement, require the consent of each Limited Partner
adversely affected by such amendment.
Management Fees and Expenses
Holdings may not be compensated for its services as General
Partner. However, Holdings and/or the Company may be reimbursed for all
expenses that they incur relating to the ownership and operation of, or for
the benefit of, the Operating Partnership.
Distributions and Allocations
The Partnership Agreement provides that the Operating Partnership
will distribute all available cash (as defined in the Partnership
Agreement) on at least a quarterly basis, in amounts determined by the
General Partner in its sole discretion, to the partners in accordance with
their respective percentage interest in the Operating Partnership. Upon
liquidation of the Operating Partnership, after payment of, or adequate
provision for, debts and obligations of the Operating Partnership,
including any partner loans, any remaining assets of the Operating
Partnership will be distributed to all partners with positive capital
accounts in accordance with their respective positive capital account
balances.
Profit and loss of the Operating Partnership for each fiscal year
of the Operating Partnership generally will be allocated among the partners
in accordance with their respective interest in the Operating Partnership.
Taxable income and loss will be allocated in the same manner, subject to
compliance with the provisions of Code sections 704(b) and 704(c) and
Treasury Regulations promulgated thereunder.
Term
The Operating Partnership will continue until December 31, 2094,
or until sooner dissolved upon (i) withdrawal of the General Partner
(unless the Limited Partners elect to continue the Operating Partnership),
(ii) through December 31, 2053, an election to dissolve the Operating
Partnership made by the General Partner with the consent of the Limited
Partners (including the Company) holding 75% or more of the limited partner
interests in the Operating Partnership, (iii) on or after January 1, 2054,
an election to dissolve the Operating Partnership made by the General
Partner in its sole and absolute discretion, (iv) entry of a decree of
judicial dissolution, (v) the sale of all or substantially all of the
assets of the Operating Partnership, or (vi) a final and non-appealable
judgment ruling the General Partner bankrupt or insolvent (unless the
Limited Partners elect to continue the Operating Partnership prior to the
entry of such order or judgment).
Tax Matters
Pursuant to the Partnership Agreement, the General Partner will
be the tax matters partner of the Operating Partnership and, as such, will
have authority to handle tax audits and to make tax elections under the
Code on behalf of the Operating Partnership.
<PAGE>
ITEM 12. INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Partnership Agreement generally provides that the General
Partner will incur no liability to the Operating Partnership or any Limited
Partner for losses sustained or liabilities incurred as a result of errors
in judgment or of any act or omission if the General Partner acted in good
faith. In addition, the General Partner is not responsible for any
misconduct or negligence on the part of its agents provided the General
Partner appointed such agents in good faith. The General Partner may
consult with legal counsel, accountants, appraisers, management
consultants, investment bankers and other consultants and advisors, and any
action it take or omits to take in reliance upon the opinion of such
persons, as to matters which the General Partner reasonably believes to be
within their professional or expert competence, shall be conclusively
presumed to have been done or omitted in good faith and in accordance with
such opinion. The Partnership Agreement also provides for indemnification
of the General Partner, the directors and officers of the General Partner,
and such other persons as the General Partner may from time to time
designate, against any and all losses, claims, damages, liabilities, joint
or several, expenses (including, without limitation, attorney's fees and
other legal fees and expenses), judgments, fines, settlements and other
amounts arising from any and all claims, demands, actions, suits or
proceedings, civil, criminal, administrative or investigative, that relate
to the operations of the Operating Partnership in which such person may be
involved.
The Operating Partnership is managed by Holdings, which serves as
general partner of the Operating Partnership. Holdings is a wholly-owned
subsidiary of the Company.
The Company is a Maryland corporation. Under Maryland law, a
corporation formed in Maryland is permitted to limit, by provision in its
Articles of Incorporation, the liability of directors and officers so that
no director or officer of the Company shall be liable to the Company or to
any shareholder for money damages except to the extent that (i) the
director or officer actually received an improper benefit in money,
property, or services, for the amount of the benefit or profit in money,
property, or services actually received, or (ii) a judgment or other final
adjudication adverse to the director or officer is entered in a proceeding
based on a finding in a proceeding that the director's or officer's action
was the result of active and deliberate dishonesty and was material to the
cause of action adjudicated in the proceeding. The Company's Articles of
Incorporation have incorporated the provisions of such law limited the
liability of directors and officers. Holding's Certificate of
Incorporation contains similar provisions that are consistent with Delaware
law.
The Company's Bylaws require it to indemnify, to the full extent
of Maryland law, any present or former director or officer (and such
person's spouse and children) (an "Indemnitee") who is or was a party or
threatened to be made a party to any proceeding by reason of his or her
service in that capacity, against all expenses, judgments, fines and
amounts paid in settlement actually and reasonably incurred by him or her
in connection with the proceeding, provided that the Company shall have
received a written affirmation by the Indemnitee that he or she has met the
standard of conduct necessary for indemnification by the Company as
authorized by the Bylaws. The Company shall not be required to indemnify
an Indemnitee if (a) it is established that (i) the Indemnitee's act or
<PAGE>
omission was committed in bad faith or was the result of active or
deliberate dishonesty, (ii) the Indemnitee actually received an improper
personal benefit in money, property or services or (iii) in the case of a
criminal proceeding, the Indemnitee had reasonable cause to believe that
the Indemnitee's act or omission was unlawful, (b) the proceeding was
initiated by the Indemnitee, (c) the Indemnitee received payment for such
expenses pursuant to insurance or otherwise or (d) the proceeding arises
under Section 16 of the Securities Exchange Act of 1934, as amended.
Pursuant to the Bylaws, the Indemnitee is required to repay the amount paid
or reimbursed by the Company if it shall ultimately be determined that the
standard of conduct was not met. The Company's Bylaws also permit the
Company to provide such other and further indemnification or payment or
reimbursement of expenses as may be permitted by the MGCL or to which the
Indemnitee may be entitled. Holdings' bylaws contain similar provisions
that are consistent with Delaware law.
Each of the Company's officers and directors (the "Indemnitees")
has entered into an indemnification agreement with the Company (the
"Indemnitor"). The indemnification agreements require, among other things,
that the Indemnitor indemnify the Indemnitees to the fullest extent
permitted by law and advance to the Indemnitees all related expenses,
subject to reimbursement if it is subsequently determined that
indemnification is not permitted. Under these agreements, the Indemnitors
also must indemnify and advance all expenses incurred by the Indemnitees
seeking to enforce their rights under the indemnification agreements, and
cover such Indemnitees under the Company's director's and officers'
liability insurance. Although the form of indemnification agreement offers
substantially the same scope of coverage afforded by provisions in the
Company's Articles of Incorporation and Bylaws, it provides greater
assurance to directors and officers that indemnification will be available
because, as a contract, it cannot be modified unilaterally in the future by
the Board of Directors or by the Company's shareholders to eliminate the
rights it provides.
ITEM 13. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
See "Financial Statements Table of Contents" on page F-1 of this
Form 10. See also the Company's Current Report on Form 8-K filed
October 24, 1997, Amended Current Report on Form 8-K/A dated April 17,
1998, and Current Report on Form 8-K dated June 10, 1998 with respect to
the historical summaries of combined gross revenue and direct operating
expenses of certain acquired and acquisition Properties.
ITEM 14. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
Not Applicable.
ITEM 15. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial Statements and Financial Statement Schedules
See "Financial Statements Table of Contents" on page F-1 of this
Form 10.
<PAGE>
(b) Exhibits
Exhibit No. Description
3.1* Agreement of Limited Partnership of
the Operating Partnership, as amended
3.2** Amended and Restated Articles of
Incorporation of the Company
3.3** By-laws of the Company
3.4 Articles Supplementary of the Articles of
Incorporation of the Company classifying and
designating the Company's Series A Junior
Participating Preferred Stock (Incorporated
by reference to Exhibit 3.1 to the Company's
Form 8A filed December 3, 1996)
10.1* Revolving Credit Agreement between the
Company, the Operating Partnership, Fleet
National Bank and other lenders named therein
10.2** Form of Non-competition Agreement between the
Company and Charles E. Lannon
10.3** Form of Non-competition Agreement between the
Company and Robert J. Attea
10.4** Form of Non-competition Agreement between the
Company and Kenneth F. Myszka
10.5** Form of Non-competition Agreement between the
Company and David L. Rogers
10.6** Sovran Self Storage, Inc. 1995 Award and
Option Plan
10.7** 1995 Sovran Self Storage, Inc. Directors'
Option Plan
10.8** Sovran Self Storage Incentive Compensation
Plan for Executive Officer
10.9** Restricted Stock Agreement between the
Company and David L. Rogers
10.10** Form of Supplemental Representations,
Warranties and Indemnification Agreement
among the Company and Robert J. Attea,
Charles E. Lannon, Kenneth F. Myszka and
David L. Rogers
10.11** Form of Pledge Agreement among the Company
and Robert J. Attea, Charles E. Lannon,
Kenneth F. Myszka and David L. Rogers
<PAGE>
10.12** Form of Indemnification Agreement between the
Company and certain Officers and Directors of
the Company
10.13** Form of Subscription Agreement (including
Registration Rights Statement) among the
Company and subscribers for 422,171 Common
Shares
10.14** Form of Registration Rights and Lock-Up
Agreement among the Company and Robert J.
Attea, Charles E. Lannon, Kenneth F. Myszka
and David L. Rogers
10.15** Form of Facilities Services Agreement between
the Company and Williamsville Properties,
Inc.
27.1* Financial Data Schedule
_________________
* Previously filed.
** Incorporated by reference to the exhibits as filed with the Company's
Registration Statement on Form S-11 (File No. 33-91422) filed June 19,
1995.
<PAGE>
Financial Statements
Table of Contents
Sovran Acquisition Limited Partnership
Page
I
Pro Forma
Unaudited Pro Forma Financial Information . . . . . . . . . . . . . . .F-2
Unaudited Pro Forma Balance Sheet as of March 31, 1998. . . . . . . . .F-3
Unaudited Pro Forma Statement of Operations for the
three months ended March 31, 1998 . . . . . . . . . . . . . . . . . .F-4
Unaudited Pro Forma Statement of Operations for the
Year Ended December 31, 1997. . . . . . . . . . . . . . . . . . . . .F-5
Notes to Unaudited Pro Forma Financial Statements . . . . . . . . . . .F-6
II
Historical
Balance Sheet at March 31, 1998 (unaudited) . . . . . . . . . . . . . .F-8
Statements of Operations of the Operating Partnership for
the three months ended March 31, 1998 and 1997 (unaudited). . . . . .F-9
Statements of Cash Flows of the Operating Partnership for
the three months ended March 31, 1998 and 1997 (unaudited). . . . . F-10
Notes to Financial Statements March 31, 1998 (unaudited). . . . . . . F-11
Report of Independent Auditors. . . . . . . . . . . . . . . . . . . . F-14
Balance Sheets at December 31, 1997 and 1996. . . . . . . . . . . . . F-15
Statements of Operations of the Operating Partnership
for the Years ended December 31, 1997 and 1996 and the period
from June 26, 1995 to December 31, 1995 and the Company
Predecessors for the period January 1, 1995 to June 25, 1995 . . F-16
Combined Statement of Owners' Equity for the Company
Predecessors for the Period January 1, 1995 to June 25, 1995 . . F-17
Statement of Partners' Capital of the Operating Partnership
for the Years ended December 31, 1997 and 1996 and the period
ended December 31, 1995. . . . . . . . . . . . . . . . . . . . . F-18
Statements of Cash Flows of the Operating Partnership
for the Years ended December 31, 1997 and 1996 and the period
from June 26, 1995 to December 31, 1995 and the Company
Predecessors for the period January 1, 1995 to June 25, 1995 . . F-19
Notes to Financial Statements December 31, 1997 . . . . . . . . . . . F-20
III
Historical
Financial Statement Schedule
Report of Independent Auditors. . . . . . . . . . . . . . . . . . . . .F-30
Schedule of Combined Real Estate and Accumulated Depreciation . . . . .F-31
<PAGE>
Sovran Acquisition Limited Partnership
Pro Forma Financial Information
The following unaudited Pro Forma Balance Sheet as of March 31,
1998 and unaudited Pro Forma Statements of Operations for the three months
ended March 31, 1998 and the year ended December 31, 1997, have been
prepared to reflect the Operating Partnership's acquisition or expected
acquisition of self storage facilities and the adjustments described in the
accompanying notes. The pro forma financial information is based on (i.)
the historical financial statements of Sovran Acquisition Limited
Partnership included in elsewhere in this Form-10 for the three months
ended March 31, 1998 and the year ended December 31, 1997, (ii) the
historical summaries of combined gross revenue and direct operating
expenses included in the Company's 8-K Report filed October 24, 1997,
(iii) the historical summaries of combined gross revenue and direct
operating expenses included in the Company's 8-K/A Report dated April 17,
1998, and (iv) the historical summaries of combined gross revenue and
direct operating expenses included in the Company's 8-K Report dated
June 10, 1998 , and should be read in conjunction with those financial
statements and notes thereto. The Pro Forma Combined Balance Sheet was
prepared as if the 12 facilities that were purchased or are expected to be
purchased after March 31, 1998, were acquired at that date. The Pro Forma
Combined Statements of Operations were prepared as if the 44 self storage
facilities acquired in 1997 and the 30 facilities acquired or expected to
be acquired in 1998 were purchased at the beginning of 1997. The combined
pro forma financial information is not necessarily indicative of the
financial position or results of operations which actually would have
occurred if such transactions had been consummated on the dates described,
nor does it purport to represent the Company's future financial position or
results of operations.
<PAGE>
Sovran Acquisition Limited Partnership
Pro Forma Balance Sheet
March 31, 1998
(in thousands)
(unaudited)
Facilities
Sovran Acquired Pro Forma
Acquisition Since Sovran
Limited March 31, Acquisition
Partnership 1998 Limited
(Note 1) (Note 2) Partnership
Assets
Investment in storage facilities, net $ 376,792 $42,046 $418,838
Cash and cash equivalents 2,987 - 2,987
Accounts receivable 1,204 5 1,209
Prepaid expenses and other assets 3,484 19 3,503
Total Assets $ 384,467 $42,070 $426,537
=====================================
Liabilities
Line of credit $ 88,000 $41,288 $129,288
Accounts payable and accrued liabilities 4,955 173 5,128
Deferred revenue 2,506 336 2,842
Accrued distributions 6,899 - 6,899
Mortgage payable 3,059 - 3,059
Total liabilities 105,419 41,797 147,216
Limited partners' capital interest 13,170 273 13,443
Partners' Capital
General partner 5,244 - 5,244
Limited partner 260,634 - 260,634
Total partners' capital 265,878 - 265,878
Total liabilities and
partners' capital $ 384,467 $ 42,070 $426,537
=====================================
<PAGE>
<TABLE>
<CAPTION>
Sovran Acquisition Limited Partnership
Pro Forma Statement of Operations
Three Months ended March 31, 1998
(in thousands, except unit information)
(unaudited)
Preacquisi-
tion Pro
Forma For
Facilities Facilities
Sovran Acquired in Acquired Pro Forma
Acquisition Period ended Since 1998 Sovran
Limited March 31, March 31, Facilities Acquisition
Partnership 1998 1998 Pro Forma Limited
(Note 1) (Note 3) (Note 5) Adjustments Partnership
<S> <C> <C> <C> <C> <C>
Revenues
Rental Income $ 14,175 $ 950 $ 1,401 $ - $ 16,526
Interest and other income 200 28 21 - 249
Total revenue 14,375 978 1,422 - 16,775
Expenses
Property operations and
maintenance 2,818 223 286 - 3,327
Real estate taxes 1,188 76 87 - 1,351
General and administrative 854 43 - 8 (a) 905
Interest 1,215 435 - 645 (b) 2,295
Depreciation and amortization 2,097 146 - 211 (c) 2,454
Income before extraordinary item 6,203 55 1,049 (864) 6,443
Extraordinary Item -
extinguishment of debt 350 - - - 350
Net Income $ 5,853 $ 55 $ 1,049 $ (864) $ 6,093
===================================================================
Earnings per unit before
extraordinary item-basic $ 0.49 $ 0.50
Extraordinary item (0.03) (0.02)
<PAGE>
Earnings per unit - basic $ 0.46 $ 0.48
Earnings per unit - diluted $ 0.46 $ 0.47
Distributions declared per unit $ 0.54 $ 0.54
Units used in basic
per unit calculation 12,733,076 12,784,572(d)
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Sovran Acquisition Limited Partnership
Pro Forma Statement of Operations
Year Ended December 31, 1997
(in thousands, except unit information)
(unaudited)
1997
Sovran Facilities Facilities Pro Forma
Acquisition Preacquisi- Acquired 1998 Sovran
Limited tion Pro in 1998 Facilities Acquisition
Partnership Forma (Notes 3 Pro Forma Limited
(Note 1) (Note 4) and 5) Adjustments Partnership
<S> <C> <C> <C> <C> <C>
Revenues
Rental Income $ 48,584 $ 4,680 $11,922 $ - $ 65,186
Interest and other income 770 51 221 - 1,042
Total revenue 49,354 4,731 12,143 - 66,228
Expenses
Property operations and
maintenance 9,708 1,020 2,490 - 13,218
Real estate taxes 3,955 397 844 - 5,196
General and administrative 2,757 43 - 163 (a) 2,963
Interest 2,166 1,001 - 5,844 (b) 9,011
Depreciation and amortization 7,005 737 - 1,929 (c) 9,671
Net Income $ 23,763 $1,533 $8,809 $(7,936) $26,169
===================================================================
Earnings per unit - basic $ 1.97 $ 2.05
Earnings per unit - diluted $ 1.96 $ 2.04
Distributions declared per unit $ 2.12 $ 2.12
Units used in basic
per unit calculation 12,090,141 12,784,572(d)
</TABLE>
<PAGE>
Sovran Acquisition Limited Partnership
Notes to Pro Forma Financial Statements
(unaudited)
1. Sovran Acquisition Limited Partnership
The balance sheet and statements of operations as of March 31,
1998 and for the three months then ended and for the year ended
December 31, 1997, include the accounts of Sovran Acquisition Limited
Partnership included elsewhere in this Form-10.
2. Pro Forma Adjustments - Balance Sheet
These adjustments reflect the 12 acquisitions that occurred
subsequent to March 31, 1998 and were not included in the Sovran
Acquisition Limited Partnership March 31, 1998 balance sheet. The
facilities were purchased from unaffiliated parties for an aggregate
purchase price of approximately $42 million. The acquisitions were funded
by cash generated from operations, borrowings under the line of credit, and
the issuance of Operating Partnership Units.
3. Facilities Acquired in Period Ended March 31, 1998
The statements of operations reflect the results of operations
for the 18 facilities for the period not owned by the Operating Partnership
during the three months ended March 31, 1998.
4. Facilities Acquired in 1997 - Statement of Operations
The statements of operations for the 44 facilities acquired in
1997 reflects the results of operations for the 44 facilities up to the
date acquired in 1997 and additional general and administrative,
depreciation, and interest expense which would have resulted if the
facilities were owned since January 1, 1997.
5. Facilities Acquired Since March 31, 1998 - Statement of Operations
The statements of operations for the 12 facilities acquired since
March 31, 1998 reflect the gross revenue and direct operating expenses for
these facilities for the three months ended March 31, 1998.
6. 1998 Facilities Pro Forma Adjustments - Statement of Operations
(a) To reflect an estimated increase in general and administrative
expenses based on results subsequent to acquisition.
(b) To reflect interest expense on the line of credit utilized to
fund the purchase of the facilities in 1998.
(c) To record additional depreciation expense related to the
facilities purchased based on a 39 year life.
(d) Pro forma earnings per share calculated as if the operating
partnership units outstanding after the purchase of the
facilities had been outstanding for the entire period presented.
<PAGE>
Sovran Acquisition Limited Partnership
Balance Sheet
(in thousands)
(unaudited)
March 31, 1998
Assets
Investment in storage facilities, net $ 376,792
Cash and cash equivalents 2,987
Accounts receivable 1,204
Prepaid expenses and other assets 3,484
Total Assets $ 384,467
===========
Liabilities
Line of credit $ 88,000
Accounts payable and accrued liabilities 4,955
Deferred revenue 2,506
Accrued distributions 6,899
Mortgage payable 3,059
Total liabilities 105,419
Limited partners' capital interest 13,170
Partners' Capital
General partner 5,244
Limited partner 260,634
Total partners' capital 265,878
Total liabilities and partners' capital $ 384,467
===========
See notes to financial statements.
<PAGE>
Sovran Acquisition Limited Partnership
Statements of Operations
(in thousands, except unit information)
(unaudited)
Three months ended March 31,
1998 1997
Revenues
Rental income $ 14,175 $ 10,578
Interest and other income 200 154
Total Revenue 14,375 10,732
Expenses
Property operations
and maintenance 2,818 2,154
Real estate taxes 1,188 857
General and administrative 854 744
Interest 1,215 512
Depreciation and amortization 2,097 1,530
Total Expenses 8,172 5,797
Income before extraordinary item 6,203 4,935
Extraordinary item-extinguishment
of debt 350 -
Net income $ 5,853 $ 4,935
=========================
Earnings per unit before
extraordinary item-basic $ 0.49 $ 0.46
Extraordinary item 0.03 -
Earnings per unit-basic $ 0.46 $ 0.46
=========================
Earnings per unit-diluted $ 0.46 $ 0.46
=========================
Distributions declared per unit $ 0.54 $ 0.52
=========================
Units used in basic per
unit calculation 12,733,000 10,839,000
See notes to financial statements
<PAGE>
Sovran Acquisition Limited Partnership
Statements of Cash Flows
(in thousands)
(unaudited)
January 1, 1998 January 1, 1997
to to
March 31, 1998 March 31, 1997
Operating Activities
Net income $5,853 $ 4,935
Adjustments to reconcile
net income to net cash
provided by operating
activities:
Extraordinary item 350 -
Depreciation and amortization 2,097 1,530
Restricted stock earned 4 4
Changes in assets and
liabilities:
Accounts receivable (343) (287)
Prepaid expenses and
other assets (836) 131
Accounts payable and
other liabilities 3,130 1,065
Deferred revenue 221 487
Net cash provided by operating
activities 10,476 7,865
Investing Activities
Additions to storage
facilities (53,866) (48,537)
Additions to other assets (851) (10)
Net cash used in investing
activities (54,717) (48,547)
Financing Activities
Net proceeds from sale
of common stock - 32
Proceeds from line of
credit draw down 52,000 32,000
Distributions paid (6,839) (5,641)
Mortgage principal payments (500) -
Net cash proviced by
financing activities 44,661 26,391
Net increase (decrease)
in cash 420 (14,291)
Cash at beginning of period 2,567 16,687
Cash at end of period $2,987 $ 2,396
===========================
See notes to financial statements.
<PAGE>
Supplemental cash flow
information
Cash paid for interest $ 717 $ 512
Storage facilities acquired
through the issuance of
common stock 3,336 7,313
Fair value of net liabilities
assumed on the acquisition
of storage facilities 366 3,559
Distributions declared
but unpaid 6,899 5,568
<PAGE>
Notes to Consolidated Financial Statements
(Unaudited)
1. Basis of Presentation
The accompanying unaudited financial statements of
Sovran Acquisition Limited Partnership (the "Operating
Partnership") have been prepared in accordance with generally
accepted accounting principles for interim financial information
and with the instructions to Form 10-Q and Article 10 of
Regulation S-X. Accordingly, they do not include all information
and footnotes required by generally accepted accounting
principles for complete financial statements. In the opinion of
management, all adjustments (consisting of normal recurring
accruals) considered necessary for a fair presentation have been
included. Operating results for the three month periods ended
March 31, 1998 and March 31, 1997 are not necessarily indicative
of the results that may be expected for the year ended
December 31, 1998.
2. Organization
Sovran Acquisition Limited Partnership (the "Operating
Partnership"), is the entity through which Sovran Self Storage,
Inc. (the "Company"), a self-administered and self-managed real
estate investment trust (a "REIT"), conducts substantially all of
its business and owns substantially all of its assets. On
June 26, 1995, the Company commenced operations, through the
Operating Partnership, effective with the completion of its
initial public offering of 5,890,000 shares (the Offering).
Contemporaneously with the closing of the Offering, the Operating
Partnership acquired, in a transaction accounted for as a
purchase, sixty-two self-storage facilities (the Original
Properties) which had been owned and managed by Sovran Capital,
Inc. and the Sovran Partnerships (Predecessors to the Company).
Purchase accounting was applied to the acquisition of the
Original Properties to the extent cash was paid to purchase 100%
of the limited-partnership interests in the Sovran Partnerships,
prepay outstanding mortgages at the time of acquisition and for
related transaction costs. Additionally, the Operating
Partnership acquired on that date twelve self-storage properties
from unaffiliated third parties. The Operating Partnership has
since purchased a total of ninety-nine (eighteen in 1998, forty-
four in 1997, twenty-nine in 1996 and eight in 1995) self storage
properties from unaffiliated third parties, increasing the total
number of self-storage properties owned at March 31, 1998 to 173
properties, most of which are in the eastern United States and
Texas.
As of March 31, 1998, the Company was a 96.5% economic
owner of the Operating Partnership and controls it through Sovran
Holdings, Inc. ("Holdings"), a wholly owned subsidiary of the
Company incorporated in Delaware and the sole general partner of
the Operating Partnership (this structure is commonly referred to
as an umbrella partnership REIT or "UPREIT"). The board of
directors of Holdings, the members of which are also members of
the Board of Directors of the Company, manages the affairs of the
<PAGE>
Operating Partnership by directing the affairs of Holdings. The
Company's limited partner and indirect general partner interests
in the Operating Partnership entitle it to share in cash
distributions from, and in the profits and losses of, the
Operating Partnership in proportion to its ownership interest
therein and entitle the Company to vote on all matters requiring
a vote of the limited partners.
The other limited partners of the Operating Partnership
are persons who contributed their direct or indirect interests in
certain self-storage properties to the Operating Partnership.
The Operating Partnership is obligated to redeem each unit of
limited partnership ("Unit") at the request of the holder thereof
for cash equal to the fair market value of a share of the
Company's common stock ("Common Shares") at the time of such
redemption, provided that the Company at its option may elect to
acquire any Unit presented for redemption for one Common Share or
cash. The Company presently anticipates that it will elect to
issue Common Shares to acquire Units presented for redemption,
rather than paying cash. With each such redemption the Company's
percentage ownership interest in the Operating Partnership will
increase. In addition, whenever the Company issues Common
Shares, the Company is obligated to contribute any net proceeds
therefrom to the Operating Partnership and the Operating
Partnership is obligated to issue an equivalent number of Units
to the Company. Such limited partners' redemption rights are
reflected in "limited partners' capital interest" in the
accompanying balance sheets at the cash redemption amount at the
balance sheet date.
3. Investment in Storage Facilities
The following summarizes activity in storage facilities
during the period ended March 31, 1998.
(Dollars in Thousands)
_________________________________________________________________
Cost:
Beginning balance $ 333,036
Property acquisitions 52,450
Improvements and equipment additions 4,953
Dispositions (90)
_________________________________________________________________
Ending balance $ 390,349
_________________________________________________________________
Accumulated Depreciation:
Beginning balance $ 11,639
Additions during the period 1,934
Dispositions (16)
________________________________________________________________
Ending balance $ 13,557
________________________________________________________________
<PAGE>
4. Line of Credit
On February 20, 1998, the Operating Partnership entered
into a new $150 million unsecured credit facility which replaces
in its entirety the Company's $75 million revolving credit
facility. The new facility matures February 2001 and provides for
funds at LIBOR plus 1.25%, a savings of 65 basis points over the
Company's old facility. As a result of the new credit facility,
in 1998 the Company recorded an extraordinary loss on the
extinguishment of debt of $ 350,000 representing the unamortized
financing costs of the former revolving credit facility.
5. Commitments and Contingencies
The Company's current practice is to conduct
environmental investigations in connection with property
acquisitions. At this time, the Company is not aware of any
environmental contamination of any of its facilities which
individually or in the aggregate would be material to the
Company's overall business, financial condition, or results of
operations.
As of March 31, 1998, the Company had entered into
contracts for the purchase of 8 self-storage facilities which
were purchased in April 1998 for a total cost of $28.8 million.
6. Legal Proceedings
A former business associate (Plaintiff) of certain
officers and directors of the Company, including Robert J. Attea,
Kenneth F. Myszka, David L. Rogers and Charles E. Lannon, filed a
lawsuit against the Company on June 13, 1995 in the United States
District Court for the Northern District of Ohio. The Plaintiff
has since amended the complaint in the lawsuit alleging breach of
fiduciary duty, breach of contract, breach of general
partnership/joint venture arrangement, breach of duty of good
faith, fraud and deceit, and other causes of action including
declaratory judgement as to the Plaintiff's continuing interest
in the Company. The Plaintiff is seeking money damages in excess
of $15 million, as well as punitive damages and declaratory and
injunctive relief (including the imposition of a constructive
trust on assets of the Company in which the Plaintiff claims to
have a continuing interest) and an accounting. The amended
complaint also added Messrs. Attea, Myszka, Rogers and Lannon as
additional defendants. The parties are currently involved in
discovery. The Company intends to vigorously defend the lawsuit.
Messrs. Attea, Myszka, Rogers and Lannon have agreed to indemnify
the Company for cost and any loss arising from the lawsuit. The
Company believes that the actual amount of the Plaintiff's
recovery in this matter if any, would be within the ability of
these individuals to provide indemnification. The Company does
not believe that the lawsuit will have a material, adverse effect
upon the Company.
<PAGE>
7. Recent Accounting Pronouncements
On March 19, 1998 the Financial Accounting Standards
Board Emerging Issues Task Force reached a consensus as to the
accounting for internal acquisition costs incurred in connection
with real property. The Task Force consensus indicates that
internal costs related to the acquisition of operating properties
should be expensed as incurred. The Company has previously
capitalized such costs and will comply with the consensus
prospectively. The effect of expensing internal acquisition
costs for the period March 19 through March 31, 1998, was
immaterial. The amount of internal acquisition cost capitalized
in this first quarter of 1997 and 1998 was $222,000 and $254,000
respectively.
<PAGE>
Report of Independent Auditors
The Board of Directors and Partners
Sovran Acquisition Limited Partnership:
We have audited the accompanying balance sheets of
Sovran Acquisition Limited Partnership as of December 31, 1997
and 1996 and the related statements of operations, partners'
capital and cash flows for the years ended December 31, 1997 and
1996 and the period from June 26, 1995 to December 31, 1995. We
have also audited the combined statements of operations, owners'
equity and cash flows of Sovran Capital, Inc. and Sovran
Partnerships for the period from January 1, 1995 to June 25,
1995. These financial statements are the responsibility of the
management of Sovran Acquisition Limited Partnership. Our
responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally
accepted auditing standards. Those standards require that we
plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements referred to
above present fairly, in all material respects, the financial
position of Sovran Acquisition Limited Partnership as of
December 31, 1997 and 1996, and the results of its operations and
its cash flows for the years ended December 31, 1997 and 1996 and
the period from June 26, 1995 through December 31, 1995, and the
combined results of operations and cash flows of Sovran Capital,
Inc. and Sovran Partnerships from January 1, 1995 to June 25,
1995 in conformity with generally accepted accounting principles.
Ernst & Young LLP
Buffalo, New York
April 16, 1998
<PAGE>
Balance Sheets - Sovran Acquisition Limited Partnership
December 31,
(Dollars in thousands) 1997 1996
Assets
Investment in storage facilities:
Land $ 71,391 $ 49,591
Building and equipment 261,645 171,120
333,036 220,711
Less accumulated depreciation (11,639) (5,457)
Investments in storage facilities, net 321,397 215,254
Cash and cash equivalents 2,567 16,687
Accounts receivable 834 482
Prepaid expenses and other assets 2,275 2,992
Total Assets $327,073 $235,415
=======================
Liabilities
Line of credit $ 36,000 $ -
Accounts payable and accrued
liabilities 1,950 1,124
Deferred revenue 1,994 1,367
Accrued distributions 6,816 5,640
Mortgage payable 3,559 -
Total Liabilities 50,319 8,131
Limited partners' capital interest
(443,609 and 139,930 units,
respectively), at redemption
value (Note 1) 14,454 4,435
Partners' Capital
General partner (219,567 and
119,567 units issued and
outstanding, respectively) 5,257 2,523
Limited partner (12,001,554 and
10,587,104 units issued and
outstanding, respectively) 257,043 220,326
Total partners' capital 262,300 222,849
Total liabilities and
partners' capital $327,073 $235,415
=======================
(See notes to financial statements.)
<PAGE>
<TABLE>
<CAPTION>
Sovran Acquisition Limited Partnership (the Operating Partnership) and Sovran Capital,
Inc. and Sovran Partnerships (Company Predecessors)
Statements of Operations of the Operating Partnership and Combined Statements of
Operations of Company Predecessors
Operating Partnership Predecessors
Year Ended Year Ended For Period For Period
Dollars in thousands, December 31, December 31, 6/26/95 to 1/1/95 to
except per unit data) 1997 1996 12/31/95 6/25/95
_____________________________________________ ____________
<S> <C> <C> <C> <C>
Revenues:
Rental income $48,584 $ 32,946 $ 12,557 $ 9,260
Interest and other income 770 651 385 272
_________ _________ _________ ________
Total revenues 49,354 33,597 12,942 9,532
Expenses:
Property operations and
maintenance 9,708 6,662 2,533 2,061
Real estate taxes 3,955 2,464 861 708
General and administrative 2,757 2,282 974 1,574
Interest 2,166 1,924 131 3,268
Depreciation and
amortization 7,005 4,583 1,699 1,610
_________ _________ _________ ________
Total expenses 25,591 17,915 6,198 9,221
_________ _________ _________ ________
Net income $23,763 $ 15,682 $ 6,744 $ 311
=========================================================
Earnings per unit-basic $ 1.97 $ 1.88 $ 0.91 $ -
Earnings per unit-diluted $ 1.96 $ 1.87 $ 0.91 $ -
Distributions declared
per unit $ 2.12 $ 2.05 $ 1.04 $ -
(See notes to financial statements.)
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Sovran Capital, Inc. and Sovran Partnerships (the Company Predecessors)
Combined Statement of Owners' Equity
Common Additional Accumulated Distribution
Stock Common Paid-in Owners' Treasury in Excess of Total
(Dollars in thousands) Shares Stock Capital Equity Stock Net Income Equity
<S> <C> <C> <C> <C> <C> <C> <C>
Balance January 1, 1995 400 $ - $ - $13,794 $ (75) $ - $ 13,719
Cash distributions - - - (1,779) - - (1,779)
Cash contributions - - - 965 - - 965
Net income - - - 311 - - 311
Balance June 25, 1995 400 $ - $ - $13,291 $ (75) $ - $ 13,216
</TABLE>
<PAGE>
<TABLE>
<CAPTION> Sovran Acquisition Limited Partnership (the Operating Partnership)
Statements of Partners' Capital
Sovran Sovran Self Total
Holdings, Inc. Storage Inc. Partners' Limited Partners'
General Partner Limited Partner Capital Capital Interest
<S> <C> <C> <C> <C>
Balance June 26, 1995 $ - $ - $ - $ -
Proceeds from Initial
Public Offering 1,243 123,089 124,332 -
Proceeds from private placement 101 10,031 10,132 -
Proceeds from exercise of
over-allotment 160 15,882 16,042 -
Issuance of units to principal
shareholders in exchange for
their interest in Sovran
Capital, Inc. 3 293 296 -
Net income 67 6,677 6,744 -
Distributions (78) (7,728) (7,806) -
________ _________ _________ _________
Balance December 31, 1995 $1,496 $148,244 $149,740 $ -
Proceeds from issuance of
common stock 1,074 75,899 76,973 -
Issuance of redeemable units
for acquisition of storage
facilities - - - 3,659
Earned portion of restricted
stock - 12 12 -
Net income 162 15,497 15,659 23
Distributions (200) (18,555) (18,755) (27)
Adjustment to reflect limited
partners' redeemable capital
at balance sheet date (9) (771) (780) 780
________ _________ _________ _________
Balance December 31, 1996 $2,523 $220,326 $222,849 $4,435
Proceeds from issuance of
common stock 2,796 39,148 41,944 -
<PAGE>
Issuance of redeemable units
for acquisition of storage
facilities - - - 9,240
Exercise of stock options - 328 328 -
Earned portion of restricted
stock - 13 13 -
Net income 366 22,753 23,119 644
Distributions (413) (24,708) (25,121) (697)
Adjustment to reflect limited
partners' redeemable capital
at balance sheet date (15) (817) (832) 832
________ _________ _________ _________
Balance December 31, 1997 $5,257 $257,043 $262,300 $14,454
======== ========= ========= =========
(See notes to financial statements.)
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Sovran Acquisition Limited Partnership (the Operating Partnership) and Sovran Capital, Inc. and
Sovran Partnerships (Company Predecessors)
Statements of Cash Flows of the Operating Partnership and Combined Statements of Cash Flows of the
Predecessors
Operating Partnership Predecessors
Year Ended Year Ended For Period For Period
December 31, December 31, 6/26/95 to 1/1/95 to
(Dollars in thousands) 1997 1996 12/31/95 6/25/95
<S> <C> <C> <C> <C>
Operating Activities
Net income $ 23,763 $ 15,682 $ 6,744 $ 311
Adjustments to reconcile
net income to net cash
provided by operating
activities
Depreciation and amortization 7,005 4,583 1,699 1,610
Restricted stock earned 13 12 - -
Changes in assets and
liabilities
Accounts receivable (162) (145) (40) (46)
Prepaid expenses and other (283) (182) 37 (849)
Accounts payable and other
liabilities 894 157 (1,225) 891
Deferred revenue (71) 45 (27) 86
_______________________________________ _______
Net cash provided by
operating activities 31,159 20,152 7,188 2,003
Investing Activities
Additions to storage
facilities (98,970) (57,160) (156,780) (3,478)
Other assets 205 (1,986) (1,185) -
Restricted cash - - - 138
_______________________________________ _______
Net cash used in investing
activities (98,765) (59,146) (157,965) (3,340)
<PAGE>
Financing Activities
Net proceeds from sale of
common stock 42,273 76,973 150,506 -
Proceeds from (payments on)
line of credit 36,000 (5,000) 5,000 -
Distributions paid (24,787) (17,024) (3,997) (1,779)
Proceeds from issuance of
mortgages - - - 2,821
Mortgage principal payments - - - (1,500)
Capital contributions - - - 965
_______________________________________ ________
Net cash provided by
financing activities 53,486 54,949 151,509 507
_______________________________________ ________
Net (decrease) increase
in cash (14,120) 15,955 732 (830)
Cash beginning of period 16,687 732 - 1,045
_______________________________________ ________
Cash end of period $ 2,567 $ 16,687 $ 732 $ 215
=======================================
Supplemental cash flow
information
Cash paid for interest $ 2,238 $ 1,842 $ 234 $3,268
</TABLE>
<PAGE>
Sovran Acquisition Limited Partnership (the Operating Partnership) and
Sovran Capital, Inc. and Sovran Partnerships (Company Predecessors)
Statements of Cash Flows of the Operating Partnership and Combined
Statements of Cash Flows of the Predecessors
Supplemental cash-flow information for the years ended December 31, 1997,
and 1996.
(Dollars in thousands)
1997 1996
Storage facilities acquired through the
issuance of partnership units $ 9,240 $ 3,659
Storage facilities acquired through
assumption of mortgage 3,559 -
Fair value of net liabilities assumed on the
acquisition of storage facilities 4,144 434
Distributions declared but unpaid at December 31, 1997, 1996 and 1995 were
$6,816, $5,640 and $3,809, respectively.
Supplemental cash-flow information for the period June 26, 1995 to
December 31, 1995
(Dollars in thousands)
Cash paid for partnership interest $42,865
Cash paid for acquisition properties 45,121
Cash paid to retire partnership mortgages 67,602
Prepayment penalties and closing costs 860
Cash paid for building improvements 332
Cash paid for storage facilities per statement of cash flows $156,780
Fair value of net liabilities assumed of the partnerships
and Sovran Capital, Inc. 2,681
Investment in storage facilities per financial statements $159,461
(See notes to financial statements.)
<PAGE>
NOTES TO FINANCIAL STATEMENTS
Sovran Acquisition Limited Partnership - December 31, 1997
1. ORGANIZATION
Sovran Acquisition Limited Partnership (the "Operating
Partnership") is the entity through which Sovran Self Storage, Inc. (the
"Company"), a self-administered and self-managed real estate investment
trust ("REIT"), conducts substantially all of its business and owns
substantially all of its assets. The Operating Partnership is one of the
largest owners and operators of self-storage properties in the Eastern
United States and Texas. In 1995, the Company was formed under Maryland
law and the Operating Partnership was organized as a Delaware limited
partnership to continue and to expand the self-storage operations of the
Company's privately owned predecessor organizations. On June 26, 1995, the
Company commenced operations, through the Operating Partnership, effective
with the completion of its initial public offering of 5,890,000 shares (the
"Initial Offering"). Contemporaneously with the closing of the Initial
Offering, the Operating Partnership acquired, in a transaction accounted
for as a purchase, sixty-two self-storage facilities (the "Original
Properties") which had been owned and managed by Sovran Capital, Inc. and
the Sovran Partnerships ("Company Predecessors"). Purchase accounting was
applied to the acquisition of the Original Properties to the extent cash
was paid to purchase 100% of the limited-partnership interests in the
Sovran Partnerships, prepay outstanding mortgages at the time of
acquisition and for related transaction costs. Additionally, the Operating
Partnership acquired on that date twelve self-storage properties from
unaffiliated third parties. The Operating Partnership has since purchased
a total of eighty-one (forty-four in 1997, twenty-nine in 1996 and eight in
1995) self storage properties from unaffiliated third parties, increasing
the total number of self-storage properties owned at December 31, 1997 to
155 properties, most of which are in the eastern United States and Texas.
As of December 31, 1997, the Company was a 96.5% economic owner
of the Operating Partnership and controls it through Sovran Holdings, Inc.
("Holdings"), a wholly owned subsidiary of the Company incorporated in
Delaware and the sole general partner of the Operating Partnership (this
structure is commonly referred to as an umbrella partnership REIT or
"UPREIT"). The board of directors of Holdings, the members of which are
also members of the Board of Directors of the Company, manages the affairs
of the Operating Partnership by directing the affairs of Holdings. The
Company's limited partner and indirect general partner interests in the
Operating Partnership entitle it to share in cash distributions from, and
in the profits and losses of, the Operating Partnership in proportion to
its ownership interest therein and entitle the Company to vote on all
matters requiring a vote of the limited partners.
The other limited partners of the Operating Partnership are
persons who contributed their direct or indirect interests in certain self-
storage properties to the Operating Partnership. The Operating Partnership
is obligated to redeem each unit of limited partnership ("Unit") at the
request of the holder thereof for cash equal to the fair market value of a
share of the Company's common stock ("Common Shares") at the time of such
redemption, provided that the Company at its option may elect to acquire
any Unit presented for redemption for one Common Share or cash. The
Company presently anticipates that it will elect to issue Common Shares to
acquire Units presented for redemption, rather than paying cash. With each
<PAGE>
such redemption the Company's percentage ownership interest in the
Operating Partnership will increase. In addition, whenever the Company
issues Common Shares, the Company is obligated to contribute any net
proceeds therefrom to the Operating Partnership and the Operating
Partnership is obligated to issue an equivalent number of Units to the
Company. Such limited partners' redemption rights are reflected in
"limited partners' capital interest" in the accompanying balance sheets at
the cash redemption amount at the balance sheet date. Capital activity
with regard to such limited partners' redemption rights is reflected in the
accompanying statements of partners' capital.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation: The Company and the Operating Partnership were
formed on April 19, 1995, and commenced operations effective with the
completion of the Offering on June 25, 1995. Accordingly, the Operating
Partnership results of operations are presented from June 26, 1995, the
date following the completion of the Offering and the establishment of REIT
status, through December 31, 1997.
The combined statements of operations for the period ended
June 25, 1995 reflect the assets, liabilities and results of operations of
the Sovran Capital, Inc. and the Sovran Partnerships (Company
Predecessors). Such financial statement has been presented on a combined
basis, because the entities were the subject of the business combination
described in Note 1. All intercompany transactions and balances have been
eliminated.
Cash and Cash Equivalents: The Operating Partnership considers all highly
liquid debt instruments purchased with maturity of three months or less to
be cash equivalents.
Revenue Recognition: Rental income is recorded when earned. Rental income
received prior to the start of the rental period is included in deferred
revenue.
Interest and Other Income: Other income consists primarily of interest
income, sales of storage-related merchandise (locks and packing supplies)
and commissions from truck rentals.
Investment in Storage Facilities: Storage facilities are recorded at cost.
Depreciation is computed using the straight line method over estimated
useful lives of forty years for buildings and improvements, and five to
twenty years for furniture, fixtures and equipment. Expenditures for
significant renovations or improvements which extend the useful life of
assets are capitalized. Repair and maintenance costs are expensed as
incurred.
Whenever events or changes in circumstances indicate that the
basis of the Operating Partnership's property may not be recoverable, the
Operating Partnership's policy is to assess whether any impairment of
value. Impairment is evaluated based upon comparing the sum of the
expected undiscounted future cash flows to the carrying value of the
property; on a property by property basis. If the sum of the cash flows is
less than the carrying amount, an impairment loss is recognized for the
amount by which the carrying amount of the asset exceeds the fair value of
the asset. At December 31, 1997 and 1996, no assets had been determined to
<PAGE>
be impaired under this policy, and, accordingly, this policy has had no
impact on the Operating Partnership's financial position or results of
operations.
Prepaid Expenses and Other Assets: Included in prepaid expenses and other
assets are prepaid expenses and intangible assets. The intangible assets
at December 31, 1997, consist primarily of loan acquisition costs of
approximately $1,155, net of accumulated amortization of approximately
$771; organizational costs of approximately $63, net of accumulated
amortization of approximately $29; and covenants not to compete of $785,
net of accumulated amortization of $350. Loan acquisition costs are
amortized over the terms of the related debt; organization costs are
amortized over five years; and the covenants are amortized over the
contract periods. Amortization expense was $794 and $620 for the periods
ended December 31, 1997 and 1996, respectively.
Income Taxes: No provision has been made for income taxes in the
accompanying financial statements since the Operating Partnership qualifies
as a partnership for Federal and state income tax purposes and its partners
are required to include their respective shares of profits and losses in
their income tax returns.
Use of Estimates: The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the amounts reported in the financial
statements and accompanying notes. Actual results could differ from those
estimates.
3. EARNINGS PER UNIT
In 1997, the Operating Partnership adopted Statement of Financial
Accounting Standards No. 128, "Earnings Per Share." All prior period per
unit data has been restated to conform with the provisions of this
statement. The following table sets forth the computation of basic and
diluted earnings per unit.
Year Ended Year Ended For Period
(Dollars in thousands, December 31, December 31, 6/26/95
except per unit data) 1997 1996 to 12/31/95
Numerator:
Net Income $ 23,763 $ 15,682 $ 6,744
Denominator:
Denominator for basic
earnings per unit -
weighted average units 12,090 8,344 7,430
Effect of Dilutive Securities:
Options for Company stock 62 35 10
Denominator for diluted
earnings per unit -
adjusted weighted -
average units and
assumed conversion 12,152 8,379 7,440
Basic Earnings per Unit $ 1.97 $ 1.88 $ .91
<PAGE>
Diluted Earnings
per Unit $ 1.96 $ 1.87 $ .91
4. INVESTMENT IN STORAGE FACILITIES
The following summarizes activity in storage facilities during the years
ended December 31, 1997 and December 31, 1996
(Dollars in Thousands)
1997 1996
Cost:
Beginning balance $ 220,711 $ 159,461
Property acquisitions 106,926 58,626
Improvements and equipment additions 5,527 2,640
Dispositions (128) (16)
Ending balance $ 333,036 $ 220,711
Accumulated Depreciation:
Beginning balance $ 5,457 $ 1,497
Additions during the year 6,211 3,964
Dispositions (29) (4)
Ending balance $ 11,639 $ 5,457
5. LINE OF CREDIT
At December 31, 1997, the Operating Partnership maintained a $75
million revolving-credit facility of which $36 million was outstanding and
secured by specific storage facilities. At December 31, 1997, the
Operating Partnership had identified and pledged properties sufficient to
provide $75 million of such borrowings. Interest on outstanding balances
is payable monthly at 190 basis points above LIBOR. The commitment fee was
$225,000 and there is a facility fee attached to the line at the following
rates: i) .25% if the unused commitment (UC) is less than $30 million, or
ii) .375% if UC is greater than $30 million. At December 31, 1997, the
Operating Partnership was at the .375% rate.
On February 20, 1998, the Operating Partnership entered into a
new $150 million unsecured credit facility which replaces in its entirety
the $75 million revolving credit facility. The new facility matures
February 2001 and provides for funds at LIBOR plus 1.375%, a savings of
52.5 basis points over the old facility. As a result of the new credit
facility, in 1998 the Operating partnership will record an extraordinary
loss on the extinguishment of debt of $350,000, representing the
unamortized financing costs of the revolving credit facility.
<PAGE>
6. PRO FORMA FINANCIAL INFORMATION (UNAUDITED)
The following unaudited pro forma information shows the results
of operations as though the acquisitions of storage facilities in 1997 and
1996, and the common stock offerings of the Company in 1997 and 1996 had
all occurred as of the beginning of 1996.
Year ended December 31,
(Dollars in thousands, except unit data) 1997 1996
Total revenues $ 54,085 $ 51,455
Total expenses (28,789) (27,175)
Net Income $ 25,296 $ 24,280
Earnings per unit - basic $ 2.00 $ 1.92
Units used in basic earnings
per unit calculation 12,666,730 12,666,730
Such unaudited pro forma information is based upon the historical
statements of operations of the Operating Partnership. It should be read
in conjunction with the financial statements of the Operating Partnership
and the predecessors and notes thereto. In management's opinion, all
adjustments necessary to reflect the effects of these transactions have
been made. This unaudited pro forma statement does not purport to
represent what the actual results of operations of the Operating
Partnership would have been assuming such transactions had been completed
as set forth above, nor does it purport to represent the results of
operations for future periods.
7. STOCK OPTIONS
The Operating Partnership continues to account for Company stock-
based compensation using the measurement prescribed by APB Opinion No. 25
which does not recognize compensation expense because the exercise price of
the stock options equals the market price of the underlying stock on the
date of grant. SFAS 123 requires companies that choose not to adopt the
new fair value accounting rules to disclose pro forma net income and
earnings per unit under the new method. The Operating Partnership will
issue a Unit to the Company for each common share of the Company issued
under the following plans.
The Company has established the 1995 Award and Option Plan (the
Plan) for the purpose of attracting and retaining the Company's executive
officers and other employees. The options vest ratably over four years,
and must be exercised within ten years from the date of grant. The
exercise price for qualified incentive stock options must be at least equal
to the fair market value at the date of grant. As of December 31, 1997,
options for 306,000 shares had been granted under the Plan. The total
options available under the plan is 400,000.
The Company also established the 1995 Outside Directors' Stock
Option Plan (the Non-employee Plan) for the purpose of attracting and
retaining the services of experienced and knowledgeable outside directors.
<PAGE>
The Non-employee Plan provides for the annual granting of options to
purchase 2,500 shares of common stock to each eligible director. Such
options vest over a one year period for initial awards and immediately upon
subsequent grants. The total shares reserved under the Non-employee Plan
is 50,000. The exercise price for options granted under the Non-employee
Plan is equal to fair market value at date of grant. As of December 31,
1997, options for 30,000 shares had been granted under the Non-employee
Plan.
The Company has also issued 2,200 shares of restricted stock to
employees which vest over a four-year period. The fair value of the
restricted stock on the date of grant ranged from $25.38 to $29.19.
The fair value for these options was $2.30, which was estimated
at the date of grant using a Black-Scholes option pricing model with the
following weighted-average assumptions for 1997: risk-free interest rate of
6%; dividend yield of 7%, volatility factor of the expected market price of
the Company's common stock of .16.
The Black-Scholes options valuation model was developed for use
in estimating the fair value of traded options which have no vesting
restrictions and are fully transferable. In addition, option valuation
models require the input of highly subjective assumptions including the
expected stock price volatility. Because the Company's employee stock
options have characteristics significantly different from those of traded
options, and because changes in the subjective input assumptions can
materially affect the fair value estimate, in management's opinion, the
existing models do not necessarily provide a reliable single measure of the
fair value of its employee stock options.
For purposes of pro forma disclosures, the estimated fair value
of the options is amortized to expense over the options' vesting period.
The Operating Partnership's pro forma information for the year ended
December 31, 1997 follows (in thousands, except for earnings per unit
information).
Pro forma net income $ 23,620
Pro forma earnings per unit: Basic $ 1.95
Diluted $ 1.94
The pro forma effect on earnings for the years ended December 31, 1996 and
1995 was immaterial.
<PAGE>
<TABLE>
<CAPTION>
A summary of the Company's stock option activity and related information for the years ended
December 31 follows:
1997 1996 1995
Weighted Weighted Weighted
Average average average
exercise exercise exercise
Options price Options price Options price
__________________________________________________________________________________________
<S> <C> <C> <C> <C> <C> <C>
Outstanding at
beginning of year 293,500 $23.97 268,000 $23.00 - $ -
Granted 34,000 29.93 28,000 25.92 274,000 23.00
Exercised (14,250) 23.00 - - - -
Forfeited (18,000) 24.53 (2,500) 23.00 (6,000) 23.00
__________________________________________________________________________________________
Outstanding at end
of year 295,250 $25.36 293,500 $23.97 268,000 $ 23.00
__________________________________________________________________________________________
Exercisable at end
of year 146,750 $25.12 82,000 $23.48 - -
Exercise prices for options outstanding as of December 31, 1997 ranged from $23.00 to $30.63. The
weighted average remaining contractual life of those options is 8.07 years.
<PAGE>
8. RETIREMENT PLAN
Employees of the Operating Partnership qualifying under certain
age and service requirements are eligible to be a participant in a 401(K)
Plan which was effective September 1, 1997. The Operating Partnership
contributes to the Plan at the rate of 50% of the first 4% of gross wages.
Total expense to the Operating Partnership was approximately $15,000 for
the year ended December 31, 1997.
9. THE COMPANY'S SHAREHOLDER RIGHTS PLAN
In November 1996, the Company adopted a Shareholder Rights Plan
and declared a dividend distribution of one Right for each outstanding
share of common stock. Under certain conditions, each Right may be
exercised to purchase one one-thousandth of a share of Series A Junior
Participating Preferred Stock at a purchase price of $75, subject to
adjustment. The Rights will be exercisable only if a person or group has
acquired 10% or more of the outstanding shares of common stock, or
following the commencement of a tender or exchange offer for 10% or more of
such outstanding shares of common stock. If a person or group acquires
more than 10% of the then outstanding shares of common stock, each Right
will entitle its holder to receive, upon exercise, common stock having a
value equal to two times the exercise price of the Right. In addition, if
the Company is acquired in a merger or other business combination
transaction, each Right will entitle its holder to purchase that number of
the acquiring Company's common shares having a market value of twice the
Right's exercise price. The Company will be entitled to redeem the Rights
at $.01 per Right at any time prior to the earlier of the expiration of the
Rights in November 2006 or the time that a person has acquired a 10%
position. The Rights do not have voting or dividend rights, and until they
become exercisable, have no dilutive effect on the Operating Partnership's
earnings.
10. SUPPLEMENTARY QUARTERLY FINANCIAL DATA (UNAUDITED)
The following is a summary of quarterly results of operations for
the fiscal quarters since the consummation of the offering on June 26, 1995
(dollars in thousands, except per unit data)
1997 Quarter Ended
March 31 June 30 Sept. 30 Dec. 31
Revenue $10,732 $11,938 $13,320 $13,364
Net Income $ 4,935 $ 6,189 $ 6,559 $ 6,080
Net Income Per Unit (Note 3):
Basic $ 0.46 $ 0.50 $ 0.52 $ 0.49
Diluted $ 0.46 $ 0.50 $ 0.52 $ 0.48
<PAGE>
1996 Quarter Ended
March 31 June 30 Sept. 30 Dec. 31
Revenues $ 6,944 $ 7,960 $ 9,034 $ 9,659
Net Income $ 3,152 $ 3,610 $ 3,651 $ 5,269
Net Income Per Unit (Note 3):
Basic $ 0.42 $ 0.48 $ 0.48 $ 0.50
Diluted $ 0.42 $ 0.48 $ 0.48 $ 0.49
1995 Quarter Ended
June 30* Sept. 30 Dec. 31
Revenues $ 352 $ 6,343 $ 6,247
Net Income $ 164 $ 3,213 $ 3,367
Net Income Per Unit(Note 3):
Basic and Diluted $ 0.02 $ 0.44 $ 0.45
(*) Includes results for the period June 26, 1995 (Formation) to June 30,
1995.
11. COMMITMENTS AND CONTINGENCIES
The Operating Partnership's current practice is to conduct
environmental investigations in connection with property acquisitions. At
this time, the Operating Partnership is not aware of any environmental
contamination of any of its facilities which individually or in the
aggregate would be material to the Operating Partnership's overall
business, financial condition, or results of operations.
As of December 31, 1997, the Operating Partnership had entered
into contracts for the purchase of ten facilities. These facilities were
acquired in January and February, 1998 for a total cost of $34,145,000.
12. LEGAL PROCEEDINGS
A former business associate (Plaintiff) of certain officers and
directors of the Company, including Robert J. Attea, Kenneth F. Myszka,
David L. Rogers and Charles E. Lannon, filed a lawsuit against the Company
on June 13, 1995 in the United States District Court for the Northern
District of Ohio. The Plaintiff has since amended the complaint in the
lawsuit alleging breach of fiduciary duty, breach of contract, breach of
general partnership/joint venture arrangement, breach of duty of good
faith, fraud and deceit, and other causes of action including declaratory
judgement as to the Plaintiff's continuing interest in the Company. The
Plaintiff is seeking money damages in excess of $15 million, as well as
punitive damages and declaratory and injunctive relief (including the
imposition of a constructive trust on assets of the Company in which the
Plaintiff claims to have a continuing interest) and an accounting. The
amended complaint also added Messrs. Attea, Myszka, Rogers and Lannon as
additional defendants. The parties are currently involved in discovery.
The Company intends to vigorously defend the lawsuit. Messrs. Attea,
<PAGE>
Myszka, Rogers and Lannon have agreed to indemnify the Company for cost and
any loss arising from the lawsuit. The Operating Partnership believes that
the actual amount of the Plaintiff's recovery in this matter if any, would
be within the ability of these individuals to provide indemnification. The
Operating Partnership does not believe that the lawsuit will have a
material, adverse effect upon the Operating Partnership.
13. INTERNAL PROPERTY ACQUISITION COSTS
On March 19, 1998 the Financial Accounting Standards Board
Emerging Issues Task Force reached a consensus as to the accounting for
internal acquisition costs incurred in connection with real property. The
Task Force consensus indicates that internal costs related to the
acquisition of operating properties should be expensed as incurred. The
Operating Partnership has previously capitalized such costs and will comply
with the consensus prospectively. The amount of such costs capitalized in
1997 and 1996 were $728,000 and $755,000, respectively.
<PAGE>
Report of Independent Auditors
The Board of Directors and Partners
Sovran Acquisition Limited Partnership:
We have audited the financial statements of Sovran Acquisition
Limited Partnership as of December 31, 1997 and 1996, and for the years
ended December 31, 1997 and 1996 and the period from June 26, 1995 to
December 31, 1995 and have issued our report thereon dated April 16, 1998
included elsewhere in this General Form of Registration of Securities. Our
audits also included the financial statements schedule listed in Item 15(b)
of this Registration Statement. This schedule is the responsibility of the
Operating Partnership's management. Our responsibility is to express an
opinion based on our audits.
In our opinion, the financial statement schedule referred to above,
when considered in relation to the basic financial statements taken as a
whole, present fairly in all material respects the information set forth
therein.
ERNST & YOUNG LLP
Buffalo, New York
April 16, 1998
<PAGE>
</TABLE>
<TABLE>
<CAPTION> Sovran Acquisition Limited Partnership Schedule III
Combined Real Estate and Accumulated Depreciation
(in thousands)
December 31, 1997
Cost
Initial Cost Capitalized
to Operating Subsequent to Gross Amount at Which
Partnership Acquisition Carried at Close of Period
Building, Building, Building
Equipment Equipment Equipment
and and Land and Accumulated
Description ST Land Improvements Improvements Land Improvements Total Depreciation Acquired
_________________________________________________________________________________________________________________________________
<S> <C><C> <C> <C> <C> <C> <C> <C>
Charleston I SC 416 1,516 12 416 1,528 1,944 102 6/26/95
Lakeland I FL 397 1,424 33 397 1,457 1,854 96 6/26/95
Charlotte NC 308 1,102 42 308 1,144 1,452 71 6/26/95
Tallahassee I FL 770 2,734 222 770 2,956 3,726 180 6/26/95
Youngstown OH 239 1,110 69 239 1,179 1,418 73 6/26/95
Cleveland-Metro I OH 179 836 144 179 980 1,159 57 6/26/95
Cleveland-Metro II OH 701 1,659 8 701 1,667 2,368 107 6/26/95
Tallahassee II FL 204 734 31 204 765 969 48 6/26/95
Pt. St. Lucie FL 395 1,501 97 395 1,598 1,993 114 6/26/95
Deltona FL 483 1,752 157 483 1,909 2,392 119 6/26/95
Middletown NY 224 808 38 224 846 1,070 55 6/26/95
Buffalo I NY 423 1,531 435 497 1,892 2,389 104 6/26/95
Rochester I NY 395 1,404 17 395 1,421 1,816 89 6/26/95
Salisbury MD 164 760 63 164 823 987 52 6/26/95
New Bedford MA 367 1,325 31 367 1,356 1,723 86 6/26/95
Fayetteville NC 853 3,057 59 853 3,116 3,969 197 6/26/95
Allentown PA 199 921 65 203 982 1,185 63 6/26/95
Jacksonville I FL 152 728 64 152 792 944 53 6/26/95
Columbia I SC 268 1,248 5 268 1,253 1,521 83 6/26/95
Rochester II NY 230 847 87 234 930 1,164 60 6/26/95
Savannah I GA 463 1,684 58 463 1,742 2,205 112 6/26/95
Greensboro NC 444 1,613 30 444 1,643 2,087 107 6/26/95
Raleigh I NC 649 2,329 75 649 2,404 3,053 152 6/26/95
New Haven CT 387 1,402 14 387 1,416 1,803 92 6/26/95
Atlanta-Metro I GA 844 2,021 58 844 2,079 2,923 133 6/26/95
Atlanta-Metro II GA 302 1,103 9 303 1,111 1,414 74 6/26/95
<PAGE>
Buffalo II NY 315 745 110 315 855 1,170 50 6/26/95
Raleigh II NC 321 1,150 15 321 1,165 1,486 74 6/26/95
Columbia II SC 361 1,331 42 374 1,360 1,734 91 6/26/95
Columbia III SC 189 719 26 189 745 934 52 6/26/95
Columbia IV SC 488 1,188 12 488 1,200 1,688 79 6/26/95
Atlanta-Metro III GA 430 1,579 18 430 1,597 2,027 106 6/26/95
Orlando I FL 513 1,930 75 513 2,005 2,518 137 6/26/95
Spartanburg SC 331 1,209 25 331 1,234 1,565 82 6/26/95
Sharon PA 194 912 37 194 949 1,143 64 6/26/95
Ft. Lauderdale FL 1,503 3,619 105 1,503 3,724 5,227 248 6/26/95
West Palm I FL 398 1,035 40 398 1,075 1,473 80 6/26/95
Atlanta-Metro IV GA 423 1,015 10 423 1,025 1,448 68 6/26/95
Atlanta-Metro V GA 483 1,166 35 483 1,201 1,684 77 6/26/95
Atlanta-Metro VI GA 308 1,116 31 308 1,147 1,455 76 6/26/95
Atlanta-Metro VII GA 170 786 49 170 835 1,005 54 6/26/95
Atlanta-Metro VIII GA 413 999 22 413 1,021 1,434 68 6/26/95
Baltimore I MD 154 555 38 154 593 747 40 6/26/95
Baltimore II MD 479 1,742 85 479 1,827 2,306 119 6/26/95
Augusta I GA 357 1,296 77 357 1,373 1,730 87 6/26/95
Macon I GA 231 1,081 7 231 1,088 1,319 72 6/26/95
Melbourne I FL 883 2,104 33 883 2,137 3,020 144 6/26/95
Newport News VA 316 1,471 13 316 1,484 1,800 98 6/26/95
Pensacola I FL 632 2,962 96 632 3,058 3,690 199 6/26/95
Augusta II GA 315 1,139 71 315 1,210 1,525 73 6/26/95
Hartford-Metro I CT 715 1,695 25 715 1,720 2,435 113 6/26/95
Atlanta-Metro IX GA 304 1,118 49 304 1,167 1,471 77 6/26/95
Alexandria VA 1,375 3,220 46 1,375 3,266 4,641 205 6/26/95
Pensacola II FL 244 901 6 244 907 1,151 63 6/26/95
Melbourne II FL 834 2,066 26 834 2,092 2,926 148 6/26/95
Hartford-Metro II CT 234 861 7 234 868 1,102 59 6/26/95
Atlanta-Metro X GA 256 1,244 4 256 1,248 1,504 85 6/26/95
Norfolk I VA 313 1,462 27 313 1,489 1,802 97 6/26/95
Norfolk II VA 278 1,004 12 278 1,016 1,294 67 6/26/95
Birmingham I AL 307 1,415 33 307 1,448 1,755 92 6/26/95
Birmingham II AL 730 1,725 38 730 1,763 2,493 114 6/26/95
Montgomery I AL 863 2,041 78 863 2,119 2,982 137 6/26/95
Jacksonville II FL 326 1,515 49 326 1,564 1,890 103 6/26/95
Pensacola III FL 369 1,358 42 369 1,400 1,769 90 6/26/95
Pensacola IV FL 244 1,128 32 244 1,160 1,404 75 6/26/95
Pensacola V FL 226 1,046 32 226 1,078 1,304 70 6/26/95
Tampa I FL 1,088 2,597 42 1,088 2,639 3,727 175 6/26/95
Tampa II FL 526 1,958 58 526 2,016 2,542 140 6/26/95
Tampa III FL 672 2,439 32 672 2,471 3,143 164 6/26/95
<PAGE>
Jackson I MS 343 1,580 26 343 1,606 1,949 102 6/26/95
Jackson II MS 209 964 22 209 986 1,195 64 6/26/95
Richmond VA 443 1,602 51 443 1,653 2,096 101 8/25/95
Orlando II FL 1,161 2,755 64 1,162 2,818 3,980 162 9/29/95
Birmingham III AL 424 1,506 47 424 1,553 1,977 76 1/16/96
Macon II GA 431 1,567 19 431 1,586 2,017 87 12/1/95
Harrisburg I PA 360 1,641 62 360 1,703 2,063 87 12/29/95
Harrisburg II PA 627 2,224 25 627 2,249 2,876 115 12/29/95
Syracuse I NY 470 1,712 40 472 1,750 2,222 93 12/27/95
Ft. Myers FL 205 912 26 206 937 1,143 70 12/28/95
Ft. Myers II FL 412 1,703 36 413 1,738 2,151 113 12/28/95
Newport News II VA 442 1,592 27 442 1,619 2,061 84 1/5/96
Montgomery II AL 353 1,299 48 353 1,347 1,700 72 1/23/96
Charleston II SC 237 858 63 237 921 1,158 45 3/1/96
Tampa IV FL 766 1,800 50 766 1,850 2,616 83 3/28/96
Arlington I TX 442 1,767 21 442 1,788 2,230 80 3/29/96
Arlington II TX 408 1,662 27 408 1,689 2,097 77 3/29/96
Ft. Worth TX 328 1,324 35 328 1,359 1,687 61 3/29/96
San Antonio I TX 436 1,759 27 436 1,786 2,222 80 3/29/96
San Antonio II TX 289 1,161 24 289 1,185 1,474 53 3/29/96
Syracuse II NY 481 1,559 300 496 1,844 2,340 70 6/5/96
Montgomery III AL 279 1,014 21 279 1,035 1,314 44 5/21/96
West Palm II FL 345 1,262 47 345 1,309 1,654 57 5/29/96
Ft. Myers III FL 229 884 37 229 921 1,150 40 5/29/96
Pittsburgh PA 545 1,940 18 545 1,958 2,503 76 6/19/96
Lakeland II FL 359 1,287 57 359 1,344 1,703 52 6/26/96
Springfield MA 251 917 174 300 1,042 1,342 41 6/28/96
Ft. Myers IV FL 344 1,254 83 344 1,337 1,681 54 6/28/96
Cincinnati OH 557 1,988 17 557 2,005 2,562 73 7/23/96
Dayton OH 667 2,379 15 667 2,394 3,061 87 7/23/96
Baltimore III MD 777 2,770 36 777 2,806 3,583 102 7/26/96
Jacksonville III FL 568 2,028 229 568 2,257 2,825 76 8/23/96
Jacksonville IV FL 436 1,635 32 436 1,667 2,103 64 8/26/96
Pittsburgh II PA 627 2,257 79 632 2,331 2,963 79 8/28/96
Jacksonville V FL 535 2,033 19 538 2,049 2,587 78 8/30/96
Charlotte II NC 487 1,754 16 487 1,770 2,257 58 9/16/96
Charlotte III NC 315 1,131 12 315 1,143 1,458 38 9/16/96
Orlando III FL 314 1,113 88 314 1,201 1,515 35 10/30/96
Rochester III NY 704 2,496 18 708 2,510 3,218 63 12/20/96
Youngstown II OH 600 2,142 25 600 2,167 2,767 55 1/10/97
Akron OH 413 1,478 12 413 1,490 1,903 38 1/10/97
<PAGE>
Cleveland III OH 751 2,676 204 751 2,880 3,631 70 1/10/97
Cleveland IV OH 725 2,586 179 725 2,765 3,490 68 1/10/97
Cleveland V OH 637 2,918 324 637 3,242 3,879 78 1/10/97
Cleveland VI OH 495 1,781 227 495 2,008 2,503 48 1/10/97
Cleveland VII OH 761 2,714 171 761 2,885 3,646 71 1/10/97
Cleveland VIII OH 418 1,921 193 418 2,114 2,532 51 1/10/97
Cleveland IX OH 606 2,164 43 606 2,207 2,813 56 1/10/97
Grand Rapids I MI 455 1,631 14 455 1,645 2,100 38 1/17/97
Grand Rapids II MI 219 790 34 219 824 1,043 19 1/17/97
Kalamazoo MI 516 1,845 65 516 1,910 2,426 44 1/17/97
Lansing MI 327 1,332 5 327 1,337 1,664 31 1/17/97
Holland MI 451 1,830 99 451 1,929 2,380 45 1/17/97
San Antonio III TX 474 1,686 87 474 1,773 2,247 40 1/30/97
Universal TX 346 1,236 38 346 1,274 1,620 29 1/30/97
San Antonio IV TX 432 1,560 30 432 1,590 2,022 38 1/30/97
Houston-Eastex TX 634 2,565 4 634 2,569 3,203 50 3/26/97
Houston-Nederland TX 566 2,279 4 566 2,283 2,849 44 3/26/97
Houston-College TX 293 1,357 4 293 1,361 1,654 27 3/26/97
Lynchburg-Lakeside VA 335 1,342 30 335 1,372 1,707 26 3/31/97
Lynchburg -
Timberlake VA 328 1,315 10 328 1,325 1,653 25 3/31/97
Lynchburg-Amherst VA 155 710 16 155 726 881 14 3/31/97
Christiansburg VA 245 1,120 9 245 1,129 1,374 21 3/31/97
Chesapeake VA 260 1,043 33 260 1,076 1,336 20 3/31/97
Danville VA 326 1,488 14 326 1,502 1,828 28 3/31/97
Orlando-W 25th St FL 289 1,160 33 289 1,193 1,482 23 3/31/97
Delray I-Mini FL 491 1,756 53 491 1,809 2,300 35 4/11/97
Savannah II GA 296 1,196 84 296 1,280 1,576 22 5/8/97
Delray II-Safeway FL 921 3,282 70 921 3,352 4,273 49 5/21/97
Cleveland X-Avon OH 301 1,214 72 301 1,286 1,587 19 6/4/97
Dallas-Skillman TX 960 3,847 37 960 3,884 4,844 49 6/30/97
Dallas-Centennial TX 965 3,864 35 965 3,899 4,864 49 6/30/97
Dallas-Samuell TX 570 2,285 34 570 2,319 2,889 29 6/30/97
Dallas-Hargrove TX 370 1,486 2 370 1,488 1,858 19 6/30/97
Houston-Antoine TX 515 2,074 5 515 2,079 2,594 27 6/30/97
Atlanta-Alpharetta GA 1,033 3,753 22 1,033 3,775 4,808 41 7/24/97
Atlanta-Marietta GA 769 2,788 8 769 2,796 3,565 31 7/24/97
Atlanta-Doraville GA 735 3,429 17 735 3,446 4,181 30 8/21/97
GreensboroHilltop NC 268 1,097 5 268 1,102 1,370 7 9/25/97
GreensboroStgCch NC 89 376 3 89 379 468 3 9/25/97
<PAGE>
Baton Rouge-
Airline LA 396 1,831 4 396 1,835 2,231 12 10/9/97
Baton Rouge-
Airline2 LA 282 1,303 1 282 1,304 1,586 3 11/21/97
Harrisburg-
Peiffers PA 635 2,550 5 635 2,555 3,190 5 12/3/97
Corporate Office NY 0 68 282 0 350 350 12 01/1/95
Boston-Metro I MA 363 1,679 76 363 1,755 2,118 113 6/26/95
Boston-Metro II MA 680 1,616 28 680 1,644 2,324 108 6/26/95
E. Providence RI 345 1,268 90 345 1,358 1,703 88 6/26/95
0
____________________ _____ ____________________________________________ ______
71,214 253,311 8,511 71,391 261,645 333,036 11,639
======================================================================================
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
December 31, 1997 December 31, 1996 December 31, 1995
<S> <C> <C> <C> <C> <C> <C>
Balance at beginning of period $220,711 $159,461 $ -
Additions during period:
Acquisitions through
foreclosure $ - $ - $ -
Other acquisitions 106,926 58,626 158,698
Improvements, etc. 5,527 2,640 763
Other (describe) - 112,453 - 61,266 - 159,461
Deductions during period:
Cost of real estate sold - - - -
Other (describe) (128) (128) (16) (16) - -
____ ____ ___ ___ _ _
Balance at close of period $333,036 $220,711 $159,461
==================================================
</TABLE>
<PAGE>
SIGNATURE
Pursuant to the requirements of Section 12 of the Securities
Exchange Act of 1934, the Registrant has duly caused this amended
Registration Statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of Buffalo, State of New York on
this 15th day of June, 1998.
SOVRAN ACQUISITION LIMITED PARTNERSHIP
By: Sovran Holdings, Inc.
Its: General Partner
By: /S/ David L. Rogers
David L. Rogers, Chief Financial Officer
<PAGE>
EXHIBIT INDEX
Exhibit No. Description
3.1* Agreement of Limited Partnership of
the Operating Partnership, as amended
3.2** Amended and Restated Articles of
Incorporation of the Company
3.3** By-laws of the Company
3.4 Articles Supplementary of the Articles of
Incorporation of the Company classifying and
designating the Company's Series A Junior
Participating Preferred Stock (Incorporated
by reference to Exhibit 3.1 to the Company's
Form 8A filed December 3, 1996)
10.1* Revolving Credit Agreement between the
Company, the Operating Partnership, Fleet
National Bank and other lenders named therein
10.2** Form of Non-competition Agreement between the
Company and Charles E. Lannon
10.3** Form of Non-competition Agreement between the
Company and Robert J. Attea
10.4** Form of Non-competition Agreement between the
Company and Kenneth F. Myszka
10.5** Form of Non-competition Agreement between the
Company and David L. Rogers
10.6** Sovran Self Storage, Inc. 1995 Award and
Option Plan
10.7** 1995 Sovran Self Storage, Inc. Directors'
Option Plan
10.8** Sovran Self Storage Incentive Compensation
Plan for Executive Officer
10.9** Restricted Stock Agreement between the
Company and David L. Rogers
10.10** Form of Supplemental Representations,
Warranties and Indemnification Agreement
among the Company and Robert J. Attea,
Charles E. Lannon, Kenneth F. Myszka and
David L. Rogers
10.11** Form of Pledge Agreement among the Company
and Robert J. Attea, Charles E. Lannon,
Kenneth F. Myszka and David L. Rogers
<PAGE>
10.12** Form of Indemnification Agreement between the
Company and certain Officers and Directors of
the Company
10.13** Form of Subscription Agreement (including
Registration Rights Statement) among the
Company and subscribers for 422,171 Common
Shares
10.14** Form of Registration Rights and Lock-Up
Agreement among the Company and Robert J.
Attea, Charles E. Lannon, Kenneth F. Myszka
and David L. Rogers
10.15** Form of Facilities Services Agreement between
the Company and Williamsville Properties,
Inc.
27.1* Financial Data Schedule
_________________
* Previously filed as an exhibit to this Registration Statement.
** Incorporated by reference to the exhibits as filed with the
Company's Registration Statement on Form S-11 (File No. 33-91422)
filed June 19, 1995.
<PAGE>
