FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1998
Commission file number: 0-24071
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, NY 14221
(Address of principal executive offices) (Zip code)
716-633-1850
(Registrant's telephone number including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No ____
<PAGE>
Part I. Financial Information
Item 1. Financial Statements
SOVRAN ACQUISITION LIMITED PARTNERSHIP
BALANCE SHEETS
<TABLE>
<CAPTION>
June 30, December 31,
(dollars in thousands) ....................... 1998 1997
- ---------------------------------------------- ---- ----
<S> <C> <C>
Assets
Investment in storage facilities:
Land $ 93,757 $ 71,391
Building and equipment 358,334 261,645
---------- ----------
452,091 333,036
Less: accumulated depreciation (15,873) (11,639)
---------- ----------
Investments in storage facilities, net 436,218 321,397
Cash and cash equivalents 2,695 2,567
Accounts receivable 1,335 834
Prepaid expenses and other assets 3,030 2,275
---------- ----------
Total Assets.................................. $ 443,278 $ 327,073
========== ==========
Liabilities
Line of credit $ 148,000 $ 36,000
Accounts payable and accrued liabilities 4,591 1,950
Deferred revenue 2,934 1,994
Accrued distributions 6,882 6,816
Mortgage payable 3,059 3,559
---------- ----------
Total Liabilities 165,466 50,319
Limited partners' capital interest
(453,609 and 443,609 units, respectively),
at redemption value 12,814 14,454
Partners' Capital
General partner 5,244 5,257
Limited partner 259,754 257,043
---------- ----------
Total partners' capital 264,998 262,300
---------- ----------
Total Liabilities and Partners' Capital $ 443,278 $ 327,073
========== ==========
</TABLE>
See notes to financial statements
SOVRAN ACQUISITION LIMITED PARTNERSHIP
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
April 1, 1998 April 1, 1997
(dollars in thousands, except unit to to
data) June 30, 1998 June 30, 1997
- ---------------------------------- ------------- -------------
<S> <C> <C>
Revenues:
Rental income $ 16,171 $ 11,724
Interest and other income 271 214
---- ---
Total revenues 16,442 11,938
Expenses:
Property operations
and maintenance 3,164 2,254
Real estate taxes 1,311 918
General and administrative 1,093 586
Interest 2,153 306
Depreciation and amortization 2,450 1,685
------ ------
Total expenses 10,171 5,749
------- ------
Net Income $ 6,271 $ 6,189
========= =========
Earnings per unit - basic $ 0.49 $ 0.50
========= ========
Earnings per unit - diluted $ 0.49 $ 0.50
========= ========
Units used in basic earnings
per unit calculation 12,775,737 12,201,392
Distributions declared per unit $ 0.54 $ 0.52
========= =========
</TABLE>
See notes to financial statements.
SOVRAN ACQUISITION LIMITED PARTNERSHIP
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
January 1, 1998 January 1, 1997
(dollars in thousands, to to
except unit data) June 30, 1998 June 30, 1997
- ----------------- ------------- -------------
<S> <C> <C>
Revenues:
Rental income $ 30,347 $ 22,302
Interest and other income 470 368
----------- -------------
Total revenues 30,817 22,670
Expenses:
Property operations and maintenance 5,983 4,408
Real estate taxes 2,498 1,775
General and administrative 1,947 1,330
Interest 3,368 818
Depreciation and amortization 4,547 3,216
----------- -------------
Total expenses 18,343 11,547
----------- -------------
Income before extraordinary item 12,474 11,123
Extraordinary loss on extinguishment of debt (350) -
----------- -------------
Net Income $ 12,124 $ 11,123
=========== =============
Earnings per unit before
extraordinary item - basic ................. 0.98 0.96
Extraordinary item (0.03) -
----------- -------------
Earnings per unit - basic $ 0.95 $ 0.96
========== =============
Earnings per unit - diluted $ 0.95 $ 0.96
=========== =============
Units used in basic
earnings per unit calculation 12,754,524 11,525,835
Distributions declared per unit $ 1.08 $ 1.04
=========== =============
</TABLE>
See notes to financial statements.
SOVRAN ACQUISITION LIMITED PARTNERSHIP
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
January 1, 1998 January 1, 1997
to to
(dollars in thousands) June 30, 1998 June 30, 1997
- ---------------------- ------------- -------------
<S> <C> <C>
Operating Activities
Net income $ 12,124 $ 11,123
Adjustments to reconcile net income
to net cash provided by operating activities:
Extraordinary loss 350 -
Depreciation and amortization 4,547 3,216
Restricted stock earned 7 6
Changes in assets and liabilities:
Accounts receivable (474) (202)
Prepaid expenses and other assets (462) 514
Accounts payable and other liabilities 2,767 2,594
Deferred revenue 649 683
---------- ----------
Net cash provided by operating activities 19,508 17,934
---------- ----------
Investing Activities
Additions to storage facilities (115,337) (76,521)
Additions to other assets (851) (10)
---------- ----------
Net cash used in investing activities (116,188) (76,531)
---------- ----------
Financing Activities
Net proceeds from sale of common stock - 42,419
Proceeds from line of credit draw down 112,000 15,000
Distributions paid (13,738) (12,193)
Purchase of treasury stock (954) -
Mortgage principal payments (500) -
---------- ----------
Net cash provided by financing activities 96,808 45,226
---------- ----------
Net increase (decrease) in cash 128 (13,371)
Cash at beginning of period 2,567 16,687
---------- ----------
Cash at end of period $ 2,695 $ 3,316
========== ==========
Supplemental cash flow information
Cash paid for interest $ 3,181 $ 818
========== ==========
</TABLE>
See notes to financial statements ......................
SOVRAN ACQUISITION LIMITED PARTNERSHIP
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Supplemental cash flow information for the six months
ended June 30, 1998
(dollars in thousands)
- -------------------------------------------------------------------------------
<S> <C>
Storage facilities acquired through the issuance
of units in the Operating Partnership $ 3,609
Fair value of net liabilities assumed on the acquisition
of storage facilities $ 424
- -------------------------------------------------------------------------------
Distributions declared but unpaid were $6,882 at June 30, 1998
and $6,816 at December 31, 1997
</TABLE>
See notes to financial statements.
Notes to 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 six month periods ended June 30, 1998 and June 30,
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 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 117 (thirty-six in 1998, forty-four in 1997, twenty-nine in 1996 and
nine in 1995) self storage properties from unaffiliated third parties,
increasing the total number of self-storage properties owned at June 30, 1998 to
192 properties, most of which are in the eastern United States and Texas.
As of June 30, 1998, the Company was a 96.4% economic owner of the
Operating Partnership and controls it through Sovran Holdings, Inc. (Holdings) a
wholly-owned subsidiary of the Company and the sole general partner of the
Operating Partnership. 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 interest in the Operating
Partnership entitle it to share in the 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 interest in certain self-storage properties
to the Operating Partnership. The Operating Partnership is obligated to redeem
each unit of the limited partnership (Unit) at the request of the holder thereof
for cash equal to the fair value of a share of the Company's common stock
(Common Shares) at the time of such redemption, provided that the Company at its
options may elect to acquire any Unit presented for redemption for one Common
Share or 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
June 30, 1998.
<TABLE>
<CAPTION>
(dollars in thousands)
<S> <C>
Cost:
Beginning balance $ 333,036
Property acquisitions 110,940
Improvements and equipment additions 8,232
Dispositions (117)
- --------------------------------------------------------------------------------
Ending balance $ 452,091
- --------------------------------------------------------------------------------
Accumulated Depreciation:
Beginning balance $ 11,639
Additions during the period 4,258
Dispositions (24)
- --------------------------------------------------------------------------------
Ending balance $ 15,873
- --------------------------------------------------------------------------------
</TABLE>
4. Line of Credit
On February 20, 1998, the Operating Partnership entered into a new $150
million unsecured credit facility which replaced in its entirety the Operating
Partnership'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 Operating Partnership's old facility. As a result of the new
credit facility, in 1998 the Operating Partnership recorded an extraordinary
loss on the extinguishment of debt of $350,000 representing the unamortized
financing costs of the former revolving credit facility.
In June 1998, the Operating Partnership entered into a $30 million
unsecured term note which matures on September 24, 1998 and provides for funds
at LIBOR plus 1.25%.
To manage its exposure to interest rate fluctuations, the Operating
Partnership has entered into LIBOR-based interest rate swap agreements in
amounts of $75 million through October 1998 and $40 million through June 1999.
Net payments or receipts under swap agreements are recorded as adjustments to
interest expense. The net carrying amount of the Operating Partnership's debt
instruments approximates the fair values.
5. 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 June 30, 1998, the Operating Partnership had entered into
contracts for the purchase of 4 self-storage facilities which were purchased in
July 1998 for a total cost of $22.7 million.
6. Pro Forma Financial Information
The following unaudited pro forma Condensed Statement of Operations is
presented as if the 36 storage facilities purchased during the six months ended
June 30, 1998, had occurred at January 1, 1998. Such unaudited pro forma
information is based upon the historical combined statements of operations of
the Operating Partnership. It should be read in conjunction with the financial
statements of the Operating Partnership and notes thereto included elsewhere
herein. 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.
<TABLE>
<CAPTION>
(in thousands, except per unit data)
Six Months
Ended June 30,
1998
<S> <C>
Revenues:
Rental income $ 34,011
Other income 535
----------------
Total revenues 34,546
Expenses:
Property operations & maintenance 6,836
Real estate taxes 2,800
General and administrative 1,995
Interest 5,236
Depreciation and amortization 4,939
----------------
Total Expenses 21,806
Income before extraordinary item 12,740
Extraordinary loss on extinguishment of debt (350)
-----------------
Net income $ 12,390
================
Earnings per unit before extraordinary item - basic 1.00
Extraordinary item (.03)
-----------------
Earnings per unit - basic $ .97
================
Earnings per unit - diluted $ .97
================
Units used in basic earnings
per unit calculation 12,751,822
</TABLE>
7. 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 in
connection with the formation of the Company as a REIT and related transactions,
as well as the Offering. On April 29, 1996, the Plaintiff 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
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.
8. Earnings Per Unit
In 1997, the Operating Partnership adopted Statement of Financial
Accounting Standards No. 128, "Earnings Per Share." The following table sets
forth the computation of basic and diluted earnings per unit:
<TABLE>
<CAPTION>
Six Months Six Months
Ended Ended
June 30, June 30,
1998 1997
--------- --------
<S> <C> <C>
Numerator:
Net Income ........................... $12,124 $11,123
Denominator:
Denominator for basic earnings
per unit - weighted average units .. 12,754 11,526
Effect of Diluted Securities:
Stock options ........................ 54 57
Denominator for diluted earnings
per unit - adjusted weighted average
units and assumed conversion ....... 12,808 11,583
Basic earnings per unit ................ $ .95 $ .96
Diluted earnings per unit .............. $ .95 $ .96
</TABLE>
9. 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 Operating Partnership has
previously capitalized such costs and will comply with the consensus
prospectively. The amount of internal acquisition costs capitalized in the
six-months ended June 30, 1998 and 1997, was $222,000 and $400,000,
respectively.
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operation
The following discussion and analysis of the consolidated financial
condition and results of operations should be read in conjunction with the
financial statements and notes thereto included elsewhere in this report.
The Company operates as a Real Estate Investment Trust ("REIT") and
owns and operates, through the Operating Partnership, a portfolio of 192
self-storage facilities, providing storage space for business and personal use
to customers in 19 states. The Company's investment objective is to increase
cash flow and enhance shareholder value by aggressively managing its portfolio,
to expand and enhance the facilities in that portfolio and to selectively
acquire new properties in geographic areas that will either complement or
efficiently grow the portfolio.
When used in this discussion and elsewhere in this document, the words
"intends," "believes," "anticipates," and similar expressions are intended to
identify "forward-looking statements" within the meaning of that term in Section
27A of the Securities Exchange Act of 1933, as amended, and in Section 21F of
Securities Exchange Act of 1934, as amended. Such forward-looking statements
involve known and unknown risks, uncertainties and other factors, which may
cause the actual results, performance or achievements of the Operating
Partnership to be materially different from those expressed or implied by such
forward-looking statements. Such factors include the effect of competition from
new self-storage facilities, which would cause rents and occupancy rates to
decline; the Operating Partnership's ability to evaluate, finance and integrate
acquired businesses into the Operating Partnership's existing business and
operations; the Operating Partnership's ability to effectively compete in the
industries in which it does business; and tax law changes which may change the
taxability of future income.
Liquidity and Capital Resources
Revolving Credit Facility
On February 20, 1998, the Operating Partnership entered into a new $150
million unsecured credit facility which replaces in its entirety the Operating
Partnership'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 Operating Partnership's old facility. The Operating Partnership
intends to use funds available from this credit facility to finance future
acquisition and development plans described below. At June 30, 1998, the
Operating Partnership had remaining borrowing capacity of $2 million on the
line.
In June 1998, the Operating Partnership entered into a $30 million term
note which matures on September 24, 1998 and provides for funds at LIBOR plus
1.25%. At June 30, 1998, there was no balance outstanding on the term note. To
manage its exposure to interest rate fluctuations, the Operating Partnership has
entered into LIBOR-based interest rate swap agreements in amounts of $75 million
through October 1998 and $40 million through June 1999.
Umbrella Partnership
The Operating Partnership has the ability to issue operating partnership
("OP") units in exchange for properties sold by independent owners. By utilizing
such OP units as currency in facility acquisitions, the Operating Partnership
may partially defer the seller's income-tax liability and obtain more favorable
pricing or terms. As of June 30, 1998, 453,609 units have been issued in
exchange for property at the request of the sellers.
Acquisition of Properties
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 an operating presence or to expand into new markets by
acquiring several facilities at once in those new markets. In the three months
ended June 30, 1998, the Operating Partnership acquired eighteen properties,
increasing its existing presence in Florida, Michigan, Missouri, North Carolina,
Ohio, Tennessee and Texas. The Operating Partnership also entered a new market,
New Hampshire. The eighteen acquisitions in the three months ended June 30, 1998
added 1,169,000 square feet of space and 11,000 rental units to the Operating
Partnership's portfolio.
Future Acquisition and Development Plans
In July, the Operating Partnership continued its external growth
strategy by increasing the number of facilities it owns in Florida, and has
contracts on properties in Florida, North Carolina, and Texas with planned
closings in the third quarter.
The Operating Partnership also intends to improve 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.
Liquidity
At June 30, 1998, the Operating Partnership's debt to equity ratio was
57%.
As most of the Company's operating cash flow is expected to be used to
pay dividends, (see REIT Qualification and Distribution Requirements), the funds
required to acquire additional properties will be provided by borrowings
pursuant to the revolving line of credit and the issuance of UPREIT units. In
addition, 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 a portion of 1998 growth. The Company has filed a registration statement
and expects to access the capital markets in 1998.
REIT Qualification and Distribution Requirements
The Operating Partnership is treated as a partnership for Federal income
tax purposes and the Company is treated as a partner in the Operating
Partnership. As a partner, the Company is deemed to own its proportionate share
of the assets of the partnership and is deemed to be entitled to the income of
the partnership attributable to such share.
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 dividend of the following year.
As a REIT, the Company must derive at least 95% of its total gross
income from income related to real property, interest and dividends. In the
three months ended June 30, 1998, the Company's percentage of revenue from such
sources exceeded 98%, thereby passing the 95% test, and no special measures are
expected to be required to enable the Company to maintain its REIT designation.
Results of Operations
The following discussion is based on the financial statements of the
Operating Partnership as of June 30, 1998 and June 30, 1997.
For the period January 1, 1998 through June 30, 1998 (dollars in thousands)
The Operating Partnership reported revenues of $30,817 during the
period and incurred $8,481 in operating expenses, resulting in net operating
income of $22,336, or 72%. General and administrative expenses of $1,947,
interest expense of $3,368 and depreciation and amortization expenses of 4,547
resulted in income of $12,474 before extraordinary item. An extraordinary loss
of $350 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 $12,124.
Three months ended June 30, 1998, compared to Three months ended June 30, 1997
(dollars in thousands)
The following discussion compares the activities of the Operating
Partnership for the three months ended June 30, 1998 with the activities of the
Operating Partnership for the three months ended June 30, 1997.
Total revenues increased from $11,938 for the three months ended June
30, 1997 to $16,442 for the three months ended June 30, 1998, an increase of
$4,504 or 38%. Of this, $4,200 resulted from the acquisition of 18 properties
during the period April 1, 1998 through June 30, 1998 and $304 was realized as a
result of increased rental rates at the 138 properties owned by the Operating
Partnership at April 30, 1997. Overall, same-store revenues grew 3% for the
three month period ended June 30, 1998 as compared to the same period in 1997.
Property operating and real estate tax expense increased $1,303 or 41%
during the period. $1,112 was a result of absorbing additional expenses from
operating the newly acquired properties, and $191 related to the operations of
its sites operated more than one year.
General and administrative expenses, which includes losses of $66
realized as the result of replacement of equipment, increased $507 principally
as a result of the need for additional personnel and increased administrative
costs associated with managing the additional properties.
Interest expense increased $1,847 due to the $112 million drawn on the
Operating Partnership's line of credit during 1998. Net income increased from
$6,189 to $6,271, an increase of $82 or 1.3%.
Inflation
The Operating Partnership does not believe that inflation has had or
will have a direct adverse effect on its operations. Substantially all of the
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 quarters, 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 geographical
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.
Item 3. Changes in Information About Market Risk
No disclosure required
Part II. Other Information
Item 1. Legal Proceedings
The Operating Partnership is a party to proceedings arising in the ordinary
course of operation of self-storage facilities. However, the Operating
Partnership does not believe that these matters, individually or in the
aggregate, will have a material adverse effect on the Operating Partnership.
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 in
connection with the formation of the Company as a REIT and related transactions,
as well as the Offering. On April 29, 1996, the Plaintiff 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
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
Item 2. Changes in Securities
No disclosure required.
Item 3. Defaults Upon Senior Securities
No disclosure required.
Item 4. Submission of Matters to a Vote of Security Holders
No disclosure required.
Item 5. Other Information
No disclosure required.
Item 6. Exhibits and Reports on Form 8-K
1. (a.) Exhibit 27. Financial Data Schedule
(b.) Reports on Form 8-K
On April 17, 1998, the Company filed an amended Current Report on Form
8-K/A, which amended the Company's Form 8-K filed February 20, 1998. The
8-K/A filed April 17, 1998, included the financial statements for
twenty-four self storage facilities acquired. In addition, an unaudited Pro
Forma Combined Balance Sheet and Statement of Operations at and for the
year ended December 31, 1997 were presented.
On June 10, 1998, the Company filed a Current Report on Form 8-K reporting
the acquisition of eight self-storage facilities. In addition, an unaudited
Pro Forma Combined Balance Sheet and Statement of Operations at and for the
three months ended March 31, 1998 and the year ended December 31, 1997 were
presented.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
Sovran Acquisition Limited Partnership
By: Sovran Holdings, Inc.,
Its: General Partner
August 13, 1998 By: /S/ David L. Rogers
- --------------- --- -------------------
Date David L. Rogers,
Chief Financial Officer
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0001060224
<NAME> SOVRAN ACQUISITION LIMITED PARTNERSHIP
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> JUN-30-1998
<EXCHANGE-RATE> 1.000
<CASH> 2,695
<SECURITIES> 0
<RECEIVABLES> 1,335
<ALLOWANCES> 0
<INVENTORY> 0
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0
0
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</TABLE>
