SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C.
FORM 10-Q
Quarterly Report Under Section 13 or 15 (d)
of the Securities Exchange Act of 1934
For Quarter Ended Commission File Number 1-13820
March 31, 1996
SOVRAN SELF STORAGE, INC.
(Exact name of registrant as specified in its charter)
Maryland 16-1480124
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
5166 Main Street
Williamsville, NY 14221
(Address of principal executive offices)
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
Number of common shares outstanding as of the close of the period covered by
this report: 7,542,171 shares of Common Stock.
<PAGE>
SOVRAN SELF STORAGE, INC.
FORM 10-Q FOR THE PERIOD ENDED MARCH 31, 1996
INDEX
Part 1. Financial Information
Item 1. Financial Statements (Unaudited) Page
Balance sheet of Sovran Self Storage, Inc. as of
March 31, 1996 and December 31, 1995. 3
Statements of operations of Sovran Self Storage, Inc.
for the three months ended March 31, 1996 and combined
statements of operations of Sovran Capital, Inc. and
the Sovran Partnerships (predecessor to Sovran Self
Storage, Inc.) for the three months ended March 31, 1995. 4
Statement of cash flows of Sovran Self Storage, Inc.
for the three months ended March 31, 1996 and
combined statements of cash flows of Sovran Capital, Inc.
and the Sovran Partnerships (predecessor to Sovran Self
Storage, Inc.) for the three months ended March 31, 1995. 5-6
Notes to financial statements 7-10
Pro forma condensed statement of operations of Sovran
Self Storage, Inc. for the three months ended March 31,
1996 and 1995. 9
Item 2. Management's discussion and analysis of financial
condition and results of operations. 11-13
Part II. Other Information 14
Signatures 15
<PAGE>
SOVRAN SELF STORAGE, INC.
CONSOLIDATED BALANCE SHEET
(In Thousands)
Sovran Self Sovran Self
Storage, Inc. at Storage, Inc. at
March 31, 1996 December 31, 1995
(Unaudited) (Audited)
Assets
Investment in storage facilities:
Land $ 40,707 $ 36,640
Building and equipment 137,499 122,821
------------ ----------
178,206 159,461
Less: accumulated depreciation (2,348) (1,497)
------------ ----------
Investment in storage facilities, net 175,858 157,964
Cash and cash equivalents 1,275 732
Accounts receivable 231 297
Prepaid expenses and other assets 1,448 1,444
------------ ----------
Total assets $ 178,812 $ 160,437
============= ===========
Liabilities
Line of credit $ 23,809 $ 5,000
Accounts payable and accrued
liabilities 953 908
Deferred revenue 1,157 980
Accrued dividends 3,810 3,809
------------ ------------
Total liabilities 29,729 10,697
Shareholders' Equity
Common stock $.01 par value,
100,000 shares authorized, 7,542
shares issued and outstanding 75 75
Additional paid-in capital 150,727 150,727
Retained earnings (1,062) 0
Dividends in excess of net income (657) (1,062)
------------- -------------
Total shareholders' equity 149,083 149,740
------------- -------------
Liabilities and shareholders' equity $ 178,812 $ 160,437
============= =============
See notes to financial statements.
<PAGE>
SOVRAN SELF STORAGE, INC. (THE COMPANY) AND
SOVRAN CAPITAL, INC. AND SOVRAN PARTNERSHIPS (THE
PREDECESSORS TO THE COMPANY)
STATEMENT OF OPERATIONS OF THE COMPANY AND
COMBINED STATEMENTS OF OPERATIONS OF THE PREDECESSORS
(In Thousands, Except Per Share Amounts)
Company Predecessors
--------------- -------------------
Sovran Capital,
Sovran Self Inc. and Sovran
Storage, Inc. Partnerships
January 1, 1996 January 1, 1995
to to
March 31, 1996 March 31, 1995
(Unaudited) (Audited)
Revenues:
Rental income $ 6,857 $ 4,703
Interest and other income 87 113
----------- ---------
Total revenues 6,944 4,816
Expenses:
Property operations & maintenance 1,514 1,048
Real estate taxes 513 349
General and administrative 507 567
Interest 278 1,628
Depreciation and amortization 980 809
---------- ---------
Total expenses 3,792 4,401
---------- ---------
Net income $ 3,152 $ 415
========== ===========
Earnings per share $ 0.42
========
Common shares used in earnings per
share calculation 7,542,171
Dividends declared per share $ 0.505
=========
See notes to financial statements.
<PAGE>
SOVRAN SELF STORAGE, INC. (THE COMPANY) AND
SOVRAN CAPITAL, INC. AND SOVRAN PARTNERSHIPS (THE
PREDECESSORS TO THE COMPANY)
STATEMENT OF CASH FLOWS OF THE COMPANY AND
COMBINED STATEMENTS OF CASH FLOWS OF THE PREDECESSORS
(In Thousands)
Company Predecessors
Sovran Capital,
Sovran Self Inc. and Sovran
Storage, Inc. Partnerships
January 1, 1996 January 1, 1995
to to
March 31, 1996 March 31, 1995
(Unaudited) (Audited)
Operating Activities
Net income $ 3,152 $ 415
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation and amortization 980 809
Changes in assets and liabilities:
Accounts receivable 18 (23)
Prepaid expenses and other assets (82) (300)
Accounts payable and other liabilities 46 741
Deferred revenue 177 6
------------ ------------
Net cash provided by operating activities 4,291 1,648
------------ ------------
Investing Activities
Additions to storage facilities (18,745) (2,084)
Additions to other assets (3) 0
Restricted cash 0 (91)
------------ ------------
Net cash used in investing activities (18,748) (2,175)
------------ ------------
Financing Activities
Proceeds from line of credit draw down 18,809 0
Dividends paid (3,809) 0
Proceeds from issuance of mortgages 0 1,240
Mortgage principal payments 0 (540)
Capital Contributions 0 650
Cash Contributions 0 (855)
------------ ------------
Net cash provided by financing activities 15,000 495
------------ ------------
Net increase (decrease) in cash 543 (32)
Cash at beginning of period 732 1,045
------------ ------------
Cash at end of period $ 1,275 $ 1,013
============ ============
Supplemental cash flow information
Cash paid for interest $ 278 $ 1,628
See notes to financial statements.
<PAGE>
SOVRAN SELF STORAGE, INC. (THE COMPANY) AND
SOVRAN CAPITAL, INC. AND SOVRAN PARTNERSHIPS (THE
PREDECESSORS TO THE COMPANY)
STATEMENT OF CASH FLOWS OF THE COMPANY AND
COMBINED STATEMENTS OF CASH FLOWS OF THE PREDECESSORS
(In Thousands)
Supplemental cash flow information
Cash paid for acquisition properties $ 18,668
Cash paid for building improvements 77
-------------
Cash paid for storage facilities per
statement of cash flows 18,745
Additions to storage facilities, December 31, 1995 156,780
Fair value of net liabilities assumed of the
partnerships and Sovran Capital, Inc. 2,681
Investment in storage facilities per financial -------------
statements $ 178,206
=============
See notes to financial statements.
<PAGE>
Notes to Consolidated Financial Statements
1. Organization
Sovran Self Storage, Inc. (the Company), a self-administered and self-managed
real estate investment trust (a REIT), was formed on April 19, 1995 to own and
operate self-storage facilities throughout the United States. On June 26, 1995,
the Company commenced operations effective with the completion of its initial
public offering of 5,890,000 shares (the Offering). The Offering price per share
was $23.00, resulting in net proceeds to the Company, after underwriting
discount and other expenses, of $124.3 million. On July 25, 1995, the
underwriters exercised their over-allotment option granted in connection with
the Company's initial public offering and purchased 750,000 shares of the
Company's common stock at $23.00 per share, resulting in net proceeds to the
Company of approximately $16 million. Additionally, the Company received $10.1
million in proceeds from a private placement of 422,171 shares of its common
stock.
Contemporaneously with the closing of the Offering, Sovran Self Storage, Inc.
acquired, in a transaction accounted for as a purchase, 62 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 Company
acquired on that date 12 self-storage properties (the Acquisition Properties)
from unaffiliated third parties. The Company has since purchased a total of 18
self-storage properties from unaffiliated third parties, increasing the total
number of self-storage properties owned at March 31, 1996 to 92 properties.
2. Summary of Significant Accounting Policies
Basis of Presentation:
The Company was formed on April 19, 1995, and commenced operations effective
with the completion of the Offering on June 25, 1995. Accordingly, there are no
historical results of operations for the Company for the three months ended
March 31, 1995.
All of the Company's assets are owned by, and all its operations conducted
through Sovran Acquisition Limited Partnership (the Partnership). Sovran
Holdings, Inc., a wholly-owned subsidiary of the Company (the Subsidiary), is
the sole general partner; and the Company is the sole limited partner of the
Partnership. The consolidated financial statements of the Company include the
accounts of the Company, the Partnership, and the wholly-owned Subsidiary. All
intercompany transactions and balances have been eliminated.
The combined statements of operations and the combined statements of cash flows
for the period ended March 31, 1995 reflect the results of operations of Sovran
Capital, Inc. and the Sovran Partnerships (the Predecessor). Such financial
statements have 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 Company 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.
<PAGE>
Long-Lived Assets:
In March 1995, the FASB issued Statement No. 121, Accounting for the Impairment
of Long-Lived Assets and for Long -Lived Assets to Be Disposed Of, which
requires impairment losses to be recorded on long-lived assets used in
operations when indicators of impairment are present and the undiscounted cash
flows estimated to be generated by those assets are less than the assets'
carrying amount. Statement 121 also addresses the accounting for long-lived
assets that are expected to be disposed of. The Company adopted Statement 121 in
January, 1996 and has not realized, nor expects to realize, any material effect
from this adoption.
Prepaid Expenses and Other Assets:
Included in prepaid expenses and other assets are prepaid operating expenses and
intangible assets. The intangible assets at March 31, 1996 consist primarily of
loan acquisition costs of approximately $481, net of accumulated amortization of
approximately $294, organizational costs of approximately $56, net of
accumulated amortization of approximately $7, and a covenant not to compete of
approximately $321, net of accumulated amortization of approximately $29. Loan
acquisition costs are amortized over the terms of the related debt, organization
costs are amortized over 5 years, and the covenant is amortized over the
contract period of the agreement.
Income Per Share:
Net income per share is calculated using the weighted average number of shares
outstanding during the period. In the first quarter of 1996, the impact of
outstanding stock options is not materially dilutive.
Reclassifications:
Certain previously reported amounts have been reclassified to conform with the
current year presentation.
Income Taxes:
The Company qualifies as a REIT under the Internal Revenue Code of 1986, as
amended, and will generally not be subject to corporate income taxes to the
extent it distributes at least 95% of its taxable income to its shareholders
and complies with certain other requirements. Accordingly, no provision has been
made for income taxes in the accompanying financial statements.
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. Investment in Storage Facilities
The following summarizes activity in storage facilities during the period (in
thousands):
Cost
Balance at December 31, 1995 . . . . . . . . . . . . . . . . . . .$159,461
Property Acquisitions . . . . . . . . . . . . . . . . . . . . . . 18,669
Improvements . . . . . . . . . . . . . . . . . . . . . . . . . . . 76
----------
Balance at March 31, 1996 . . . . . . . . . . . . . . . . . . . .$178,206
----------
Accumulated Depreciation
Balance at March 31, 1996 . . . . . . . . . . . . . . . . .$ 2,348
4. Line of Credit
In June, 1995, the Company entered into an agreement with a financial
institution to establish a two-year revolving credit facility for up to $60
million, secured by real estate. At March 31, 1996, the Company had identified
and pledged properties sufficient to provide $45 million of such borrowings. At
the Company's option, and upon pledging additional properties, the line can be
increased an additional $15 million. Interest on outstanding balances is payable
monthly at 260 basis points above LIBOR. The commitment fee was $281,250, 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 March 31, 1996, the Company was at the .25% rate.
The loan agreement related to the line of credit provides for certain
restrictive covenants based on net worth and cash flow.
At March 31, 1996, the Company had an outstanding balance of $23.8 million on
the line of credit.
<PAGE>
5. Pro Forma Financial Information (Unaudited)
The following unaudited pro forma Condensed Statement of Operations is presented
as if the consummation of the Offering, the purchase of the 12 Acquisition
Properties, and the subsequent purchase of 18 additional storage facilities had
occurred at the beginning of the periods presented. Such unaudited pro forma
information is based upon the historical combined statements of operations of
the Company and the Predecessors, and the application of the proceeds of the
Offering. It should be read in conjunction with the financial statements of the
Company and the Predecessors and notes thereto included elsewhere herein and in
the Prospectus dated June 20, 1995, relating to its initial public offering of
shares. 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
Company 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.
(in thousands, except per share data)
Three Months Ended March 31,
1996 1995
Revenues:
Rental income $ 7,380 $ 7,013
Other income 91 84
---------- ---------
Total revenues 7,471 7,097
Expenses:
Property operations & maintenance 1,599 1,531
Real estate taxes 555 526
General and administrative 507 507
Interest 278 278
Depreciation and amortization 980 980
---------- ---------
Total Expenses 3,966 3,869
---------- ---------
Net income $ 3,552 $ 3,275
---------- ---------
Earnings per share $ 0.47 $ 0.43
---------- ---------
Common shares used in earnings
per share calculation 7,542,171 7,542,171
6. Stock Options
The Company had established the 1995 Stock 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 10 years from the date of grant. The exercise price for qualified
incentive options must be at least equal to the fair market value at the date of
grant. The Plan expires March 31, 2006. As of March 31, 1996, options for
258,000 shares had been granted under the Plan at an exercise price of $23.00
per share. The total options available under the plan is 400,000.
The Company also established the Stock Option Plan for Nonemployee Directors
(the Nonemployee Plan) for the purpose of attracting and retaining the services
of experienced and knowledgeable outside directors. The Nonemployee Plan
provides for the annual granting of options to purchase 2,500 shares of common
stock. Such options vest upon continued service until the next annual meeting of
the Company. The total shares reserved under the Nonemployee Plan is 50,000. The
exercise price for options granted under the Nonemployee Plan is equal to fair
market value at date of grant. As of March 31, 1996, options for 10,000 shares
had been granted under the Nonemployee Plan at an exercise price of the average
market price of $23.00 per share.
<PAGE>
7. 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, 1996, the Company had entered into contracts for the purchase of
three self-storage facilities. All of these facilities are scheduled to be
acquired in May, 1996 at a total cost of $4.4 million.
8. Legal Proceedings
The Company is a party to proceedings arising in the ordinary course of
operation of self-stsorage facilities. However, the Company does not believe
that these matters, individually or in the aggregate, will have a material
adverse effect on the Company.
A former business associate of Messrs. Attea, Myszka, Rogers and Lannon filed
a lawsuit against the Company on June 13, 1995 in the United States District
Court for the Northern District of Ohio, alleging breach of fiduciary duty,
breach of contract, fraud and violation of trade name rights in connection with
the Formation Transactions and the Offering. The lawsuit seeks money damages as
well as declaratory and injunctive relief and an accounting. Messrs. Attea,
Myszka, Rogers and Lannon have agreed to indemnify the Company for any loss
arising from the lawsuit. The Company has answered denying the material
allegations of the complaint and interposing nine affirmative defenses, and the
parties are currently involved in discovery. The Company intends to vigorously
defend the lawsuit, and does not believe it will have a material adverse effect
upon the Company.
<PAGE>
Management's Discussion and Analysis
of Financial Condition and Results of Operations
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 a portfolio of 92 self-storage facilities, providing storage
space for business and personal use to some 40,000 customers in 15 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.
Liquidity and Capital Resources
Revolving Credit Facility: In June, 1995, the Company entered into an agreement
with a financial institution to establish a revolving credit facility for up to
$60 million, secured by real estate. At March 31, 1996, the Company had
identified and pledged properties sufficient to provide $45 million of such
borrowings; at the Company's option, and upon pledging additional properties,
the line can be increased an additional $15 million. Interest on outstanding
balances is payable monthly at 260 basis points above LIBOR. The commitment fee
was $281,250, and the term of the agreement is for two years. The Company
intends to use funds available from this credit facility to finance future
acquisition and development plans described below. At March 31, 1996, the
Company had remaining borrowing capacity of $21 million on the line.
Umbrella Partnership REIT: The Company was formed as an Umbrella Partnership
Real Estate Investment Trust (UPREIT) and, as such, 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 Company may partially defer the seller's income-tax liability
and obtain more favorable pricing or terms. As of March 31, 1996, no OP units
have been issued.
Acquisition of Properties: The Company'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 in new markets by
acquiring several facilities at once in those new markets. In the three months
ended March 31, 1996, this strategy was implemented in new markets by acquiring
five facilities in Texas: three facilities in the Dallas-Ft. Worth area and two
facilities in San Antonio. The Company also increased its existing presence in
Birmingham and Montgomery, Alabama, Newport News, Virginia, Charleston, South
Carolina, and Tampa, Florida. Total acquisitions in the three months ended March
31, 1996 added 527,500 square feet of space and 4,000 rental units to the
Company's portfolio.
Future Acquisition and Development Plans: The Company intends to continue its
external growth strategy by increasing the number of facilities it owns in
Florida, Alabama, North Carolina, and New York. It is also negotiating contracts
to enter new markets in Virginia.
The Company 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 March 31, 1996, the Company's debt to equity ratio was 16%,
providing considerable flexibility and room for growth. Continued acquisition of
existing properties represents the Company's principal liquidity requirement. 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 these additional properties will be provided by borrowings
pursuant to the revolving line of credit or other debt instruments and the
issuance of OP units. The Company intends to incur additional borrowings for
such purposes in a manner consistent with its policy of limiting the Company's
indebtedness at the time of incurrence to not more than 50% of market
capitalization.
REIT Qualification and Distribution Requirements: 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 March 31, 1996, 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.
<PAGE>
Results of Operations
The following discussion is based on the consolidated financial statements of
the Company as of March 31, 1996 and the combined statements of Sovran Capital,
Inc. and the Sovran Partnerships (the predecessors to the Company) as of March
31, 1995.
The combined financial statements of Sovran Capital, Inc. and the
Sovran Partnerships combine the results of operations of the partnerships that
previously owned the properties and the management operations of Sovran Capital,
Inc., all of which was contributed to the Company in the formation transactions.
Sovran Capital, Inc. and the Sovran Partnerships are considered the predecessor
entity to the Company, and the combined financial statements are presented for
comparative purposes.
For the Period January 1, 1996 through March 31, 1996:
Income during the period was derived from 60 properties operated by
Sovran Capital, Inc. in 1994, 2 facilities purchased by Sovran Capital, Inc.
in early 1995, 12 properties acquired concurrently with the initial public
offering ("IPO") and 18 properties purchased by the Company since the IPO.
The Company reported revenues of $6,944,000 during the period and
incurred $2,027,000 in operating expenses, resulting in net operating income of
$4,917,000. The gross operating margin of 71% is one of the highest in the
industry and reflects a corporate-wide effort to operate the business
efficiently. General and administrative expenses of $513,000, interest
expense of $278,000 and depreciation and amortization expenses of $980,000
were incurred during the period, resulting in a net income of $3,152,000.
Three Months Ended March 31, 1996, compared to Three Months Ended March 31,
1995:
The following discussion compares the activities of the Company for
the three months ended March 31, 1996 with the activities of Sovran Capital,
Inc. and the Sovran Partnerships for the three months ended March 31, 1995.
Total revenues increased from $4,816,000 for the three months ended
March 31, 1995 to $6,944,000 for the three months ended March 31, 1996, an
increase of $2,128,000, or 44%. Of this, $1,997,000 resulted from the
acquisition of 32 properties during the period from March, 1995 through March,
1996. An additional $136,000 was realized by imposing an average 4% rental-rate
increase at the 60 properties owned by the Company for the entire year 1995.
Occupancy slipped slightly from 86.6% to 86.5%, primarily in the Company's
Florida and northeastern markets; but overall, same-store revenues grew 4.06%
for the three month period ended March 31, 1996 as compared to the same period
in 1995.
Property operating and real estate tax expense increased $630,000, or
45%, during the period. Of this, $577,000 was a result of absorbing additional
expenses from operating the newly acquired properties. The remaining $53,000 is
attributable to increased costs, primarily snow removal, in the operation of the
Company's sites operated for more than one year.
General and administrative expenses decreased $60,000 principally as
a result of the elimination of partnership syndication, management and
administration costs. These savings were offset by additional expenses
associated with reporting as a public company.
Interest expense decreased $1,350,000, because on June 25, 1995, all
outstanding debt of Sovran Capital, Inc. and the Sovran Partnerships was paid
from the proceeds of the public offering. A sum of $18,809,000 was borrowed
pursuant to the Company's line of credit during the three months ended March 31,
1996, and the $5,000,000 owed at December 31, 1995 on that same line of credit
is still outstanding. These borrowings resulted in an interest expense of
$278,000.
Earnings before interest, depreciation, and amortization increased from
$2,852,000 to $4,410,000, an increase of $1,558,000, or 54.6%.
Pro Forma Three Months Ended March 31, 1996 Compared to Pro Forma Three Months
Ended March 31, 1995:
The Company believes that pro forma results of operations are
important to provide an understanding of results of operations in its first
year of operation. The pro forma information includes the results of the 32
properties acquired in 1995 and 1996 as if they had been acquired on January 1,
1995.
First quarter 1996 revenues were $7,471,000, an increase of 5.3% over
first quarter 1995 revenues. This increase was achieved by increasing rental
rates by 4.2%, and increasing occupancy by 1.1%. Property operating expense
increased by 4.4%, and real extate taxes increased by 5.5% over 1995 levels.
Accordingly, net operating income improved from $5,040,000 in 1995 to $5,317,000
in 1996, an increase of 5.5%.
Inflation
The Company 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 Company with the
opportunity to achieve increases in rental income as each lease matures.
Seasonality
The Company's revenues typically have been higher in the third and fourth
quarter, primarily because the Company 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 Company 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 Company does not expect seasonality to affect
materially distributions to shareholders.
<PAGE>
PART II - OTHER INFORMATION
Item 1 Legal Proceedings
Not Applicable
Item 2 Changes in Securities
Not Applicable
Item 3 Defaults Upon Senior Securities
Not Applicable
Item 4 Submission of Matters to a Vote of Security Holders
Not Applicable
Item 5 Other Information
Not Applicable
Item 6 Exhibits and Reports on 8-K
(a) Exhibits: None required
(b) Reports on Form 8-K:
No reports on Form 8-K were required to be filed during the
quarter ended March 31, 1996.
<PAGE>
SOVRAN SELF STORAGE, INC.
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 SELF STORAGE, INC.
Registrant
May 15, 1996 David L. Rogers
Date
David L. Rogers
Chief Financial Officer and Secretary
