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 9/30/96
OR
|_| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the transition period from ________ to ___________
Commission file number: 1-13820
Sovran Self Storage, Inc.
State or other jurisdiction of (I.R.S. Employer
incorporation or organization Identification No.)
Maryland 16-1194043
Sovran Self Storage, Inc.
5166 Main Street
Williamsville, NY 14221
(716) 633-1850
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 ____
(APPLICABLE ONLY TO CORPORATE REGISTRANTS)
Indicate the number of shares outstanding of each of the registrant's
classes of common stock, as of the latest practicable date.
Title Outstanding
Common Shares, $.01 Par Value 7,544,171
<PAGE>
Part I. Financial Information
Item 1. Financial Statements
SOVRAN SELF STORAGE, INC.
CONSOLIDATED BALANCE SHEETS
(In Thousands)
<TABLE>
<CAPTION>
Sovran Self Sovran Self
Storage,Inc.at Storage,Inc.at
September 30, December 31,
1996 1995
(Unaudited)
--------------------------------------------
<S> <C> <C>
Assets
Investment in storage facilities:
Land $ 48,484 $ 36,640
Building and equipment 166,580 122,821
------------ -----------
215,064 159,461
Less: accumulated
depreciation (4,329) (1,497)
------------ -----------
Investments in storage facilities,
net 210,735 157,964
Cash and cash equivalents 2,255 732
Accounts receivable 446 297
Prepaid expenses and other assets 2,761 1,444
----------- ---------
Total Assets $ 216,197 $ 160,437
============ ============
Liabilities
Line of credit $ 59,310 $ 5,000
Accounts payable and
accrued liabilities 2,585 908
Deferred revenue 1,282 980
Accrued dividends 3,932 3,809
Minority interest 477 ----
---------- --------
Total Liabilities 67,586 10,697
Shareholders' Equity
Common stock $.01 par value,
100,000 shares authorized,
7,544 shares issued and
outstanding $ 75 $ 75
Additional paid-in
capital 150,778 150,727
Unearned restricted stock (42) ----
Dividends in excess of net income (2,200) (1,062)
------------ -----------
Total shareholders'equity 148,611 149,740
------------ -----------
Liabilities and shareholders
equity $ 216,197 $ 160,437
============= ============
</TABLE>
See notes to financial statements.
<PAGE>
SOVRAN SELF STORAGE, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(In Thousands, Except Per Share Amounts)
<TABLE>
<CAPTION>
Sovran Self Sovran Self
Storage,Inc. Storage,Inc.
July 1,1996 July 1, 1996
to to
September 30, 1996 September 30, 1995
(Unaudited) (Unaudited)
---------------------------------------------
<S> <C> <C>
Revenues:
Rental income $ 8,911 $ 6,126
Interest and other income 123 217
--------------- ---------------
Total revenues 9,034 6,343
Expenses:
Property operations & maintenance 1,806 1,224
Real estate taxes 704 423
General and administrative 710 424
Interest 956 76
Depreciation and amortization 1,207 983
--------------- ---------------
Total expenses 5,383 3,130
--------------- ---------------
Income before minority interest 3,651 3,213
Minority interest (7) ----
---------------- ---------------
Net income $ 3,644 $ 3,213
================ ================
Earnings per share $ 0.48 $ 0.44
=============== ===============
Common shares used in earnings per
share calculation 7,544,171 7,321,118
Dividends declared per share $ 0.52 $ 0.51
</TABLE>
See notes to financial statements.
<PAGE>
SOVRAN SELF STORAGE, INC. (THE COMPANY) AND
SOVRAN CAPITAL, INC. AND SOVRAN PARTNERSHIPS (THE
PREDECESSORS TO THE COMPANY)
CONSOLIDATED STATEMENTS OF OPERATIONS OF THE COMPANY AND
COMBINED STATEMENTS OF OPERATIONS OF THE PREDECESSORS
(In Thousands, Except Per Share Amounts)
<TABLE>
<CAPTION>
Company Predecessors
-------------------------------------------------- -------------------------
Sovran Capital,
Sovran Self Sovran Self Inc. and Sovran
Storage, Inc. Storage, Inc. Partnerships
January 1, 1996 June 26, 1995 January 1, 1995
to to to
September 30, 1996 September 30, 1995 June 25, 1995
(Unaudited) (Unaudited) (Unaudited)
-------------------------------------------------- -------------------------
<S> <C> <C> <C>
Revenues:
Rental income $ 23,582 $ 6,473 $ 9,260
Other income 357 222 272
---------------- ---------------- ----------------
Total revenues 23,939 6,695 9,532
Expenses:
Property operations & maintenance 4,820 1,307 2,061
Real estate taxes 1,783 446 708
General and administrative 1,825 453 1,574
Interest 1,846 82 3,268
Depreciation and amortization 3,252 1,030 1,610
---------------- ---------------- ----------------
Total expenses 13,526 3,318 9,221
---------------- ---------------- ----------------
Income before minority interest 10,413 3,377 311
Minority interest (7) ---- ----
---------------- --------------- ---------------
Net income $ 10,406 $ 3,377 $ 311
================= ================= ==================
Earnings per share $ 1.38 $ 0.46
================ ================
Common shares used in earnings per
share calculation 7,544,053 7,321,118
Dividends declared per share $ 1.53 $ 0.53
</TABLE>
See notes to financial statements.
<PAGE>
SOVRAN SELF STORAGE, INC. (THE COMPANY) AND
SOVRAN CAPITAL, INC. AND SOVRAN PARTNERSHIPS (THE
PREDECESSORS TO THE COMPANY)
CONSOLIDATED STATEMENTS OF CASH FLOWS OF THE COMPANY AND
COMBINED STATEMENTS OF CASH FLOWS OF THE PREDECESSORS
(In Thousands)
<TABLE>
<CAPTION>
Company Predecessors
------- ------------
Sovran Capital,
Sovran Self Sovran Self Inc.and Sovran
Storage,Inc. Storage,Inc. Partnerships
January 1, 1996 June 26, 1995 January 1, 1995
to to to
September 30, September 30, June 25,
1996 1995 1995
(Unaudited) (Unaudited) (Unaudited)
----- ----- -----
<S> <C> <C> <C>
Operating Activities
Net income ..............................$ $10,406 $ 3,377 $ 311
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation and amortization 3,252 1,030 1,610
Minority interest 7 ---- ----
Changes in assets and liabilities:
Accounts receivable (149) 31 (46)
Prepaid expenses and other assets (479) 3 (849)
Accounts payable and other liabilities 1,679 (342) 891
Deferred revenue 301 (225) 86
--------- --------- ---------
Net cash provided by operating
activities 15,017 3,874 2,003
--------- --------- ---------
Investing Activities
Additions to storage facilities (55,124) (143,145) (3,478)
Additions to other assets (1,252) (811) ----
Restricted cash ---- ---- 138
--------- --------- --------
Net cash used in investing activities (56,376) (143,956) (3,340)
--------- --------- ---------
Financing Activities
Net proceeds from sale of common stock ---- 149,918 ----
Proceeds from line of credit draw down 54,310 ---- ----
Dividends paid (11,428) ---- ----
Proceeds from issuance of mortgages ---- ---- 2,821
Mortgage principal payments ---- ---- (1,500)
Capital contributions ---- ---- 965
Cash distributions ---- ---- (1,779)
--------- --------- --------
Net cash provided by financing activities 42,882 149,918 507
--------- --------- ---------
Net increase (decrease) in cash 1,523 9,836 (830)
Cash at beginning of period 732 ---- 1,045
--------- --------- ---------
Cash at end of period $ 2,255 $ 9,836 $ 215
========= ========= =========
Supplemental cash flow information
Cash paid for interest $ 1,846 $ 82 $ 3,268
</TABLE>
See notes to financial statements.
<PAGE>
Notes to Consolidated Financial Statements
(Unaudited)
1. Basis of Presentation
The accompanying unaudited financial statements of Sovran Self Storage,
Inc. (the Company) 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- and nine-month periods ended September 30, 1996 are not necessarily
indicative of the results that may be expected for the year ended December 31,
1996.
2. 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 35 self-storage properties from unaffiliated third parties, increasing
the total number of self-storage properties owned at September 30, 1996 to 109
properties.
3. 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 September 30, 1996, the Company had entered into contract for the
purchase of a self-storage facility which is scheduled to be acquired in
October for a total cost of $1.4 million.
<PAGE>
4. Pro Forma Financial Information
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 35 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)
<TABLE>
<CAPTION>
Nine Months Ended September 30,
1996 1995
---------- ----------
<S> <C> <C>
Revenues:
Rental income $ 27,144 $ 25,539
Other income 371 686
---------- ----------
Total revenues 27,515 26,225
Expenses:
Property operations & maintenance 5,562 5,398
Real estate taxes 2,072 1,889
General and administrative 1,825 1,825
Interest 1,846 1,846
Depreciation and amortization 3,744 3,744
---------- ----------
Total Expenses 15,049 14,702
---------- ----------
Income before minority interest 12,466 11,523
Minority interest (31) (29)
----------- ----------
Net income $ 12,435 $ 11,494
========== =========
Earnings per share $ 1.65 $ 1.52
---------- ----------
Common shares used in earnings
per share calculation 7,544,171 7,544,171
</TABLE>
5. Legal Proceedings
The Company is a party to proceedings arising in the ordinary course of
operation of self-storage 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.
6. Subsequent Events
On October 1, 1996, the Company completed the offering of 2.75 million
shares of its common stock. The offering was priced at $26.00 per share
resulting in gross proceeds of $71.5 million. Net proceeds were approximately
$67 million, of which $63 million was used to repay in full all indebtedness
outstanding under the Company's $75 million credit facility.
On October 11, 1996, the underwriters exercised their over-allotment
option granted in connection with the Company's recent public offering and
purchased 412,500 shares of the Company's common stock at $26.00 per share,
resulting in net proceeds to the Company of approximately $10 million. The
remainder of the net proceeds of the offering and from the exercise
of the over-allotment option will be used to acquire additional self-storage
facilities.
Since September 30, 1996, the Company has completed the acquisition
of $1.4 million of properties under contract. The Company has also entered
into agreements to acquire 11 additional properties totalling $30.5 million
subject to customary conditions of closing including satisfactory due diligence.
<PAGE>
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 a portfolio of 109 self-storage facilities, providing storage
space for business and personal use to some 45,000 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. In August, 1996, the Company executed a modification of
the credit facility which increased the amount available to $75 million.
Interest on outstanding balances is payable monthly at 190 basis points above
LIBOR. The term of the agreement is for two years, expiring August 1998. The
Company intends to use funds available from this credit facility to finance
future acquisition and development plans described below. At September 30, 1996,
the Company had remaining borrowing capacity of $16 million on the line.
Umbrella Partnership REIT
The Company was formed as an Umbrella Partnership Real Estate 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 September 30, 1996, 18,787 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
September 30, 1996, the Company acquired properties in the Cincinnati and
Dayton, OH markets. The Company also increased its existing presence in
Pittsburgh, PA, Jacksonville, FL, Charlotte, NC and in the Capitol region. Total
acquisitions in the three months ended September 30, 1996 added 519,000 square
feet of space and 5,200 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. It is also negotiating
contracts to enter new markets in Ohio, New York, and Texas.
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 September 30, 1996, the Company's debt to equity ratio was 40%. In
October, 1996, the Company successfully completed a common stock offering,
resulting in the issuance of 3,162,500 shares, netting approximately $77
million. The proceeds were used to repay the entire outstanding balance on the
line of credit, and provided an additional $15 million in cash. 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 September 30, 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.
Results of Operations
The following discussion is based on the consolidated financial
statements of the Company as of September 30, 1996 and the period from June 26,
1995 to September 30, 1995 and the combined statements of Sovran Capital, Inc.
and the Sovran Partnerships (the Predecessors to the Company) as of June 25,
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 July 1, 1996 through September 30, 1996
Income during the period was derived from 62 properties operated by
Sovran Capital, Inc. in 1994 and the first two quarters of 1995, 12 properties
acquired concurrently with the initial public offering ("IPO") and 35 properties
purchased by the Company since the IPO.
The Company reported revenues of $9,034,000 during the period and
incurred $2,510,000 in operating expenses, resulting in net operating income of
$6,524,000. The gross 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 $710,000, interest expense
of $956,000, depreciation and amortization expenses of $1,207,000 and minor
ity interest of $7,000 were incurred during the period, resulting in a net
income of $3,644,000.
Three months ended September 30, 1996, compared to Three months ended September
30, 1995
The following discussion compares the activities of the Company for the
three months ended September 30, 1996 with the activities of the Company for the
three months ended September 30, 1995.
Total revenues increased from $6,343,000 for the three months ended
September 30, 1995 to $9,034,000 for the three months ended September 30, 1996,
an increase of $2,691,000, or 42%. Of this, $2,336,000 resulted from the
acquisition of 35 properties during the period from July, 1995 through
September, 1996, and $355,000 was realized as a result of increased rental rates
and occupancy levels at the 74 properties owned by the Company at June 30, 1995.
Overall, same-store revenues grew 5.76% for the three month period ended
September 30, 1996 as compared to the same period in 1995.
Property operating and real estate tax expense increased $863,000, or
52%, during the period. $747,000 was a result of absorbing additional expenses
from operating the newly acquired properties. The Company realized an increase
of $116,000 from the operations of its sites operated more than one year,
primarily a result of increased property taxes.
General and administrative expenses increased $286,000 principally as a
result of the need for additional personnel and increased administrative costs
associated with managing the 35 additional properties ($63,000), the expense of
searching for and qualifying properties not purchased ($127,000) and investor
relations costs ($96,000).
Interest expense increased $880,000, 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 $54,310,000 was borrowed
pursuant to the Company's line of credit during the first nine months of 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 $956,000
during the quarter ended September 30, 1996.
Earnings before interest, depreciation, amortization and minority
interest increased from $4,272,000 to $5,814,000, an increase of $1,542,000,
or 36%.
Nine months ended September 30, 1996, compared to Nine months ended September
30, 1995
The following discussion compares the activities of the Company for the
nine months ended September 30, 1996 with the activities of Sovran Capital, Inc.
and the Sovran Partnerships for the period ended June 25, 1995, and the Company
for the period from June 26, 1995 to September 30, 1995.
Total revenues increased from $16,227,000 for the nine months ended
September 30, 1995 to $23,939,000 for the nine months ended September 30, 1996,
an increase of $7,712,000, or 47.5%. Of this, $6,977,000 resulted from the
acquisition of 49 properties during the period from January, 1995 through
September, 1996. An additional $735,000 was realized by imposing an average 3%
rental-rate increase and an increase in occupancy at the 60 properties owned by
the Company for the entire year 1995. Same-store revenues grew 5.03% for the
nine month period ended September 30, 1996 as compared to the same period in
1995.
Property operating and real estate tax expense increased $2,081,000, or
46%, during the period. $2,036,000 was a result of absorbing additional expenses
from operating the newly acquired properties and $45,000 is attributable to a
slight increase in costs in the operation of the Company's sites operated for
more than one year.
General and administrative expenses decreased $202,000 principally as a
result of elimination of partnership syndication management and administration
costs.
Interest expense decreased a net of $1,504,000, 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 $54,310,000 was
borrowed pursuant to the Company's line of credit during the first nine months
of 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
$1,846,000 during the nine months ended September 30, 1996.
Earnings before interest, depreciation, amortization and minority
interest increased from $9,678,000 to $15,511,000, an increase of $5,833,000,
or 60%.
Pro Forma Nine Months Ended September 30, 1996 Compared to Pro Forma Nine Months
Ended September 30, 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 49 properties
acquired in 1995 and 1996 as if they had been acquired on January 1, 1995.
Revenues for the nine months ended September 30, 1996 were $27,515,000
compared to revenues of $26,225,000 for the same period in 1995, an increase of
4.9%. This improvement is primarily due to an increase in overall occupancy, and
from rental rate increases ranging from 2% to 8% at the properties.
Property operating costs and property tax expense increased by 4.8%
over the prior year period. The Company believes the efficiencies it obtains by
"clustering" its properties in market areas, its attention to cost saving
measures and its persistence in protesting property tax increases has enabled it
to effectively contain its costs.
Operating income increased from $18,938,000 to $19,881,000, an
improvement of 5% as a result of the above.
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 quarters, 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 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 Company does not expect
seasonality to affect materially distributions to shareholders.
<PAGE>
Part II. Other Information
Item 1. Legal Proceedings
The Company is a party to proceedings arising in the ordinary
course of operation of self-storage 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.
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
<PAGE>
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits: None Required
(b) Report on Form 8-K
Acquisition of 20 storage facilities.
No financial statements filed.
Date of Filing: July 25, 1996.
Report on Form 8-K/A
Acquisition of 5 storage facilities in addition to 20
facilities previously reported.
Financial Statements:
Report of Independent Auditors
Acquisition Facilities Historical Summaries of
Combined Gross Revenue and Direct Operating
Expenses for the year ended December 31, 1995 and
the six months ended June 30, 1996.
Acquisition Facilities Notes to Historical Summaries
of Combined Gross Revenue and Direct Operating
Expenses for the year ended December 31, 1995 and
the six months ended June 30, 1996.
Pro Forma Financial Information
Sovran Self Storage, Inc., Pro Forma Combined Financial
Information
Sovran Self Storage, Inc., Pro Forma Combined Balance
Sheet as of June 30, 1996.
Sovran Self Storage, Inc., Pro Forma Combined
Statement of Operations for the six months ended
June 30, 1996.
Sovran Self Storage, Inc., Pro Forma Combined
Statement of Operations for the year ended
December 31, 1995.
Sovran Self Storage, Inc., Notes to Pro Forma Combined
Financial Statements.
Exhibits:
Consent of Independent Auditors, Ernst & Young, LLP.
Date of Filing: August 30, 1996.
<PAGE>
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.
By: /s/ David L. Rogers
David L. Rogers, Chief Financial Officer and Secretary
Date: 11/14/96
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000944314
<NAME> SOVRAN SELF STORAGE, INC.
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