SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): October 9, 1997
(January 10, 1997)
SOVRAN SELF STORAGE, INC.
(Exact Name of Registrant as Specified in Charter)
Maryland 1-13820 16-1194043
(State or other jurisdiction of (Commission (I.R.S. Employer
incorporation or organization) File Number) Identification No.)
5166 Main Street
Williamsville, NY 14221
(Address of Principal Executive Offices)
Registrant's telephone number, including area code: (716) 633-1850
NOT APPLICABLE
(Former name or former address, if changed since last report)
__________________________________________________________________________
Page 1 of 16
Item 2. Acquisition or Disposition of Assets
Sovran Self Storage, Inc. (the "Company") has consummated
the acquisition of 42 self-storage facilities through Sovran
Acquisition Limited Partnership, L.P. ("OP"), a limited
partnership controlled by the Company. The 42 facilities
totaling approximately 2,360,823 square feet are located in 8
states and were purchased for approximately $101 million.
All of the facilities were acquired from unaffiliated third
parties. The acquisitions were funded by cash generated from
operations, borrowings under the Company's line of credit, the
assumption of certain mortgages payable and seven facilities were
partially acquired through the issuance of Operating Partnership
Units (OP Units). Each of the facilities acquired was used by
the seller as a self-storage facility prior to its acquisition by
the Company, and the Company intends to continue the use of all
facilities for that purpose. The Company's management determined
the contract price through arms-length negotiations, after taking
into consideration such factors as: the age and condition of the
facility; the projected amounts of maintenance costs; anticipated
capital improvements; the facility's current revenues; comparable
facilities competing in the applicable market; market rental
rates for comparable facilities; the occupancy rate of the
facility; and the estimated amount of taxes, utility costs,
personnel costs and other anticipated expenses.
The following provides certain additional information
concerning the 42 facilities:
Date of Square
Location Seller Acquisition Price Feet
_______________________________________________________________________________
Youngstown, OH Self Service Mini Storage 1/10/97 $ 2,738,000 55,525
Akron, OH Self Service Mini Storage 1/10/97 1,883,000 37,720
Cleveland, OH Self Service Mini Storage 1/10/97 3,424,000 68,110
Cleveland, OH Self Service Mini Storage 1/10/97 3,307,000 65,125
Cleveland, OH Self Service Mini Storage 1/10/97 3,553,000 73,450
Cleveland, OH Self Service Mini Storage 1/10/97 2,262,000 46,625
Cleveland, OH Self Service Mini Storage 1/10/97 3,471,000 69,750
Cleveland, OH Self Service Mini Storage 1/10/97 2,337,000 45,275
Cleveland, OH Self Service Mini Storage 1/10/97 2,766,000 53,748
Grand Rapids, MI Extra Room Limited
Partnerships 1/17/97 2,082,000 57,900
Grand Rapids, MI Extra Room Limited
Partnerships 1/17/97 1,006,000 32,300
Kalamazoo, MI Extra Room Limited
Partnerships 1/17/97 2,358,000 58,214
Lansing, MI Extra Room Limited
Partnerships 1/17/97 1,655,000 43,943
Holland, MI Extra Room Limited
Partnerships 1/17/97 2,277,000 95,088
San Antonio, TX Bankler Partnership 1/30/97 2,158,000 48,782
Universal, TX Bankler Partnership 1/30/97 1,579,000 35,100
San Antonio, TX Bankler Partnership 1/30/97 1,989,000 44,600
2
Houston, TX M. Properties Inc. 3/26/97 3,196,000 69,650
Houston, TX M. Properties Inc. 3/26/97 2,842,000 61,861
Houston, TX M. Properties Inc. 3/26/97 1,647,000 35,600
Lynchburg, VA Montague-Betts Company 3/31/97 1,673,000 47,200
Lynchburg, VA Montague-Betts Company 3/31/97 1,612,000 41,250
Lynchburg, VA Montague-Betts Company 3/31/97 863,000 22,000
Christiansburg,
VA Montague-Betts Company 3/31/97 1,340,000 36,673
Chesapeake, VA Montague-Betts Company 3/31/97 1,278,000 35,901
Danville, VA Montague-Betts Company 3/31/97 1,781,000 49,776
Orlando, FL Montague-Betts Company 3/31/97 1,422,000 37,372
Delray, FL Delray Mini Storage
Partners 4/11/97 2,244,000 50,395
Savannah, GA P.B. Realty Inc. 5/8/97 1,488,000 50,975
Delray, FL Safeway Self Storage 5/21/97 4,200,000 71,218
Cleveland, OH Easy Storage Partnership 6/4/97 1,496,000 47,050
Dallas, TX Diller Corporation 6/30/97 4,746,000 121,707
Dallas, TX Diller Corporation 6/30/97 4,780,000 104,303
Dallas, TX Diller Corporation 6/30/97 2,806,000 79,056
Dallas, TX Diller Corporation 6/30/97 1,808,000 71,938
Houston, TX Diller Corporation 6/30/97 2,540,000 75,500
Atlanta, GA Jones Bridge Road Self
Storage, Inc. 7/24/97 4,729,000 80,265
Atlanta, GA Roswell Road Self Storage,
Inc. 7/24/97 3,508,000 59,450
Atlanta, GA Tilly Mill Self Storage LP 8/21/97 4,116,000 67,275
Greensboro, NC Triad Holding LLC 9/25/97 1,316,000 32,198
Greensboro, NC Triad Holding LLC 9/25/97 416,000 9,755
Baton Rouge, LA Seapea Inc. 10/9/97 2,136,000 71,200
___________ _________
$100,828,000 2,360,823
3
Item 7. Financial Statements and Exhibits
Page
(a) Financial Statements Applicable to Real Estate
Properties Acquired
* Report of Independent Auditors 5
* Acquisition Facilities Historical Summaries of
Combined Gross Revenue and Direct Operating
Expenses for the year ended December 31, 1996
and the six months ended June 30, 1997. 6
* Acquisition Facilities Notes to Historical
Summaries of Combined Gross Revenue and Direct
Operating Expenses for the year ended
December 31, 1996 and the six months ended
June 30, 1997. 7-8
(b) Pro Forma Financial Information
* Sovran Self Storage, Inc., Pro Forma Combined
Financial Information 10
* Sovran Self Storage, Inc., Pro Forma Combined
Balance Sheet as of June 30, 1997 11
* Sovran Self Storage, Inc., Pro Forma Combined
Statement of Operations For the Six months ended
June 30, 1997 12
* Sovran Self Storage, Inc., Pro Forma Combined
Statement of Operations For the Year ended
December 31, 1996 13
* Sovran Self Storage, Inc., Notes to Pro Forma
Combined Financial Statements 14
(c) Exhibits
Exhibit Description
No.
23 Consent of Independent Auditors, Ernst &
Young LLP. 16
4
[Ernst & Young L.L.P. Letterhead]
Report of Independent Auditors
Board of Directors
Sovran Self Storage, Inc.
We have audited the accompanying Historical Summaries of Combined
Gross Revenue and Direct Operating Expenses (the "Historical
Summaries") for thirty-four self storage facilities (the
"Acquisition Facilities") as described in Note 1, for the year
ended December 31, 1996. These Historical Summaries are the
responsibility of the management of Sovran Self Storage, Inc.
Our responsibility is to express an opinion on the Historical
Summaries based on our audit.
We conducted our audit in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether
the Historical Summaries are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the Historical Summaries. An
audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating
the overall presentation of the Historical Summaries. We believe
that our audit provides a reasonable basis for our opinion.
The accompanying Historical Summaries were prepared for the
purpose of complying with the rules and regulations of the
Securities and Exchange Commission for inclusion in the Form 8-K
of Sovran Self Storage, Inc. as described in Note 1, and are not
intended to be a complete presentation of the Acquisition
Facilities' revenue and expenses.
In our opinion, the Historical Summaries referred to above
present fairly, in all material respects, the combined gross
income and direct operating expenses of the Acquisition
Facilities for the year ended December 31, 1996, in conformity
with generally accepted accounting principles.
Ernst & Young LLP
Buffalo, New York
October 10, 1997
5
Acquisition Facilities
Historical Summaries of Combined Gross
Revenue and Direct Operating Expenses
(in thousands)
Six months
ended
June 30,
1997
___________
December 31, 1996 Total
_____________________________________
34 8 Total 42
Acquisition Acquisition 42 Acquisition
(audited) (unaudited) Facilities (unaudited)
___________ ___________ __________ ___________
Revenues:
Rental income $ 11,585 $ 2,141 $ 13,726 $ 3,780
Other income 125 27 152 40
_____________________________________________________
Total revenue 11,710 2,168 13,878 3,820
Direct Operating Expenses:
Property operations
and maintenance 2,520 577 3,097 816
Real estate taxes 1,011 138 1,149 351
_____________________________________________________
Total direct
operating expenses 3,531 715 4,246 1,167
_____________________________________________________
Revenue in excess of
direct operating
expenses $ 8,179 $ 1,453 $ 9,632 $ 2,653
=====================================================
See accompanying notes.
6
Acquisition Facilities
Notes to Historical Summaries of Combined Gross
Revenue and Direct Operating Expenses
(in thousands)
1. Basis of Presentation
The historical summaries of combined gross revenue and direct
operating expenses (the "Historical Summaries") relate to the
operations of the following 34 facilities acquired since
January 1, 1997, which have been audited, and the following 8
facilities acquired since January 1, 1997, which are unaudited.
These 42 facilities, which have been acquired from unaffiliated
third parties by Sovran Acquisition Limited Partnership (the
"Partnership") for an aggregate purchase price of $101 million,
are collectively referred to as the "42 Acquisition Facilities".
The general partner of the Partnership is Sovran Self Storage,
Inc. (the "Company").
34 Acquisition Facilities - Audited
Location Date of Acquisition Location Date of Acquisition
Youngstown, OH 1/10/97 Houston, TX 3/26/97
Akron, OH 1/10/97 Houston, TX 3/26/97
Cleveland, OH 1/10/97 Houston, TX 3/26/97
Cleveland, OH 1/10/97 Lynchburg, VA 3/31/97
Cleveland, OH 1/10/97 Lynchburg, VA 3/31/97
Cleveland, OH 1/10/97 Lynchburg, VA 3/31/97
Cleveland, OH 1/10/97 Christiansburg, VA 3/31/97
Cleveland, OH 1/10/97 Chesapeake, VA 3/31/97
Cleveland, OH 1/10/97 Danville, VA 3/31/97
Grand Rapids, MI 1/17/97 Orlando, FL 3/31/97
Grand Rapids, MI 1/17/97 Savannah, GA 5/8/97
Kalamazoo, MI 1/17/97 Delray, FL 5/21/97
Lansing, MI 1/17/97 Dallas, TX 6/30/97
Holland, MI 1/17/97 Dallas, TX 6/30/97
San Antonio, TX 1/30/97 Dallas, TX 6/30/97
Universal, TX 1/30/97 Dallas, TX 6/30/97
San Antonio, TX 1/30/97 Houston, TX 6/30/97
8 Acquisition Facilities - Unaudited
The following 8 Acquisition Facilities were not audited as the
Company believes these facilities are not material either
individually or in the aggregate.
7
Location Date of Acquisition Location Date of Acquisition
Delray, FL 4/11/97 Atlanta, GA 8/21/97
Cleveland, OH 6/4/97 Greensboro, NC 9/25/97
Atlanta, GA 7/24/97 Greensboro, NC 9/25/97
Atlanta, GA 7/24/97 Baton Rouge, LA 10/9/97
8
Acquisition Facilities
Notes to Historical Summaries of Combined Gross
Revenue and Direct Operating Expenses
(in thousands)
1. Basis of Presentation (continued)
The Historical Summaries have been prepared to comply with the
rules and regulations of the Securities and Exchange Commission
for real estate operations to be acquired. The Historical
Summaries are not representative of the actual operations for the
periods presented, as certain expenses which may not be
comparable to the expenses expected to be incurred by the Company
in the proposed future operations of the 42 Acquisition
Facilities have been excluded. Expenses excluded consist of
management fees, interest, depreciation and amortization, and
other indirect costs not directly related to the future
operations of the 42 Acquisition Facilities. Rental income is
recognized when due from occupants. Expenses are recognized on
the accrual basis.
2. Unaudited Interim Periods
The unaudited interim Historical Summaries for the six months
ended June 30, 1997, have been prepared in accordance with
generally accepted accounting principles for interim financial
information. The operations of the 42 Acquisition Facilities
through the date of acquisition are included in the unaudited
Historical Summaries. Operations subsequent to acquisition are
included in the financial statements of the Company. In the
opinion of management, all adjustments of a normal recurring
nature considered necessary for a fair presentation have been
included. Operating results for the six months ended June 30,
1997, are not necessarily indicative of future operating results.
3. Use of Estimates
The preparation of the Historical Summaries in conformity with
generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts
of assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements. Estimates
also affect the reported amounts or revenue and expenses during
the reporting period. Actual results could differ from those
estimates.
9
Sovran Self Storage, Inc.
Pro Forma Combined Financial Information
The following unaudited Pro Forma Combined Balance Sheet as of
June 30, 1997 and unaudited Pro Forma Combined Statements of
Operations for the six months ended June 30, 1997 and for the
year ended December 31, 1996 have been prepared to reflect the
acquisition of 42 self storage facilities (the "42 Acquisition
Facilities") and the adjustments described in the accompanying
notes. The pro forma combined financial information is based on
the historical financial statements of Sovran Self Storage, Inc.
in the Company's 10-Q for the period ended June 30, 1997, and the
other financial information in the Company's 1996 Annual Report
to Shareholders and should be read in conjunction with those
financial statements and notes thereto. The Pro Forma Combined
Balance Sheet was prepared as if the 6 Acquisition Facilities
that were purchased after June 30, 1997, were acquired at that
date. The Pro Forma Combined Statements of Operations were
prepared as if the 42 Acquisition Facilities were purchased at
the beginning of the period reflected thereon. The combined pro
forma financial information is not necessarily indicative of the
financial position or results of operations which actually would
have occurred if such transactions had been consummated on the
dates described, nor does it purport to represent the Company's
future financial position or results of operations.
10
Sovran Self Storage, Inc.
Pro Forma Combined Balance Sheet
June 30, 1997
(in thousands)
(unaudited)
Sovran
Self Storage Pro Forma Sovran
Historical Adjustments Self Storage, Inc.
(Note 1) (Note 2) Pro Forma
________________________________________________
Assets
Investment in storage
facilities, net $ 299,827 $ 16,221 $ 316,048
Cash and cash equivalents 3,316 - 3,316
Accounts receivable 685 3 688
Prepaid expenses and other
assets 2,092 - 2,092
________________________________________________
Total assets $ 305,920 $ 16,224 $ 322,144
================================================
Liabilities
Line of credit $ 15,000 $ 16,141 $ 31,141
Accounts payable and
accrued liabilities 3,004 18 3,022
Deferred revenue 2,050 65 2,115
Accrued dividends 6,355 - 6,355
Mortgage payable 3,559 - 3,559
________________________________________________
Total liabilities 29,968 16,224 46,192
Minority interest 10,948 - 10,948
Shareholders' Equity
Common stock, $.01 par value 122 - 122
Additional paid-in capital 270,123 - 270,123
Unearned restricted stock (33) - (33)
Dividends in excess of net
income (5,208) - (5,208)
________________________________________________
Total shareholders' equity 265,004 - 265,004
Total liabilities and
shareholders' equity $ 305,920 $ 16,224 $ 322,144
================================================
See notes to pro forma combined financial information
11
Sovran Self Storage, Inc.
Pro Forma Combined Statement of Operations
For the Six months ended June 30, 1997
(in thousands, except per share data) (unaudited)
Sovran 42
Self Storage Acquisition Pro Forma Sovran
Historical Facilities Adjustments Self Storage, Inc.
(Note 1) (Note 3) (Note 4) Pro Forma
_________________________________________________________________
Revenues:
Rental income $ 22,302 $ 3,780 $ - $ 26,082
Interest and other income 368 40 - 408
_________________________________________________________________
Total revenues 22,670 3,820 - 26,490
Expenses:
Property operations and
maintenance 4,408 816 - 5,224
Real estate taxes 1,775 351 - 2,126
General and administrative 1,330 - 70 (a) 1,400
Interest 818 - 337 (b) 1,155
Depreciation and
amortization 3,216 - 542 (c) 3,758
_________________________________________________________________
Total expenses 11,547 1,167 949 13,663
_________________________________________________________________
Net income before minority
interest 11,123 2,653 (949) 12,827
Minority interest (250) - (136) (d) (386)
_________________________________________________________________
Net income $ 10,873 $ 2,653 $ (1,085) $ 12,441
=================================================================
Earnings per share $ 0.96 $ 1.02 (e)
========= ==============
Common shares used in
earnings per share
calculation 11,338,457 12,220,921 (e)
Dividends declared per
share $ 1.04 $ 1.04
========== ==========
See notes to pro forma combined financial information
12
Sovran Self Storage, Inc.
Pro Forma Combined Statement of Operations
For the Year ended December 31, 1996
(in thousands, except per share data) (unaudited)
Sovran 42
Self Storage Acquisition Pro Forma Sovran
Historical Facilities Adjustments Self Storage, Inc.
(Note 1) (Note 3) (Note 4) Pro Forma
__________________________________________________________________
Revenues:
Rental income $ 32,946 $ 13,726 $ - $ 46,672
Interest and other income 651 152 - 803
__________________________________________________________________
Total revenues 33,597 13,878 - 47,475
Expenses:
Property operations and
maintenance 6,662 3,097 - 9,759
Real estate taxes 2,464 1,149 - 3,613
General and administrative 2,282 - 418 (a) 2,700
Interest 1,924 - 386 (b) 2,310
Depreciation and amortization 4,583 - 2,092 (c) 6,675
_________________________________________________________________
Total expenses 17,915 4,246 2,896 25,057
_________________________________________________________________
Net income before minority
interest 15,682 9,632 (2,896) 22,418
Minority interest (23) - (652) (d) (675)
_________________________________________________________________
Net income $ 15,659 $ 9,632 $ (3,548) $ 21,743
=================================================================
Earnings per share $ 1.88 $ 1.78 (e)
========= ==============
Common shares used in
earnings per share
calculation 8,328,954 12,220,921 (e)
Dividends declared per
share $ 2.05 $ 2.05
========== ==========
See notes to pro forma combined financial information
13
Sovran Self Storage, Inc.
Notes to Pro Forma Combined Financial Statements
(in thousands, except per share data)
(unaudited)
1. Sovran Self Storage Historical
The consolidated balance sheet and statement of operations as of
and for the six months ended June 30, 1997 and for the year ended
December 31, 1996, include the accounts of Sovran Self Storage,
Inc. (the "Company"), Sovran Acquisition Limited Partnership (the
"Partnership"), and Sovran Holdings, Inc., a wholly-owned
subsidiary of the Company.
2. Pro Forma Adjustments - Balance Sheet
These adjustments reflect the 6 acquisitions which occurred
subsequent to June 30, 1997 and were not included in the Sovran
Self Storage Historical June 30, 1997 balance sheet. The
facilities were purchased from unaffiliated parties for an
aggregate purchase price of approximately $16.2 million. The
acquisition price was funded with borrowings under the Company's
line of credit.
3. 42 Acquisition Facilities - Statements of Operations
The statements of operations for the 42 Acquisition Facilities
reflects the results of operations for the 42 Acquisition
Facilities for the year ended December 31, 1996, and the results
of operations of the 42 Acquisition Facilities up to the date
acquired or for the six months ended June 30, 1997, which are
reported in the Historical Summaries of Combined Gross Revenue
and Direct Operating Expenses included elsewhere herein.
4. Pro Forma Adjustments - Statements of Operations
(a) To reflect an estimated increase in general and
administrative expenses based on results subsequent to
acquisition.
(b) To reflect interest expense on the line of credit utilized
to fund the purchase of the Acquisition Facilities.
(c) To record additional depreciation expense related to the
Acquisition Facilities based on a 39 year life and
approximately $82 million of the purchase price being
allocated to depreciable assets.
(d) To adjust minority interest based on adjustments to net
income of the Company.
(e) Pro forma earnings per share calculated as if the April 16,
1997 common stock offering had occurred at the beginning of
the periods presented.
14
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
Date: October 23, 1997
15
Consent of Independent Auditors
We consent to the incorporation by reference in the Registration
Statement (Form S-8 No. 333-08883) of our report dated October
10, 1997, with respect to the historical summaries of combined
gross revenue and direct operating expenses in this Form 8-K for
the year ended December 31, 1996.
We also consent to the incorporation by reference in the
Registration Statement (Form S-8 No. 333-21679) pertaining to the
1995 Award and Option Plan and the 1995 Directors' Stock Option
Plan of Sovran Self Storage, Inc. of our report dated October 10,
1997, with respect to the historical summaries of combined gross
revenue and direct operating expenses in this Form 8-K for the
year ended December 31, 1996.
ERNST & YOUNG LLP
Buffalo, New York
October 10, 1997
16