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): July 6, 1998 (June 19,
1998)
SOVRAN SELF STORAGE, INC.
(Exact Name of Registrant as Specified in Charter)
Maryland 1-13820 16-1194043
(State or other jurisdiction (Commission (I.R.S. Employer
of 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)
__________________________________________________________________________
Item 2. Acquisition or Disposition of Assets
Sovran Self Storage, Inc. (the "Company") consummated during the
period June 19, 1998 through July 2, 1998, the acquisition of 10 self-
storage facilities (the "Acquired Facilities") through Sovran Acquisition
Limited Partnership, L.P. (the Operating Partnership"), a limited
partnership controlled by the Company. The 10 facilities totaling
approximately 670,000 square feet are located in 2 states and were
purchased for approximately $38 million.
All of the facilities were acquired from unaffiliated third parties.
The acquisitions were funded by cash generated from operations, the
issuance of Operating Partnership Units (OP Units) and borrowings under the
Company's line of credit. 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
10 Acquired Facilities.
Date of Square
Location Seller Acquisition Price Feet
- --------------------------------------------------------------------------
Houston, TX Mini Old Katy, L.P. 6/19/98 $ 3,300,000 52,360
Webster, TX Cornerstone Self Storage 6/19/98 2,900,000 56,050
Carrollton, TX Old Denton Road, #7, Ltd 6/19/98 2,500,000 51,700
San Marcos TX John Muhich 6/30/98 1,777,000 61,889
Austin, TX John Muhich 6/30/98 2,443,000 73,558
Austin, TX John Muhich 6/30/98 2,380,000 41,433
Hollywood, FL Waldner Enterprises 7/2/98 6,000,000 129,041
Pompano, FL Waldner Enterprises 7/2/98 4,700,000 73,522
Pompano, FL Waldner Enterprises 7/2/98 4,500,000 63,727
Boca Raton, FL Waldner Enterprises 7/2/98 7,500,000 66,740
---------- -------
$ 38,000,000 670,020
Item 7. Financial Statements and Exhibits
Page
(a) Financial Statements Applicable to Real Estate
Properties Acquired
* Report of Independent Auditors 4
* Acquired Facilities Historical Summaries of
Combined Gross Revenue and Direct Operating
Expenses for the three months ended March 31,
1998 and the year ended December 31, 1997 5
* Acquired Facilities Notes to Historical Summaries
of Combined Gross Revenue and Direct Operating
Expenses 6
(b) Pro Forma Financial Information
* Sovran Self Storage, Inc., Pro Forma Combined
Financial Information 8
* Sovran Self Storage, Inc., Pro Forma Combined
Balance Sheet as of March 31, 1998 9
* Sovran Self Storage, Inc., Pro Forma Combined
Statement of Operations For the three months
ended March 31, 1998 10
* Sovran Self Storage, Inc., Pro Forma Combined
Statement of Operations For the Year ended
December 31, 1997 11
* Sovran Self Storage, Inc., Notes to Pro Forma
Combined Financial Statements 12
(c) Exhibits
Exhibit No. Description
23 Consent of Independent Auditors, Ernst &
Young LLP. 14
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 nine
self storage facilities (the "Acquired Facilities") as described in Note 1,
for the year ended December 31, 1997. 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 Acquired 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 Acquired Facilities for the year ended December 31, 1997,
in conformity with generally accepted accounting principles.
/S/ Ernst & Young LLP
_____________________
Buffalo, New York
July 2, 1998
Acquired Facilities
Historical Summaries of Combined Gross
Revenue and Direct Operating Expenses
(in thousands)
Three Months Year Ended December 31, 1997
Ended 9 1
March 31, 1998 Acquired Acquired
10 Facilities Facilities Facility Total 10
(unaudited) (audited) (unaudited) Facilities
______________ _____________________________________
Revenues:
Rental income $ 1,282 $ 4,390 $ 446 $ 4,836
Other income 13 32 10 42
_________ ____________________________________
Total revenue 1,295 4,422 456 4,878
Direct Operating Expenses:
Property operations
and maintenance 303 1,086 97 1,183
Real estate taxes 144 473 59 532
_________ ____________________________________
Total direct operating
expenses 447 1,559 156 1,715
_________ ____________________________________
Revenue in excess of
direct operating
expenses $ 848 $ 2,863 $ 300 $ 3,163
========= ====================================
See accompanying notes.
Acquired 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 10
facilities acquired since June 19, 1998. These 10 facilities, have been
acquired from unaffiliated third parties by Sovran Acquisition Limited
Partnership (the "Operating Partnership") for an aggregate purchase price
of $38 million. The general partner of the Operating Partnership is Sovran
Self Storage, Inc. (the "Company").
The information presented for the year ended December 31, 1997, represents
the 12 month period ended December 31, 1997, or a representative fiscal
period. In those instances where a fiscal period is used, the difference
in gross revenue and direct operating expenses are not considered to be
material.
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 10 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 10 facilities. Rental income is
recognized when due from occupants. Expenses are recognized on the accrual
basis.
9 Facilities - Audited
Location Date of Acquisition Location Date of Acquisition
________ ___________________ ________ ___________________
Webster, TX 6/19/98 Carrollton, TX 6/19/98
San Marcos, TX 6/30/98 Austin, TX 6/30/98
Austin, TX 6/30/98 Hollywood, FL 7/2/98
Pompano, FL 7/2/98 Pompano, FL 7/2/98
Boca Raton, FL 7/2/98
1 Facility - Unaudited
Location Date of Acquisition
________ ___________________
Houston, TX 6/19/98
2. Unaudited Interim Periods
The unaudited interim Historical Summaries for the three months ended
March 31, 1998, have been prepared in accordance with generally accepted
accounting principles for interim financial information. 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 three months ended March 31, 1998, 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 of
revenue and expenses during the reporting period. Actual results could
differ from those estimates.
Sovran Self Storage, Inc.
Pro Forma Combined Financial Information
The following unaudited Pro Forma Combined Balance Sheet as of March 31,
1998 and unaudited Pro Forma Combined Statement of Operations for the three
months ended March 31, 1998 and the year ended December 31, 1997, have been
prepared to reflect the Company's acquisition of self storage 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. included in (i) the Company's 10-Q
for the three months ended March 31, 1998, (ii) the Company's 10-K for the
year ended December 31, 1997, (iii) the historical summaries of combined
gross revenue and direct operating expenses included in this 8-K, the
Company's 8-K Report dated June 10, 1998 and 8-K/A Report dated April 17,
1998, and (iv) the other financial information in the Company's 1997 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 22 facilities that were purchased after
March 31, 1998, were acquired at that date. The Pro Forma Combined
Statements of Operations were prepared as if the 44 self storage facilities
acquired in 1997 and the 40 facilities acquired in 1998 were purchased at
the beginning of 1997. The combined pro forma financial information is not
necessarily indicative of the financial position or results of operations
which actually would have occurred if such transactions had been
consummated on the dates described, nor does it purport to represent the
Company's future financial position or results of operations.
Sovran Self Storage, Inc.
Pro Forma Combined Balance Sheet
March 31, 1998
(in thousands)
(unaudited)
Pro Forma Adjustments
Sovran Previously
Self Storage Reported Acquired Sovran
Historical 12 Facilities 10 Facilities Self Storage, Inc.
(Note 1) (Note 2) (Note 3) Pro Forma
____________________________________________________________________
Assets
Investment in storage
facilities, net $ 376,792 $ 42,046 $ 38,000 $ 456,838
Cash and cash equivalents 2,987 - - 2,987
Accounts receivable 1,204 5 8 1,217
Prepaid expenses and other
assets 3,484 19 - 3,503
____________________________________________________________________
Total assets $ 384,467 $ 42,070 $ 38,008 $ 464,545
====================================================================
Liabilities
Line of credit $ 88,000 $ 41,288 $ 26,467 $ 155,755
Accounts payable and
accrued liabilities 5,195 173 69 5,437
Deferred revenue 2,506 336 72 2,914
Accrued dividends 6,659 - - 6,659
Mortgage payable 3,059 - - 3,059
___________________________________________________________________
Total liabilities 105,419 41,797 26,608 173,824
Minority interest 12,808 273 11,400 24,481
Shareholders' Equity
Common stock, $.01 par value 123 - - 123
Additional paid-in capital 273,317 - - 273,317
Unearned restricted stock (28) - - (28)
Dividends in excess of net
income (7,172) - - (7,172)
___________________________________________________________________
Total shareholders'
equity 266,240 - - 266,240
___________________________________________________________________
Total liabilities and
shareholders' equity $ 384,467 $ 42,070 $ 38,008 $ 464,545
===================================================================
See notes to pro forma combined financial information
Sovran Self Storage, Inc.
Pro Forma Combined Statement of Operations
For the Three Months ended March 31, 1998
(in thousands, except per share data) (unaudited)
18 Acquisitions 12 Acquisitions
Prior to Subsequent to
Sovran March 31, 1998 March 31, 1998 10 Acquired
Self Storage Preacquisition Reported in Facilities included Pro Forma Sovran
Historical Pro forma Previous 8-K in this 8-K Adjustments Self Storage, Inc.
(Note 1) (Note 4) (Note 4) (Note 4) (Note 6) Pro Forma
_______________________________________________________________________________________________________
Revenues:
Rental income $ 14,175 $ 950 $ 1,401 $ 1,282 $ - $ 17,808
Interest and
other income 200 28 21 13 - 262
_______________________________________________________________________________________________________
Total revenue 14,375 978 1,422 1,295 - 18,070
Expenses:
Property operations
and maintenance 2,818 223 286 303 - 3,630
Real estate taxes 1,188 76 87 144 - 1,495
General and
administrative 854 43 - - 12 (a) 909
Interest 1,215 435 - - 1,102 (b) 2,752
Depreciation and
amortization 2,097 146 - - 405 (c) 2,648
_________________________________________________________________________________________________________
Total expenses 8,172 923 373 447 1,519 11,434
_________________________________________________________________________________________________________
Income before minority
interest and
extraordinary item 6,203 55 1,049 848 (1,519) 6,636
Minority interest (205) (2) - - (210) (d) (417)
_________________________________________________________________________________________________________
Income before
extraordinary item 5,998 53 1,049 848 (1,729) 6,219
Extraordinary item -
loss on extinguishment
of debt (350) - - - - (350)
_________________________________________________________________________________________________________
Net income $ 5,648 $ 53 $ 1,049 $ 848 $ (1,729) $ 5,869
=========================================================================================================
Earnings per share before
extraordinary
item - basic $ 0.49 $ 0.50 (e)
Extraordinary item (0.03) (0.02)
_________ _________
Earnings per
share - basic $ 0.46 $ 0.48
========= =========
Earnings per
share - diluted $ 0.46 $ 0.47
========= =========
Dividends declared
per share $ 0.54 $ 0.54
========= =========
Common shares used
in basic per share
calculation 12,289,467 12,330,963
See notes to pro forma combined financial information
Sovran Self Storage, Inc.
Pro Forma Combined Statement of Operations
For the Year ended December 31, 1997
(in thousands, except per share data) (unaudited)
1997
Sovran Acquisitions 1998
Self Storage Preacquisition 40 Acquired Pro Forma Sovran
Historical Pro forma Facilities Adjustments Self Storage, Inc.
(Note 1) (Note 5) Pro Forma (Note 5) Pro Forma
_______________________________________________________________________________________
Revenues:
Rental income $ 48,584 $ 4,680 $ 16,758 $ - $ 70,022
Interest and other
income 770 51 263 - 1,084
______________________________________________________________________________________
Total revenue 49,354 4,731 17,021 - 71,106
Expenses:
Property operations
and maintenance 9,708 1,020 3,673 - 14,401
Real estate taxes 3,955 397 1,376 - 5,728
General and
administrative 2,757 43 - 178 (a) 2,978
Interest 2,166 1,001 - 7,670 (b) 10,837
Depreciation and
amortization 7,005 737 - 2,707 (c) 10,449
______________________________________________________________________________________
Total expenses 25,591 3,198 5,049 10,555 44,393
______________________________________________________________________________________
Income before minority
interest 23,763 1,533 11,972 (10,555) 26,713
Minority interest (644) (241) - (886) (d) (1,771)
______________________________________________________________________________________
Net income $ 23,119 $ 1,292 $ 11,972 $(11,441) $ 24,942
======================================================================================
Earnings per
share - basic $ 1.97 $ 2.02 (e)
- diluted $ 1.96 $ 2.01
Dividends declared
per share $ 2.12 $ 2.12
Common shares used in
basic per share
calculation 11,759,000 12,330,963
See notes to pro forma combined financial information
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 three months ended March 31, 1998 and the year ended December 31, 1997,
include the accounts of Sovran Self Storage, Inc. (the "Company"), Sovran
Acquisition Limited Partnership (the "Operating Partnership"), and Sovran
Holdings, Inc., a wholly-owned subsidiary of the Company.
2. Balance Sheet - Pro Forma Adjustments - Previously Reported 12
Facilities
These adjustments reflect the 12 acquisitions that occurred subsequent to
March 31, 1998, that were reported in the Company's 8-K Report filed June
10, 1998 and 8-K/A Report filed April 17, 1998, and were not included in
the Sovran Self Storage Historical March 31, 1998 balance sheet. The cash
portion of the purchase price is considered to be an increase in the
amounts outstanding under the Company's line of credit.
3. Balance Sheet - Pro Forma Adjustments - 10 facilities
This adjustment reflects the acquisition of the 10 facilities detailed in
Item 2 of this 8-K that have been purchased subsequent to March 31, 1998.
The cash portion of the purchase price is considered to be an increase in
the amounts outstanding under the Company's line of credit. The
partnership units issued in connection with certain of these facilities are
recorded as minority interest.
4. Statement of Operations March 31, 1998
18 Acquisitions Prior to March 31, 1998
The statements of operations for the 18 acquisitions prior to March 31,
1998 reflect the results of operations for these facilities for the period
not owned by the Company during the three months ended March 31, 1998.
12 Acquisitions Subsequent to March 31, 1998 Reported in Previous 8-K
The statements of operations for the 12 acquisitions subsequent to March
31, 1998 reflect the results of operations for these facilities for the
period March 31, 1998 which are detailed in the Company's 8-K Report filed
June 10, 1998 and 8-K/A Report filed April 17, 1998.
10 Acquired Facilities
The statements of operations for the 10 Acquired Facilities reflect the
results of operations for these facilities for the three months ended March
31, 1998, which are reported in the Historical Summaries of Combined Gross
Revenue and Direct Operating Expenses included elsewhere herein.
5. Statement of Operations December 31, 1997
1997 Acquisitions Preacquisition Pro forma
The statements of operations for the 44 acquisitions prior to December 31,
1997 reflect the results of operations for these facilities for the period
not owned by the Company during the year ended December 31, 1997.
1998 40 Acquired Facilities
The statements of operations for the 40 Acquired Facilities reflect the
results of operations for these facilities for the three months ended March
31, 1998, which are reported in the Historical Summaries of Combined Gross
Revenue and Direct Operating Expenses included elsewhere herein (10
facilities) and in the Company's 8-K filed June 10, 1998 and 8-K/A filed
April 17, 1998.
6. Pro Forma Adjustments - Statement of Operations
(a) To reflect an estimated increase in general and administrative
expenses based on results subsequent to acquisition.
(b) To reflect interest expense on the line of credit utilized to fund the
purchase of the acquired or acquisition facilities.
(c) To record additional depreciation expense related to the facilities
based on a 39 year life.
(d) To adjust minority interest based on adjustments to net income of the
Company and additional average of operating partnership units
outstanding.
(e) Pro forma earnings per share calculated as if the shares outstanding at
March 31, 1998 had been outstanding for the entire period presented.
Consent of Independent Auditors
We consent to the incorporation by reference in the Registration Statement
(Form S-8 No. 333-08883) of Sovran Self Storage, Inc. and in the related
Prospectus of our report dated July 6, 1998, 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, 1997.
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 July 6, 1998, 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, 1997.
We also consent to the incorporation by reference in the Registration
Statement (Form S-3 No. 333-51169) of Sovran Self Storage, Inc. and Sovran
Acquisition Limited Partnership and in the related Prospectus of our report
dated July 6, 1998, 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, 1997.
/S/ Ernst & Young LLP
Buffalo, New York
July 6, 1998