SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K/A CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Date of Report(Date of earliest event reported):
April 17, 1998 (November 20, 1997)
Sovran Self Storage, Inc.
(Exact name of Registrant as specified in its charter)
Maryland 16-1194043
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1-13820
(Commission File Number)
5166 Main Street
Williamsville, NY 14221
(Address of principal executive offices) (Zip code)
(716) 633-1850
(Registrant's telephone number including area code)
Not applicable
(Former name and former address, if changed since last report)
Item 2. Acquisition or Disposition of Assets
Sovran Self Storage, Inc. (the "Company") consummated during the period
November 20, 1997 through April 9, 1998, the acquisition of 24 self-storage
facilities through Sovran Acquisition Limited Partnership, L.P. ("OP"), a
limited partnership controlled by the Company. The 24 facilities totaling
approximately 1,525,793 square feet are located in 12 states and were purchased
for approximately $74 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, one facility was acquired through the issuance of
common stock, and one facility was 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 13
facilities not detailed on the 8-K Report dated February 20, 1998. These
properties are included in the accompanying financial statements in addition to
the 11 facilities listed on the February 20, 1998 8-K Report.
Date of Square
Location Seller Acquisition Price Feet
Harrisburg, PA U-Stor-It, L.P. 12/3/97 $ 3,050,000 62,575
Titusville, FL Rogers and France 2/25/98 2,435,000 54,390
Salem, MA Extra Space Management 3/3/98 3,700,000 53,400
East Greenwich, RI Frenchtown Mini Storage 3/26/98 3,570,000 71,190
Hixson, TN Kidd Development Co. 3/27/98 1,476,000 42,175
Chattanooga, TN Kidd Development Co. 3/27/98 1,704,000 37,250
Chattanooga, TN Kidd Development Co. 3/27/98 1,445,000 35,405
Ft. Oglethorpe, GA Kidd Development Co. 3/27/98 1,550,000 45,290
Birmingham, AL Kidd Development Co. 3/27/98 2,425,000 62,776
Salem, NH Salem Self Storage, Inc. 4/7/98 3,660,000 62,075
Durham, NC All American Self Storage 4/9/98 3,850,000 67,941
Durham, NC All American Self Storage 4/9/98 4,675,000 79,260
Hendersonville, TN All American Self Storage 4/9/98 5,225,000 93,665
--------- ------
$38,765,000 767,392
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, 1997 6
. Acquisition Facilities Notes to Historical Summaries of
Combined Gross Revenue and Direct Operating Expenses
for the year ended December 31, 1997. . 7-8
(b) Pro Forma Financial Information
. Sovran Self Storage, Inc., Pro Forma Combined Financial Information 9
. Sovran Self Storage, Inc., Pro Forma Combined Balance Sheet as of
. December 31, 1997 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
Statement 12
(c) Exhibits
Exhibit
Description
No.
23 Consent of Independent Auditors, Ernst & Young LLP. 14
27 Financial Data Schedule 15
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 eighteen self
storage facilities (the "Acquisition 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/A 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, 1997, in
conformity with generally accepted accounting principles.
/S/ Ernst & Young LLP
Buffalo, New York
April 9, 1998
Acquisition Facilities
Historical Summaries of Combined Gross
Revenue and Direct Operating Expenses
(in thousands)
Year ended December 31, 1997 (Note 1)
-------------------------------------
18 6 Total 24
Acquisitions Acquisitions Facilities
(audited) (unaudited) (unaudited)
--------- ----------- ----------
Revenues:
Rental income $ 7,546 $ 1,799 $ 9,345
Other income 153 31 184
--- -- ---
Total revenue 7,699 1,830 9,529
Direct Operating Expenses:
Property operations and maintenance 1,560 410 1,970
Real estate taxes 537 96 633
--- -- ---
Total direct operating expenses 2,097 506 2,603
----- --- -----
Revenue in excess of direct operating expenses $ 5,602 $ 1,324 $ 6,926
=========== =========== ===========
See accompanying notes.
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 18
facilities acquired since November 20, 1997, which have been audited, and the
following 6 facilities acquired since November 20, 1997, which are unaudited.
These 24 facilities, which have been acquired from unaffiliated third parties by
Sovran Acquisition Limited Partnership (the "Partnership") for an aggregate
purchase price of $74 million, are collectively referred to as the "24
Acquisition Facilities". The general partner of the Partnership is Sovran
Holdings, Inc., a wholly owned subsidiary of Sovran Self Storage, Inc. (the
"Company").
The information presented represents the 12 month period ended December 31,
1997, or a period ended within 90 days of December 31, 1997. In those instances
where the information is for a 12 month fiscal period ended within 90 days of
December 31, 1997, the difference in gross revenues and direct operating
expenses are not considered to be material.
18 Acquisition Facilities - Audited
Date of Date of
Location ........... Acquisition Location Acquisition
Harrisburg, PA ..... 12/3/97 East Greenwich, RI 3/26/98
Harriman, NY ....... 2/4/98 Hixson, TN 3/27/98
Tampa, FL .......... 2/4/98 Chattanooga, TN 3/27/98
Chesapeake, VA ..... 2/5/98 Chattanooga, TN 3/27/98
Chesapeake, VA ..... 2/5/98 Ft. Oglethorpe, GA 3/27/98
Virginia Beach, VA . 2/5/98 Birmingham, AL 3/27/98
Virginia Beach, VA . 2/5/98 Durham, NC 4/9/98
Norfolk, VA ........ 2/5/98 Durham, NC 4/9/98
Salem, MA .......... 3/3/98 Hendersonville, TN 4/9/98
6 Acquisition Facilities - Unaudited
The following 6 Acquisition Facilities were not audited as the Company believes
these facilities are not material either individually or in the aggregate.
Date of Date of
Location ........... Acquisition Location Acquisition
Baton Rouge, LA .... 11/20/97 Lynchburg, VA 2/18/98
Worcester, MA ...... 2/9/98 Titusville, FL 2/25/98
Greensboro, NC ..... 2/10/98 Salem, NH 4/7/98
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 24 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 24 Acquisition Facilities. Rental income is recognized when
due from occupants. Expenses are recognized on the accrual basis.
2. 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.
Sovran Self Storage, Inc.
Pro Forma Combined Financial Information
The following unaudited Pro Forma Combined Balance Sheet as of December 31, 1997
and unaudited Pro Forma Combined Statement of Operations for year then ended
have been prepared to reflect the acquisition of 24 self storage facilities (the
"24 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-K for the
year ended December 31, 1997, and 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 Acquisition Facilities that were
purchased after December 31, 1997, were acquired at that date. The Pro Forma
Combined Statement of Operations were prepared as if the 24 Acquisition
Facilities 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
December 31, 1997
(in thousands)
(unaudited)
Sovran Sovran
Self Storage Pro Forma Self Storage,Inc.
Historical Adjustments Pro Forma
(Note 1) (Note 2)
-------- -------- ---------
Assets
Investment in storage facilities, $ 321,397 $ 69,860 $ 391,257
Cash and cash equivalents ...... 2,567 - 2,567
Accounts receivable ............ 834 27 861
Prepaid expenses and other assets 2,275 36 2,311
--------- --------- ---------
Total assets ............... $ 327,073 $ 69,923 $ 396,996
========= ========= =========
Liabilities
Line of credit ................. $ 36,000 $ 66,158 $ 102,158
Accounts payable and
accrued liabilities ......... 2,167 138 2,305
Deferred revenue ............... 1,994 291 2,285
Accrued dividends .............. 6,599 - 6,599
Mortgage payable ............... 3,559 - 3,559
--------- --------- ---------
Total liabilities .......... 50,319 66,587 116,906
Minority interest ................. 12,843 - 12,843
Shareholders' Equity
Common stock, $.01 par value ... 122 1 123
Additional paid-in capital ..... 269,982 3,335 273,317
Unearned restricted stock ...... (32) - (32)
Dividends in excess of net income (6,161) - (6,161)
--------- --------- ---------
Total shareholders' equity . 263,911 3,336 267,247
--------- --------- ---------
Total liabilities and shareholders'
Equity $ 327,073 $ 69,923 $ 396,996
========= ========= =========
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)
Sovran .. 24
Self Storage Acquisition Pro Forma Sovran
Historical Facilities Adjustments Self Storage, Inc.
(Note 1) . (Note 3) (Note 4) Pro Forma
------------------ ------------ ----------- ------------------
Revenues:
Rental income ............................ $ 48,584 $ 9,345 $ - $ 57,929
Interest and other income ................ 770 184 - 954
--- --- ---
Total revenue ........................ 49,354 9,529 - 58,883
Expenses:
Property operations and maintenance ...... 9,708 1,970 - 11,678
Real estate taxes ........................ 3,955 633 - 4,588
General and administrative ............... 2,757 - 143 (a) 2,900
Interest ................................. 2,166 - 4,833 (b) 6,999
Depreciation and amortization ............ 7,005 - 1,515 (c) 8,520
----- ----- ----- -----
Total expenses ....................... 25,591 2,603 6,491 34,685
------ ----- ----- ------
Net income before minority interest ........... 23,763 6,926 (6,491) 24,198
Minority interest ........................ (644) - (82)(d) (726)
---- --- ----
Net income ................................ $ 23,119 $ 6,926 $ (6,573) $ 23,472
============ ============ ============ ========
Earnings per share- basic $ 1.97 $ 1.98 (e)
- diluted $ 1.96 $ 1.97
Dividends declared per share .............. $ 2.12 $ 2.12
Common shares used in basic
per share calculation ................ 11,759,000 11,869,000
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
year ended December 31, 1997, 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 22 acquisitions that occurred subsequent to
December 31, 1997 and were not included in the Sovran Self Storage Historical
December 31, 1997 balance sheet. The facilities were purchased from unaffiliated
parties for an aggregate purchase price of approximately $70 million. The
acquisitions were funded by cash generated from operations, borrowings under the
Company's line of credit and the issuance of common stock.
3. 24 Acquisition Facilities - Statement of Operations
The statements of operations for the 24 Acquisition Facilities reflects the
results of operations for the 24 Acquisition Facilities up to the date acquired
or for the year ended December 31, 1997, which are reported in the Historical
Summaries of Combined Gross Revenue and Direct Operating Expenses included
elsewhere herein.
4. 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 Acquisition Facilities.
(c) To record additional depreciation expense related to the Acquisition
Facilities based on a 39 year life and approximately $59 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 issuance of 109,843 shares
of common stock for one of the acquisitions had occurred at the beginning of
1997.
SIGNATURE
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.
April 17, 1998 By:___________________________________________
Date David L. Rogers, Chief Financial Officer
and Secretary