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):
September 24, 1998 (August 3, 1998)
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.)
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
August 3, 1998 through September 24, 1998, the acquisition of 4 self-storage
facilities (the "Acquired Facilities") through Sovran Acquisition Limited
Partnership, (the Operating Partnership"), a limited partnership controlled by
the Company. The 4 facilities totaling approximately 214,000 square feet are
located in 2 states and were purchased for approximately $9 million.
All of the facilities were acquired from unaffiliated third parties.
The acquisitions were funded by cash generated from operations and borrowings
under the Company's term note. 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 4
Acquired Facilities.
Date of Square
Location Seller Acquisition Price Feet
- -------------------------------------------------------------------------------
Hollywood, FL .. Hollywood Old Dixie Self Storage 8/3/98 $4,175,000 58,858
Jacksonville, NC Steve P. Mazure 8/6/98 1,630,000 50,950
Jacksonville, NC D&A Enterprises of Durham, LLC 8/17/98 2,296,000 62,900
Jacksonville, NC Henry Shapiro 9/24/98 950,000 41,400
---------- ------
$9,051,000 214,108
Item 5. Other Events
The following unaudited information for the six months ended June 30,
1998, relates to four facilities acquired since June 30, 1998, for which the
acquisition was reported in the 8-K filed July 6, 1998. The Historical Summaries
of Combined Gross Revenue and Direct Operating Expenses is included below to
update the financial information for the following four properties through June
30, 1998:
Date of Square
Location Seller Acquisition Price Feet
- -----------------------------------------------------------------
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
----------- -------
$22,700,000 333,030
Previously Acquired Facilities
Historical Summaries of Combined Gross
Revenue and Direct Operating Expenses
(in thousands)
Six months ended
June 30, 1998
4 Previously
Acquired
Facilities
(unaudited)
Revenues:
Rental income ................................ $1,668
Other income ................................. 8
------
Total revenue .............................. 1,676
Direct Operating Expenses:
Property operations and maintenance .......... 356
Real estate taxes ............................ 95
Total direct operating expenses ............ 451
Revenue in excess of direct operating expenses $1,225
======
See accompanying notes.
Previously Acquired Facilities
Notes to Historical Summaries of Combined Gross
Revenue and Direct Operating Expenses
(in thousands)
1. Basis of Presentation
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 4 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 4
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,
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 six months ended June
30, 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.
Item 7. Financial Statements and Exhibits
Page
(a) Financial Statements Applicable to Real Estate Properties Acquired
* ..Acquired Facilities Historical Summaries of Combined Gross
Revenueand Direct Operating Expenses for the six months
ended June 30, 1998 and the year ended December 31, 1997 .... ..6
* ..Acquired Facilities Notes to Historical Summaries of Combined
Gross Revenue and Direct Operating Expenses ....................7
(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 June 30, 1998 9
* Sovran Self Storage, Inc., Pro Forma Combined Statement
of Operations For the six months ended June 30, 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
None
Acquired Facilities
Historical Summaries of Combined Gross
Revenue and Direct Operating Expenses
(in thousands)
Six Months
Ended Year Ended
June 30, 1998 December 31, 1997
4 Facilities 4 Facilities
(unaudited) (unaudited)
----------- -----------
Revenues:
Rental income ................................ $629 $1,243
Other income ................................. 40 71
---- ------
Total revenue .............................. 669 1,314
Direct Operating Expenses:
Property operations and maintenance .......... 165 328
Real estate taxes ............................ 36 69
---- ------
Total direct operating expenses ............ 201 397
---- ------
Revenue in excess of direct operating expenses $468 $ 917
==== ======
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 4 facilities
acquired since August 3, 1998. These 4 facilities, have been acquired from
unaffiliated third parties by Sovran Acquisition Limited Partnership (the
"Operating Partnership") for an aggregate purchase price of $9 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 4 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 4
facilities. Rental income is recognized when due from occupants. Expenses are
recognized on the accrual basis.
4 Facilities - Unaudited
Date of Date of
Location Acquisition Location Acquisition
- -------- ----------- -------- -----------
Hollywood, FL .. 8/3/98 Jacksonville, NC 8/6/98
Jacksonville, NC 8/17/98 Jacksonville, NC 9/24/98
2. Unaudited Interim Periods
The unaudited interim Historical Summaries for the six months ended June 30,
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 six months ended June
30, 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 June 30, 1998 and
unaudited Pro Forma Combined Statement of Operations for the six months ended
June 30, 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 six months ended June
30, 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 Reports dated July 6, 1998, 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 8 facilities that were
purchased after June 30, 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 44 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
June 30, 1998
(in thousands)
(unaudited)
Pro Forma Adjustments
---------------------
Sovran Previously Sovran
Self Storage Reported Acquired Self
Inc. 4 4 Storage
Historical Facilities Facilities Inc.
(Note 1) (Note 2) (Note 3) Pro Forma
---------------------------------------------
Assets
Investment in storage facilities, net $ 436,218 $22,700 $9,051 $ 467,969
Cash and cash equivalents ............ 2,695 - - 2,695
Accounts receivable .................. 1,335 - 13 1,348
Prepaid expenses and other assets .... 3,030 - - 3,030
----- -----
Total assets ......................... $ 443,278 $22,700 $9,064 $ 475,042
========= ======= ====== =========
Liabilities
Line of credit ....................... $ 148,000 $11,300 $8,968 $ 168,268
Accounts payable and accrued
liabilities 4,832 - 37 4,869
Deferred revenue ..................... 2,934 - 59 2,993
Accrued dividends .................... 6,641 - - 6,641
Mortgage payable ..................... 3,059 - - 3,059
----- -----
Total liabilities .................... 165,466 11,300 9,064 185,830
Minority interest ..................... 13,060 11,400 - 24,460
Shareholders' Equity
Common stock, $.01 par value ......... 123 - - 123
Additional paid-in capital ........... 273,369 - - 273,369
Unearned restricted stock ............ (25) - - (25)
Dividends in excess of net income .... (7,761) - - (7,761)
Treasury stock ....................... (954) - - (954)
---------
Total shareholders' equity ........... 264,752 - - 264,752
------- -------
Total liabilities and
shareholders' equity $ 443,278 $22,700 $9,064 $ 475,042
========= ======= ====== =========
See notes to pro forma combined financial information
Sovran Self Storage, Inc.
Pro Forma Combined Statement of Operations
For the Six Months ended June 30, 1998
(in thousands, except per share data) (unaudited)
36 Acquisitions 4 Acquisitions 4
Prior to Subsequent to Acquired Sovran
Sovran June 30, 1998 June 30, 1998 Facilities Self
Self Storage Preacquisition Reported in included Pro Forma Storage,
Historical Pro forma Previous 8-K in this 8-K Adjustments Inc.
(Note 1) (Note 4) (Note 4) (Note 4) (Note 6) Pro Forma
-----------------------------------------------------------------------------------------
Revenues:
Rental income ..................... $ 30,347 $ 3,664 $ 1,668 $ 639 $ - $ 36,308
Interest and other income ......... 470 65 8 40 - 583
--- -- - -- ---
Total revenue ..................... 30,817 3,729 1,676 669 - 36,891
Expenses:
Property operations and maintenance 5,983 853 356 165 - 7,357
Real estate taxes ................. 2,498 302 95 36 - 2,931
General and administrative ........ 1,947 48 - - 10(a) 2,005
Interest .......................... 3,368 1,868 - - 699(b) 5,935
Depreciation and amortization ..... 4,547 392 - - 367(c) 5,306
----- --- --- -----
Total expenses .................... 18,343 3,463 451 201 1,076 23,534
------ ----- --- --- ----- ------
Income before minority interest and
extraordinary item ............... 12,474 266 1,225 468 (1,076) 13,357
Minority interest .................. (424) (17) - - (412)(d) (853)
---- --- ---- ----
Income before extraordinary item ... 12,050 249 1,225 468 (1,488) 12,504
Extraordinary item -
loss on extinguishment of debt .... (350) - - - - (350)
---- ----
Net income ......................... $ 11,700 $ 249 $ 1,225 $ 468 $ (1,488) $ 12,154
============ ========== ============ ========== ============ ============
Earnings per share before
extraordinary item - basic ........ $ 0.98 $ 1.02(e)
Extraordinary item ................. (0.03) (0.03)
----- -----
Earnings per share - basic ......... $ 0.95 $ 0.99
============ ===========
Earnings per share - diluted ....... $ 0.95 $ 0.99
============ ===========
Dividends declared per share ....... $ 1.08 $ 1.08
============ ===========
============
Common shares used in basic
per share calculation ......... 12,309,866 12,298,213
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
Sovran Acquisitions 1998 Self
Self Storage Preacquisition 44 Acquired Pro Forma Storage,
Historical Pro forma Facilities Adjustments Inc.
(Note 1) (Note 5) Pro forma (Note 5) Pro Forma
-----------------------------------------------------------------
Revenues:
Rental income ..................... $ 48,584 $ 4,680 $ 18,001 $ $ 71,265
Interest and other income ......... 770 51 334 - 1,155
--- -- --- -----
Total revenue ..................... 49,354 4,731 18,335 - 72,420
Expenses:
Property operations and maintenance 9,708 1,020 4,001 - 14,729
Real estate taxes ................. 3,955 397 1,445 - 5,797
General and administrative ........ 2,757 43 - 188(a) 2,988
Interest .......................... 2,166 1,001 - 8,291(b) 11,458
Depreciation and amortization ..... 7,005 737 - 2,892(c) 10,634
----- --- ----- ------
Total expenses .................... 25,591 3,198 5,446 11,371 45,606
------ ----- ----- ------ ------
Income before minority interest .... 23,763 1,533 12,889 (11,371) 26,814
Minority interest ................. (644) (241) - (871)(d) (1,756)
---- ---- ---- ------
Net income ......................... $ 23,119 $ 1,292 $ 12,889 $ (12,242) $25,058
========== ========== ========== ========== =======
Earnings per share - basic $ 1.97 $ 2.04(e)
========== =======
Earnings per share - diluted $ 1.96 $ 2.03
========== =======
Dividends declared per share $ 2.12 $ 2.12
========== =======
Common shares used in basic
per share calculation 11,759,000 12,298,213
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 six
months ended June 30, 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 4 Facilities
These adjustments reflect the 4 acquisitions that occurred subsequent to June
30, 1998, that were reported in the Company's 8-K Report filed July 6, 1998, and
were not included in the Sovran Self Storage Historical June 30, 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. The partnership
units issued in connection with certain of these facilities are recorded as
minority interest.
3. Balance Sheet - Pro Forma Adjustments -4 facilities
This adjustment reflects the acquisition of the 4 facilities detailed in Item 2
of this 8-K that have been purchased subsequent to June 30, 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.
4. Statement of Operations June 30, 1998
36 Acquisitions Prior to June 30, 1998
The statements of operations for the 36 acquisitions prior to June 30, 1998
reflect the results of operations for these facilities for the period not owned
by the Company during the six months ended June 30, 1998.
4 Acquisitions Subsequent to June 30, 1998 Reported in Previous 8-K
The statements of operations for the 4 acquisitions subsequent to June 30, 1998
reflect the results of operations for these facilities for the period June 30,
1998 which are detailed in Item 5 of this 8-K.
4 Acquired Facilities
The statements of operations for the 4 Acquired Facilities reflect the results
of operations for these facilities for the six months ended June 30, 1998, which
are reported in the Historical Summaries of Combined Gross Revenue and Direct
Operating Expenses included elsewhere herein.
Sovran Self Storage, Inc.
Notes to Pro Forma Combined Financial Statements
(in thousands, except per share data)
(unaudited)
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 44 Acquired Facilities
The statements of operations for the 44 Acquired Facilities reflect the results
of operations for these facilities for the six months ended June 30, 1998, which
are reported in the Historical Summaries of Combined Gross Revenue and Direct
Operating Expenses included elsewhere herein (4 facilities) and in the Company's
8-Ks filed July 6, 1998, 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 and term note 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
June 30, 1998 had been outstanding for the entire period presented.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
Sovran Self Storage, Inc.
September 25, 1998 By: /S/
--------------------------------------
Date David L. Rogers,
Secretary and Chief Financial Officer