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 19, 1999 (September 29, 1998)
Sovran Self Storage, Inc.
(Exact name of Registrant as specified in its charter)
Commission File Number: 1-13820
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 September 29, 1998 through February 17, 1999, the acquisition of 11
self-storage facilities (the "Acquired Facilities") through Sovran Acquisition
Limited Partnership, (the "Operating Partnership"), a limited partnership
controlled by the Company. The 11 facilities totaling approximately 638,000
square feet are located in 5 states and were purchased for approximately $27.3
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 line of credit and 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 details of the acquisitions including location, seller, acquisition
date, price and square feet are included in the 8-K Report dated March 3, 1999.
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 year ended December 31, 1998 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
December 31, 1998 9
* Sovran Self Storage, Inc., Pro Forma Combined Statement of Operations
for the Year ended December 31, 1998 10
* Sovran Self Storage, Inc., Notes to Pro Forma Combined Financial
Statements 11
(c) Exhibits
Exhibit No. Description
23 Consent of Independent Auditors, Ernst & Young LLP. 13
27 Financial Data Schedule 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 five self storage
facilities (the "Acquired Facilities") as described in Note 1, for the year
ended December 31, 1998. 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 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, 1998, in conformity
with generally accepted accounting principles.
/S/ Ernst & Young LLP
Buffalo, New York
April 13, 1999
Acquired Facilities
Historical Summaries of Combined Gross
Revenue and Direct Operating Expenses
(in thousands)
Year Ended
December 31,
Year Ended December 31, 1998 1997
---------------------------------- ----------
5 6 5 Facilities
Acquired Acquired Acquired in
Facilities Facilities Total 11 1998
(audited) (unaudited) Facilities (unaudited)
----------------------------------- --------
Revenues:
Rental income ..................... $1,868 $1,704 $3,572 $1,516
Other income ...................... 13 29 42 15
------ ------ ------ ------
Total revenue ................... 1,881 1,733 3,614 1,531
Direct Operating Expenses:
Property operations and maintenance 311 421 732 379
Real estate taxes ................. 43 157 200 155
------ ------ ------ ------
Total direct operating expenses . 354 578 932 534
------ ------ ------ ------
Revenue in excess of direct operating
expenses ....................... $1,527 $1,155 $2,682 $ 997
====== ====== ====== ======
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 11 facilities
acquired since September 29, 1998. These 11 facilities, have been acquired from
unaffiliated third parties by Sovran Acquisition Limited Partnership (the
"Operating Partnership") for an aggregate purchase price of $27.3 million. The
general partner of the Operating Partnership is Sovran Self Storage, Inc. (the
"Company").
The information presented for the year ended December 31, 1998, represents the
12-month period ended December 31, 1998, 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. Amounts shown
for facilities acquired in 1998 include revenue and expenses for the period the
facilities were not owned by the Company in 1998. Revenues and expenses for 1998
acquisitions subsequent to being purchased are included in the Company's
consolidated financial statements.
The historical summaries of combined gross revenue and direct operating expenses
for the year ended December 31, 1997, relates to the 5 facilities acquired in
1998 as identified below. This information is presented in order to comply with
the rules and regulations of the Securities and Exchange Commission which
requires that the most recent full year be presented. The historical summaries
shown for these properties for the year ended December 31, 1998 relates only to
the period the 5 properties were not owned in 1998, and not a full year of
activity.
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 11 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 11
facilities. Rental income is recognized when due from occupants. Expenses are
recognized on the accrual basis.
5 Facilities - Audited
Location Date of Acquisition
- -------------------------------------------------------
Lafayette, LA (5 facilities) 2/17/99
6 Facilities - Unaudited
Location Date of Acquisition
- -------------------------------------------------------
Dallas, TX 9/29/98
Dallas, TX 10/9/98
Cincinnati, OH 11/19/98
Jackson, MS 12/1/98
Houston, TX 12/15/98
Providence, RI 2/2/99
Acquired Facilities
Notes to Historical Summaries of Combined Gross
Revenue and Direct Operating Expenses
(in thousands)
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 amounts reported in the financial statements and
accompanying notes. 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, 1998
and unaudited Pro Forma Combined Statement of Operations for the year ended
December 31, 1998, 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 the Company's 1998
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 facilities that were purchased after December 31, 1998,
were acquired at that date. The Pro Forma Combined Statements of Operations were
prepared as if the 50 self-storage facilities acquired in 1998 and the 6
facilities acquired in 1999 were purchased at the beginning of 1998. 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, 1998
(in thousands)
(unaudited)
Sovran 6 Facilities Sovran
Self Storage,Inc. Acquired Self Storage,
Historical in 1999 Inc.
(Note 1) (Note 2) Pro Forma
--------------------------------------------
Assets
Investments in storage facilities, net . $ 481,163 $ 15,310 $ 496,473
Cash and cash equivalents .............. 2,984 - 2,984
Accounts receivable .................... 1,699 2 1,701
Prepaid expenses and other assets ...... 4,278 - 4,278
--------- --------- ---------
Total Assets ........................ $ 490,124 $ 15,312 $ 505,436
========= ========= =========
Liabilities
Line of credit ......................... $ 112,000 $ 15,189 $ 127,189
Term note .............................. 75,000 - 75,000
Accounts payable and accrued liabilities 3,542 13 3,555
Deferred revenue ....................... 2,943 110 3,053
Accrued dividends ...................... 6,895 - 6,895
Mortgage payable ....................... 3,059 - 3,059
--------- --------- ---------
Total Liabilities ................... 203,439 15,312 218,751
Minority interest ...................... 24,020 - 24,020
Shareholders' Equity
Common stock $.01 par value ............ 124 - 124
Additional paid-in capital ............. 274,638 - 274,638
Unearned restricted stock .............. (418) - (418)
Dividends in excess of net income ...... (9,689) - (9,689)
Treasury stock at cost, 75,700 shares .. (1,990) - (1,990)
--------- --------- ---------
Total Shareholders' Equity .......... 262,665 - 262,665
--------- --------- ---------
Total Liabilities and Shareholders' Equity $ 490,124 $ 15,312 $ 505,436
========= ========= =========
See notes to pro forma financial information.
Sovran Self Storage, Inc.
Pro forma Statement of Operations
Year Ended December 31, 1998
(in thousands, except per share information)
(unaudited)
45 Facilities 5 Facilities 6 Facilities
Acquired in Acquired in Acquired
Year Ended Year Ended Subsequent to
Sovran December 31, December 31, December 31,
Self Storage, Inc. 1998 1998 1998 Pro forma
Historical Previously Included in Included in Pro forma Sovran
Reported this 8-K/A this 8-K/A Adjustments Self Storage,
(Note 1) (Note 3) (Note 3) (Note 3) (Note 4) Inc.
----------------------------------------------------------------------------------------
Revenues
Rental income ........................ $ 68,231 $ 6,085 $ 1,367 $ 2,205 $ - $ 77,888
Interest and other income ............ 1,129 124 16 26 - 1,295
----- --- -- -- --- ------
Total revenue ........................ 69,360 6,209 1,383 2,231 - 79,183
Expenses
Property operations and maintenance .. 13,793 1,440 343 389 - 15,965
Real estate taxes .................... 5,659 543 131 69 - 6,402
General and administrative ........... 4,849 46 5 - 5(a) 4,905
Interest ............................. 9,601 2,694 681 - 1,010(b) 13,986
Depreciation and amortization ........ 10,303 1,001 205 - 314(c) 11,823
------ ----- --- --- --- ------
Total expenses ....................... 44,205 5,724 1,365 458 1,329 53,081
------ ----- ----- --- ----- ------
Income before minority interest and
extraordinary item ................... 25,155 485 18 1,773 (1,329) 26,102
Minority interest ......................... (1,258) (398) (1) - (29)(d) (1,686)
------ ---- -- --- --- ------
Income before extraordinary item .......... 23,897 87 17 1,773 (1,358) 24,416
Extraordinary item - extinguishment of debt (357) - - - - (357)
---- --- --- --- --- ---
Net income ................................ $ 23,540 $ 87 $ 17 $ 1,773 $ (1,358) $ 24,059
======== ======== ======== ======== ======== ========
Earnings per share before extraordinary
item - basic ............................ $ 1.94 $ 1.98 (e)
Extraordinary item ........................ 0.03 0.03
--------- ---------
Earnings per share - basic ................ $ 1.91 $ 1.95
Earnings per share - diluted .............. $ 1.91 $ 1.95
Distributions declared per share .......... $ 2.20 $ 2.20
Shares used in basic per share calculation 12,293,842 12,312,756
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, 1998, 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 -6 facilities acquired in 1999
These adjustments reflect the 6 acquisitions that occurred subsequent to
December 31, 1998, that were not included in the Sovran Self Storage historical
December 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. Statement of Operations December 31, 1998
45 Facilities Acquired in Year Ended December 31, 1998 Previously Reported
The statements of operations for the 45 acquisitions prior to December 31, 1998
reflect the results of operations for these facilities for the period not owned
by the Company during the year ended December 31, 1998.
5 Facilities Acquired in Year Ended December 31, 1998 Included in this 8-K/A
The statements of operations for the 5 acquisitions prior to December 31, 1998
reflect the results of operations for these facilities for the period not owned
by the Company during the year ended December 31, 1998 which are reported in the
Historical Summaries of Combined Gross Revenue and Direct Operating Expenses
included elsewhere herein.
6 Facilities Acquired Subsequent to December 31, 1998 Included in this 8-K/A
The statements of operations for the 6 Acquired Facilities reflect the results
of operations for these facilities for the year ended December 31, 1998, 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 acquired 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.
(e) Pro forma earnings per share calculated as if the shares outstanding at
December 31, 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.
April 19, 1999 By:/S/ David L. Rogers
Date David L. Rogers, Secretary and
Chief Financial Officer