Exhibit 99.1
Sovran Self Storage Reports First
Quarter Results: Revenues Increase 14%; Portfolio Expands by 11
Facilities
BUFFALO, N.Y.--(BUSINESS WIRE)--May 3, 2006--Sovran Self Storage,
Inc. (NYSE:SSS), a self-storage real estate investment trust (REIT),
reported operating results for the quarter ended March 31, 2006.
Net income available to common shareholders for the first quarter
of 2006 was $8.0 million or $.45 per diluted share. Net income
available to common shareholders for the same period in 2005 was $6.5
million or $.40 per diluted share. Funds from operations per share for
the quarter increased 17.6% to $13.3 million or $.75 per fully diluted
common share compared to $11.3 million or $.70 per fully diluted share
for the quarter ended March 31, 2005. Strong revenue and operating
income growth contributed to the Company's performance this quarter.
During the quarter, the Company acquired six self storage
facilities and purchased five more in April for a total cost of $36
million. In April, the Company also made further investments in Locke
Sovran I, LLC and Locke Sovran II, LLC, increasing its ownership to
over 70% in each joint venture.
Subsequent to the quarter-end, the Company issued $150 million of
10 year unsecured notes at an interest rate of 6.38%. The proceeds
were used to repay the outstanding balance on the Company's line of
credit and two short term notes.
David Rogers, the Company's Chief Financial Officer, said, "We
enjoyed a very good quarter. Many of our markets showed strong
occupancy and revenue advances, we've acquired some terrific stores,
and the new financing gives us even more opportunity to grow."
OPERATIONS:
Total Company net operating income for the first quarter grew
13.9% compared with the same quarter in 2005 to $23.5 million. This
growth was the result of improved operating performance and the income
generated by 14 stores acquired in 2005. Overall average occupancy for
the quarter was 85.3% and average rent per square foot for the
portfolio was $10.00.
Revenues at the 266 stores owned and/or managed for the entire
quarter in both years increased 6.8% over the first quarter of 2005,
the result of a 3.4% increase in rental rates, a 250 basis point
increase in average occupancy and a $190,000 increase in truck rental
revenues and other income. Same store operating expenses rose 5.3%
primarily as a result of increased maintenance costs and property
taxes. As a result, same store net operating income improved by 7.6%
over the 1st quarter of 2005.
General and administrative costs increased by $491,000, primarily
the cost of increased personnel hired to administer the 25 facilities
acquired in 2005 and thus far this year, as well as staffing for
expected additional acquisitions.
Continued strong performance was shown at the Company's Louisiana
and Florida stores, and the Atlanta and Houston markets have shown
marked improvement. Stores in Boston, Pittsburgh and South Carolina
have experienced slower than expected growth during the quarter.
ACQUISITIONS:
During the quarter, the Company acquired six stores totaling
350,000 sq. ft. at a total cost of $22.5 million. The stores are
located in markets where the Company already has an operating presence
- - four in Houston, TX, one in San Antonio, TX and one in Rochester,
NY. In April, the Company acquired five more facilities in its
existing markets of Lafayette, LA (4) and Manchester, NH. These stores
were acquired at a total cost of $13 million and have 205,000 sq. ft.
of rentable space.
Effective April 1, 2006, the Company made additional investments
of $8,475,000 in Locke Sovran I, LLC and Locke Sovran II, LLC that
increased the Company's ownership to over 70% in each of these joint
ventures. As a result of this transaction, starting with the second
quarter of 2006, the Company will consolidate the accounts of Locke
Sovran I, LLC in its financial statements. The accounts of Locke
Sovran II, LLC are already included in the Company's financial
statements as it is a majority controlled joint venture.
CAPITAL TRANSACTIONS:
During the quarter, the Company borrowed $25 million via a
short-term bank note. The proceeds were used to acquire the above
mentioned properties and to fund the ongoing expansion and enhancement
program previously announced.
Subsequent to the end of the quarter, the Company issued $150
million of ten year unsecured term notes via a private placement
arranged by M & T Bank's Debt Capital Markets Group. Interest is
payable semi-annually on the notes at a fixed rate of 6.38%. The
proceeds were used to repay the Company's outstanding line of credit
and other short term obligations and to fund second quarter
acquisitions.
During the quarter, the Company issued 69,331 shares through its
Dividend Reinvestment Program, Direct Stock Purchase Plan and Employee
Option Plan. A total of $3 million was received, and was used to fund
part of the above mentioned acquisitions.
The Company's Board of Directors authorized the repurchase of up
to two million shares of the Company's common stock. To date, the
Company has acquired approximately 1.2 million shares pursuant to the
program. The Company expects such repurchases to be effected from time
to time, in the open markets or in private transactions. The amount
and timing of shares to be purchased will be subject to market
conditions and will be based on several factors, including compliance
with lender covenants and the price of the Company's stock. No
assurance can be given as to the specific timing or amount of the
share repurchases or as to whether and to what extent the share
repurchase will be consummated. The Company did not acquire any shares
in the quarter ended March 31, 2006.
YEAR 2006 EARNINGS GUIDANCE:
The Company expects conditions in most of its markets to remain
stable, and estimates growth in net operating income on a same store
basis to be between 4.5% and 5%.
As previously announced, the Company has implemented a program
that will add 450,000 to 600,000 square feet of rentable space at
existing stores and convert up to an additional 250,000 to 300,000
square feet to premium (climate and humidity controlled) spaces over
the next two years. The projected cost of these revenue enhancing
improvements is estimated at between $32 and $40 million. In addition,
the Company expects to accelerate refurbishments and renovations at
many of its stores to improve curb appeal and office amenities. It is
expected that as much as $15 million will be expended in 2006 on such
improvements; $4.3 million was brought on line as of March 31, 2006.
As opportunities arise, the Company may acquire self-storage
facilities with high growth potential for its own portfolio, and may
sell certain facilities depending on market conditions. For purposes
of issuing 2006 guidance, the Company is forecasting accretive
acquisitions of $100 million, opportunistic acquisitions of $20
million and no sales of existing facilities.
Funding of the acquisitions and the above mentioned revenue
enhancing and refurbishing improvements will be provided primarily
from borrowings on the Company's line of credit, term note borrowings,
issuance of common shares in the Company's Dividend Reinvestment
Program and Stock Purchase Programs, and issuance of preferred stock.
General and administrative costs are expected to increase as the
Company adds properties and enters new markets.
At March 31, 2006, all but $85 million of the Company's debt is
either fixed rate or covered by rate swap contracts that essentially
fix the rate. The Company's term note borrowing of $150 million in
April repaid all of the variable rate debt, and subsequent borrowings
that may occur will be pursuant to the Company's Line of Credit
agreement at a floating rate of LIBOR plus 0.9%.
Management expects funds from operations for 2006 to be between
$3.20 and $3.25 per share. Funds from operations for the second
quarter of 2006 are projected at between $.79 and $.81 per share.
FORWARD LOOKING STATEMENTS:
When used within this news release, the words "intends,"
"believes," "expects," "anticipates," and similar expressions are
intended to identify "forward looking statements" within the meaning
of that term in Section 27A of the Securities Act of 1933, and in
Section 21F of Securities Exchange Act of 1934. Such forward-looking
statements involve known and unknown risks, uncertainties and other
factors, which may cause the actual results, performance or
achievements of the Company to be materially different from those
expressed or implied by such forward looking statements. Such factors
include, but are not limited to, the effect of competition from new
self storage facilities, which could cause rents and occupancy rates
to decline; the Company's ability to evaluate, finance and integrate
acquired businesses into the Company's existing business and
operations; the Company's ability to form joint ventures and sell
existing properties to those joint ventures; the Company's existing
indebtedness may mature in an unfavorable credit environment,
preventing refinancing or forcing refinancing of the indebtedness on
terms that are not as favorable as the existing terms; interest rates
may fluctuate, impacting costs associated with the Company's
outstanding floating rate debt; the regional concentration of the
Company's business may subject it to economic downturns in the states
of Florida and Texas; the Company's ability to effectively compete in
the industries in which it does business; the Company's ability to
successfully extend its truck leasing program and Dri-guard product
roll-out; the Company's reliance on its call center; the Company's
cash flow may be insufficient to meet required payments of principal
and interest; and tax law changes which may change the taxability of
future income.
CONFERENCE CALL:
Sovran Self Storage will hold its First Quarter Earnings Release
Conference Call at 9:00 a.m. Eastern Daylight Time on Thursday, May 4,
2006. Anyone wishing to listen to the call may access the webcast via
Sovran's homepage www.sovranss.com. The call will be archived for a
period of 90 days after initial airing.
Sovran Self Storage, Inc. is a self-administered and self-managed
equity REIT whose business is acquiring, developing and managing
self-storage facilities. The Company owns and/or operates 296 stores
under the "Uncle Bob's Self Storage"(R) trade name in 21 states. For
more information, please contact David Rogers, CFO or Diane Piegza, VP
Corporate Communications at (716) 633-1850 or visit the Company's Web
site.
SOVRAN SELF STORAGE, INC.
BALANCE SHEET DATA
(unaudited)
March 31, December 31,
(dollars in thousands) 2006 2005
- ---------------------------------------------- --------- -----------
Assets
Investment in storage facilities:
Land $ 167,934 $ 162,900
Building and equipment 754,132 731,080
--------- ----------
922,066 893,980
Less: accumulated depreciation (136,153) (130,550)
--------- ----------
Investment in storage facilities, net 785,913 763,430
Cash and cash equivalents 6,326 4,911
Accounts receivable 1,402 1,643
Receivable from related parties 75 75
Notes receivable from joint ventures 2,763 2,780
Investment in joint ventures 777 825
Prepaid expenses 3,416 3,075
Fair value of interest rate swap agreements 3,500 1,411
Other assets 6,279 6,226
--------- ----------
Total Assets $ 810,451 $ 784,376
========= ==========
Liabilities
Line of credit $ 90,000 $ 90,000
Term notes 225,000 200,000
Accounts payable and accrued liabilities 9,789 10,865
Deferred revenue 4,583 4,227
Accrued dividends 10,870 10,801
Mortgages payable 48,891 49,144
--------- ----------
Total Liabilities 389,133 365,037
Minority interest - Operating Partnership 11,001 11,132
Minority interest - Locke Sovran II, LLC 13,921 14,122
Shareholders' Equity
8.375% Series C Convertible Cumulative
Preferred Stock 26,613 26,613
Common stock 188 187
Additional paid-in capital 468,185 466,839
Unearned restricted stock - (1,838)
Dividends in excess of net income (74,903) (71,995)
Accumulated other comprehensive income 3,488 1,454
Treasury stock at cost (27,175) (27,175)
--------- ----------
Total Shareholders' Equity 396,396 394,085
--------- ----------
Total Liabilities and Shareholders' Equity $ 810,451 $ 784,376
========= ==========
CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
January 1, 2006 January 1, 2005
(dollars in thousands, to to
except share data) March 31, 2006 March 31, 2005
--------------------------------
Revenues:
Rental income $ 35,483 $ 31,211
Other operating income 1,174 938
------------ ------------
Total operating revenues 36,657 32,149
Expenses:
Property operations and maintenance 9,648 8,500
Real estate taxes 3,501 3,017
General and administrative 3,438 2,947
Depreciation and amortization 5,622 5,037
------------ ------------
Total operating expenses 22,209 19,501
------------ ------------
Income from operations 14,448 12,648
Other income (expense)
Interest expense (5,700) (4,672)
Interest income 150 98
Minority interest - Operating
Partnership (235) (239)
Minority interest - Locke Sovran II, LLC (143) (92)
Equity in income of joint ventures 75 25
------------ ------------
Net Income 8,595 7,768
Preferred stock dividends (628) (1,256)
------------ ------------
Net income available to common
shareholders $ 7,967 $ 6,512
============ ============
Earnings per common share - basic $ 0.45 $ 0.41
============ ============
Earnings per common share - diluted $ 0.45 $ 0.40
============ ============
Common shares used in basic
earnings per share calculation 17,543,154 16,037,627
Common shares used in diluted
earnings per share calculation 17,612,478 16,187,848
Dividends declared per common share $ 0.6150 $ 0.6050
============ ============
COMPUTATION OF FUNDS FROM OPERATIONS (FFO) (1) - (unaudited)
January 1, 2006 January 1, 2005
(dollars in thousands, except to to
share data) March 31, 2006 March 31, 2005
--------------------------------
Net income $ 8,595 $ 7,768
Minority interest in income 378 331
Depreciation of real estate and
amortization of intangible assets
exclusive of deferred financing fees 5,622 5,056
Depreciation and amortization from
unconsolidated joint ventures 121 118
Preferred dividends (628) (1,256)
Funds from operations allocable to
minority interest in Operating
Partnership (365) (349)
Funds from operations allocable to
minority interest in Locke
Sovran II, LLC (399) (341)
------------ ------------
Funds from operations available to
common shareholders 13,324 11,327
FFO per share - diluted (a) $ 0.75 $ 0.70
Common shares - diluted 17,612,478 16,187,848
Common shares if Series C Preferred
Stock is converted 920,244 (a)
------------ -------------
Total shares used in FFO per share
calculation (a) 18,532,722 16,187,848
(1) We believe that Funds from Operations ("FFO") provides relevant
and meaningful information about our operating performance that is
necessary, along with net earnings and cash flows, for an
understanding of our operating results. FFO adds back historical cost
depreciation, which assumes the value of real estate assets diminishes
predictably in the future. In fact, real estate asset values increase
or decrease with market conditions. Consequently, we believe FFO is a
useful supplemental measure in evaluating our operating performance by
disregarding (or adding back) historical cost depreciation.
Funds from operations is defined by the National Association of Real
Estate Investment Trusts, Inc. ("NAREIT") as net income computed in
accordance with generally accepted accounting principles ("GAAP"),
excluding gains or losses on sales of properties, plus depreciation
and amortization and after adjustments to record unconsolidated
partnerships and joint ventures on the same basis. We believe that to
further understand our performance, FFO should be compared with our
reported net income and cash flows in accordance with GAAP, as
presented in our consolidated financial statements.
Our computation of FFO may not be comparable to FFO reported by other
REITs or real estate companies that do not define the term in
accordance with the current NAREIT definition or that interpret the
current NAREIT definition differently. FFO does not represent cash
generated from operating activities determined in accordance with
GAAP, and should not be considered as an alternative to net income
(determined in accordance with GAAP) as an indication of our
performance, as an alternative to net cash flows from operating
activities (determined in accordance with GAAP) as a measure of our
liquidity, or as an indicator of our ability to make cash
distributions.
(a) Preferred stock dividends were excluded from the 2005 FFO per
share calculation because of the dilutive effect of the Series C
Convertible Preferred Stock under the "if converted" method. The
Series C Convertible Preferred Shares are convertible into 920,244
common shares on a weighted basis for the quarter ended March 2006.
These shares have been added to the diluted shares outstanding to
calculate the FFO per share in 2006. The "if converted" method was not
used in the March 31, 2005 FFO per share calculation or the 2005 and
2006 earnings per share calculation because it would have had an
antidilutive effect.
QUARTERLY SAME STORE January 1, 2006 January 1, 2005
DATA (2) to to Percentage
(dollars in thousands) March 31, 2006 March 31, 2005 Change
----------------------------------------------
Revenues:
Rental income $ 34,123 $ 32,069 6.4%
Other operating income 1,071 882 21.4%
--------------- -------------- ----------
Total operating
revenues 35,194 32,951 6.8%
Expenses:
Property operations,
maintenance, and real
estate taxes 12,339 11,713 5.3%
--------------- -------------- ----------
Operating income $ 22,855 $ 21,238 7.6%
(2) Includes the 266 stabilized stores owned and/or managed by the
Company for the entire periods presented.
OTHER DATA
Same Store (2) All Stores
------------------ -----------------
2006 2005 2006 2005
------- ------ -------- -------
Weighted average quarterly
occupancy 86.5% 84.0% 85.3% 83.6%
Occupancy at March 31 86.6% 84.3% 85.4% 83.9%
Rent per occupied square foot $ 9.86 $ 9.54 $ 10.00 $ 9.53
Investment in Storage Facilities:
- ------------------------------------------------------------
The following summarizes activity in storage facilities during the
three months ended March 31, 2006:
Beginning balance $893,980
Property acquisitions 22,451
Improvements and equipment additions:
Dri-guard / climate control installations 544
Expansions 2,845
Roofing, paving, painting, and equipment:
Stabilized stores 1,837
Recently acquired and Locke Sovran II stores 440
Rental trucks -
Dispositions (31)
---------
Storage facilities at cost at period end $922,066
=========
March 31, 2006 March 31, 2005
------------------------------
Common shares outstanding at March 31 17,674,724 16,084,820
Operating Partnership Units outstanding
at March 31 477,802 494,269
CONTACT: Sovran Self Storage, Inc.
David Rogers or Diane Piegza
716/633-1850