Exhibit 99.1
Sovran Self Storage Reports Second Quarter Results:
Revenues Increase 18%; Portfolio Expands by 26 Facilities
BUFFALO, N.Y.--(BUSINESS WIRE)--Aug. 2, 2006--Sovran Self
Storage, Inc. (NYSE:SSS), a self-storage real estate investment trust
(REIT), reported operating results for the quarter ended June 30, 2006.
Net income available to common shareholders for the second quarter
of 2006 was $8.8 million or $.50 per diluted share. Net income
available to common shareholders for the same period in 2005 was $7.6
million or $.47 per diluted share. Funds from operations for the
quarter increased 16.7% to $14.7 million or $.82 per fully diluted
common share compared to $12.6 million or $.76 per fully diluted share
for the quarter ended June 30, 2005. Strong revenue and operating
income growth contributed to the Company's performance this quarter.
During the quarter, the Company acquired twenty-six self storage
facilities for a total cost of $105 million. 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.
David Rogers, the Company's Chief Financial Officer, said, "We had
a busy quarter. We've strengthened our balance sheet, acquired some
great stores and grew occupancies and rents across the board."
OPERATIONS:
Total Company net operating income for the second quarter grew
18.7% compared with the same quarter in 2005 to $26.4 million. This
growth was the result of improved operating performance and the income
generated by 43 stores acquired since April 2005. Overall average
occupancy for the quarter was 86.6% and average rent per square foot
for the portfolio was $9.90.
Revenues at the 269 stores owned and/or managed for the entire
quarter in both years increased 5.8% over the second quarter of 2005,
the result of a 3% increase in rental rates, a 160 basis point
increase in average occupancy and a $165,000 increase in truck rental
revenues and other income. Same store operating expenses rose 3.8%
primarily as a result of increased maintenance costs and property
taxes. As a result, same store net operating income improved by 6.9%
over the second quarter of 2005.
General and administrative costs increased this quarter by
$707,000, primarily as a result of increased due diligence costs and
the expense of additional personnel hired to administer the 14
facilities acquired in 2005 and the 32 purchased thus far this year.
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 Ohio, Pennsylvania and South Carolina
experienced slower than expected growth during the quarter.
ACQUISITIONS:
During the quarter, the Company acquired twenty-six stores
totaling 1.6 million sq. ft. at a total cost of $105 million. Nineteen
of the stores are located in markets where the Company already has an
operating presence - Dallas (6), San Antonio (3), Tampa (3),
Southeastern LA (5) and Manchester, NH (2). The Company also acquired
7 stores in and near St. Louis, MO.
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 has consolidated the accounts of Locke
Sovran I, LLC in its financial statements. The accounts of Locke
Sovran II, LLC had already been included in the Company's financial
statements as it is a majority controlled joint venture.
CAPITAL TRANSACTIONS:
In April, 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 123,000 shares through its
Dividend Reinvestment Program, Direct Stock Purchase Plan and Employee
Option Plan. A total of $5.8 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 June 30, 2006.
YEAR 2006 EARNINGS GUIDANCE:
The Company expects conditions in most of its markets to remain
stable, and estimates growth in revenues on a same store basis to be
between 4.5% and 5.5%.
Increases in operating expenses have been moderate through June of
2006, but effective July 1, the Company's property and casualty
premiums increased by almost $2 million per year. This increase will
have the effect of reducing same store NOI growth by as much as 200
basis points from that of the first half of 2006.
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 $10 to $15 million will be expended in 2006
on such improvements; $4.6 million was brought on line as of June 30,
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 guidance for the remainder of 2006, the Company is
forecasting additional accretive acquisitions of $30-40 million
(expected mid to late 4th quarter), opportunistic acquisitions of
$5-10 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, issuance of common
shares in the Company's Dividend Reinvestment Program and Stock
Purchase Programs, and issuance of preferred and/or common stock.
General and administrative costs are expected to increase as the
Company adds properties and enters new markets.
At June 30, 2006, all but $40 million of the Company's debt is
either fixed rate or covered by rate swap contracts that essentially
fix the rate. 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 third quarter
of 2006 are projected at between $.83 and $.85 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 Second Quarter Earnings Release
Conference Call at 9:00 a.m. Eastern Daylight Time on Thursday, August
3, 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 317 stores
under the "Uncle Bob's Self Storage"(R) trade name in 22 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)
June 30, December 31,
(dollars in thousands) 2006 2005
- ------------------------------------ --------------------------------
Assets
Investment in storage facilities:
Land $ 199,947 $ 162,900
Building and equipment 881,941 731,080
-------------- -------------
1,081,888 893,980
Less: accumulated depreciation (142,194) (130,550)
-------------- -------------
Investment in storage facilities, net 939,694 763,430
Cash and cash equivalents 6,957 4,911
Accounts receivable 1,691 1,643
Receivable from related parties 37 75
Notes receivable from joint ventures - 2,780
Investment in joint ventures - 825
Prepaid expenses 3,763 3,075
Fair value of interest rate swap
agreements 4,505 1,411
Other assets 6,751 6,226
-------------- -------------
Total Assets $ 963,398 $ 784,376
============== =============
Liabilities
Line of credit $ 40,000 $ 90,000
Term notes 350,000 200,000
Accounts payable and accrued
liabilities 17,722 10,865
Deferred revenue 5,624 4,227
Accrued dividends 10,946 10,801
Mortgages payable 112,722 49,144
-------------- -------------
Total Liabilities 537,014 365,037
Minority interest - Operating
Partnership 8,361 11,132
Minority interest - consolidated
joint ventures 16,783 14,122
Shareholders' Equity
8.375% Series C Convertible
Cumulative Preferred Stock 26,613 26,613
Common stock 190 187
Additional paid-in capital 474,293 466,839
Unearned restricted stock - (1,838)
Dividends in excess of net income (77,090) (71,995)
Accumulated other comprehensive
income 4,409 1,454
Treasury stock at cost (27,175) (27,175)
-------------- -------------
Total Shareholders' Equity 401,240 394,085
-------------- -------------
Total Liabilities and Shareholders'
Equity $ 963,398 $ 784,376
============== =============
CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
April 1, 2006 April 1, 2005
to to
(dollars in thousands, except share data) June 30, 2006 June 30, 2005
-----------------------------
Revenues:
Rental income $ 38,960 $ 32,897
Other operating income 1,336 1,110
-------------- -------------
Total operating revenues 40,296 34,007
Expenses:
Property operations and maintenance 10,104 8,642
Real estate taxes 3,759 3,095
General and administrative 3,662 2,955
Depreciation and amortization 6,058 5,221
-------------- -------------
Total operating expenses 23,583 19,913
-------------- -------------
Income from operations 16,713 14,094
Other income (expense)
Interest expense (6,871) (4,993)
Interest income 205 121
Minority interest - Operating
Partnership (230) (270)
Minority interest - consolidated
joint ventures (462) (131)
Equity in income of joint ventures 31 57
-------------- -------------
Net Income 9,386 8,878
Preferred stock dividends (628) (1,256)
-------------- -------------
Net income available to common
shareholders $ 8,758 $ 7,622
============== =============
Earnings per common share - basic $ 0.50 $ 0.47
============== =============
Earnings per common share - diluted $ 0.50 $ 0.47
============== =============
Common shares used in basic
earnings per share calculation 17,614,604 16,189,034
Common shares used in diluted
earnings per share calculation 17,674,126 16,351,979
Dividends declared per common share $ 0.6150 $ 0.6050
============== =============
CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
January 1, 2006 January 1, 2005
to to
(dollars in thousands, except share June 30, 2006 June 30, 2005
data) -------------------------------
Revenues:
Rental income $ 74,443 $ 64,108
Other operating income 2,510 2,048
-------------- -------------
Total operating revenues 76,953 66,156
Expenses:
Property operations and maintenance 19,752 17,142
Real estate taxes 7,260 6,112
General and administrative 7,101 5,901
Depreciation and amortization 11,679 10,258
-------------- -------------
Total operating expenses 45,792 39,413
-------------- -------------
Income from operations 31,161 26,743
Other income (expense)
Interest expense (12,571) (9,665)
Interest income 356 219
Minority interest - Operating
Partnership (465) (509)
Minority interest - consolidated
joint ventures (606) (223)
Equity in income of joint ventures 106 81
-------------- -------------
Net Income 17,981 16,646
Preferred stock dividends (1,256) (2,513)
-------------- -------------
Net income available to common
shareholders $ 16,725 $ 14,133
============== =============
Earnings per common share - basic $ 0.95 $ 0.88
============== =============
Earnings per common share - diluted $ 0.95 $ 0.87
============== =============
Common shares used in basic
earnings per share calculation 17,578,879 16,113,331
Common shares used in diluted
earnings per share calculation 17,643,302 16,269,914
Dividends declared per common share $ 1.2300 $ 1.2100
============== =============
COMPUTATION OF FUNDS FROM OPERATIONS (FFO) (1) - (unaudited)
April 1, 2006 April 1, 2005
to to
(dollars in thousands, except share data) June 30, 2006 June 30, 2005
-----------------------------
Net income $ 9,386 $ 8,878
Minority interest in income 692 401
Depreciation of real estate and
amortization of intangible assets
exclusive of deferred financing fees 6,058 5,221
Depreciation and amortization from
unconsolidated joint ventures 14 119
Preferred dividends (628) (1,256)
Funds from operations allocable to
minority interest in
Operating Partnership (361) (383)
Funds from operations allocable to
minority interest in
consolidated joint ventures (462) (381)
-------------- -------------
Funds from operations available to
common shareholders 14,699 12,599
FFO per share - diluted (a) $ 0.82 $ 0.76
Common shares - diluted 17,674,126 16,351,979
Common shares if Series C Preferred
Stock is converted 920,244 1,840,488
-------------- -------------
Total shares used in FFO per share
calculation (a) 18,594,370 18,192,467
January 1, 2006 January 1, 2005
to to
(dollars in thousands, except share June 30, 2006 June 30, 2005
data) -------------------------------
Net income $ 17,981 $ 16,646
Minority interest in income 1,071 732
Depreciation of real estate and
amortization of intangible assets
exclusive of deferred financing fees 11,679 10,277
Depreciation and amortization from
unconsolidated joint ventures 134 237
Preferred dividends (1,256) (2,513)
Funds from operations allocable to
minority interest in
Operating Partnership (726) (732)
Funds from operations allocable to
minority interest in
consolidated joint ventures (861) (722)
-------------- -------------
Funds from operations available to
common shareholders 28,022 23,925
FFO per share - diluted (a) $ 1.57 $ 1.46
Common shares - diluted 17,643,302 16,269,914
Common shares if Series C Preferred
Stock is converted 920,244 1,840,488
-------------- -------------
Total shares used in FFO per share
calculation (a) 18,563,546 18,110,402
(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) The Series C Convertible Preferred Shares are convertible into
920,244 common shares on a weighted basis for the quarter ended June
2006 and 1,840,488 common shares at June 2005. These shares have been
added to the diluted shares outstanding to calculate the FFO per share
in 2006 and 2005.
QUARTERLY SAME STORE DATA (2) April 1, 2006 April 1, 2005
to to Percentage
(dollars in thousands) June 30, 2006 June 30, 2005 Change
--------------------------------------------
Revenues:
Rental income $ 35,255 $ 33,409 5.5%
Other operating income 1,221 1,056 15.6%
----------- ----------- -----
Total operating revenues 36,476 34,465 5.8%
Expenses:
Property operations,
maintenance, and real
estate taxes 12,222 11,772 3.8%
----------- ----------- ----
Operating income $ 24,254 $ 22,693 6.9%
(2) Includes the 269 stabilized stores owned and/or managed by the
Company for the entire periods presented.
YEAR TO DATE SAME STORE
DATA (3) January 1, 2006 January 1, 2005
to to Percentage
(dollars in thousands) June 30, 2006 June 30, 2005 Change
--------------------------------------------
Revenues:
Rental income $ 68,980 $ 65,036 6.1%
Other operating income 2,280 1,926 18.4%
----------- ----------- -----
Total operating revenues 71,260 66,962 6.4%
Expenses:
Property operations,
maintenance, and real
estate taxes 24,409 23,318 4.7%
----------- ----------- ----
Operating income $ 46,851 $ 43,644 7.3%
(3) 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 87.4% 85.8% 86.6% 85.5%
Occupancy at June 30 88.2% 86.8% 87.5% 86.5%
Rent per occupied square foot $9.92 $9.63 $9.90 $9.62
Investment in Storage Facilities:
- --------------------------------
The following summarizes activity in storage facilities during the six
months ended June 30, 2006:
Beginning balance $ 893,980
Property acquisitions 127,754
Consolidation of Locke
Sovran I, LLC 38,000
Additional investment in
consolidated joint
ventures 8,647
Improvements and
equipment additions:
Dri-guard / climate
control installations 1,950
Expansions 7,000
Roofing, paving, painting,
and equipment:
Stabilized stores 3,371
Recently acquired and
joint venture stores 1,243
Rental trucks -
Dispositions (57)
---------
Storage facilities at
cost at period end $1,081,888
==========
June 30, 2006 June 30, 2005
-------------------------------
Common shares outstanding
at June 30 17,797,653 16,419,848
Operating Partnership
Units outstanding at June 30 427,927 494,269
CONTACT: Sovran Self Storage, Inc.
David Rogers or Diane Piegza, 716-633-1850