Exhibit 99.1
Sovran Self Storage Reports Third Quarter Results: Revenues Increase 24%;
Acquires 9 Facilities
BUFFALO, N.Y.--(BUSINESS WIRE)--Nov. 1, 2006--Sovran Self Storage, Inc.
(NYSE:SSS), a self-storage real estate investment trust (REIT), reported
operating results for the quarter ended September 30, 2006.
Net income available to common shareholders for the third quarter of 2006
was $8.8 million or $.49 per diluted share. Net income available to common
shareholders for the same period in 2005 was $8.6 million or $.52 per diluted
share. Funds from operations for the quarter increased 11.7% to $15.4 million or
$.85 per fully diluted common share compared to $13.8 million or $.80 per fully
diluted share for the quarter ended September 30, 2005. Strong revenue growth
more than offset increased insurance and utility costs to contribute to the
Company's performance this quarter.
During the quarter, the Company acquired nine self storage facilities for a
total cost of $33.8 million.
David Rogers, the Company's Chief Financial Officer, said, "Business is
good. Our established stores are performing well, and the 41 we've acquired this
year are off to a great start."
OPERATIONS:
Total Company net operating income for the third quarter grew 21.1%
compared with the same quarter in 2005 to $28.5 million. This growth was the
result of improved operating performance and the income generated by 47 stores
acquired since July 2005. Overall average occupancy for the quarter was 85.9%
and average rent per square foot for the portfolio was $10.25.
Revenues at the 271 stores owned and/or managed for the entire quarter in
both years increased 5.8% over the third quarter of 2005, the result of a 4.8%
increase in rental rates, and a $145,000 increase in truck rental revenues and
other income. Same store operating expenses rose 8.9% primarily as a result of
increased insurance costs, utilities and property taxes. As a result, same store
net operating income improved by 4.2% over the third quarter of 2005.
General and administrative costs increased this quarter by $485,000, the
result of increased due diligence costs and the expense of additional personnel
required to administer the 14 facilities acquired in 2005 and the 41 purchased
thus far this year.
Continued strong performance was shown at the Company's Louisiana, Atlanta,
GA and Houston, TX stores. Stores in Ohio, Pennsylvania and Massachusetts
experienced slower than expected growth during the quarter.
ACQUISITIONS:
During the quarter, the Company acquired nine stores totaling 580,000 sq.
ft. at a total cost of $33.8 million. Five of the stores are located in markets
where the Company already has an operating presence - Montgomery, AL (3),
Chattanooga, TN and Southeastern LA. The Company also acquired 4 stores in
Columbus, GA.
CAPITAL TRANSACTIONS:
During the quarter, the Company borrowed $26 million pursuant to its line
of credit to fund the above described transactions.
It also issued 293,000 shares through its Dividend Reinvestment Program,
Direct Stock Purchase Plan and Employee Option Plan. A total of $14.4 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
September 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%.
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. Other operating costs have remained relatively stable.
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; $8.8 million was brought on line as of September 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, the
Company is not forecasting any accretion from additional acquisitions for the
remainder of 2006 and no sales of existing facilities.
Funding of any 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 September 30, 2006, all but $66 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 $3.22 and
$3.24 per share. Funds from operations for the fourth quarter of 2006 are
projected at between $.80 and $.82 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 Third Quarter Earnings Release Conference
Call at 9:00 a.m. Eastern Standard Time on Thursday, November 2, 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 326 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)
September 30, December 31,
(dollars in thousands) 2006 2005
- ------------------------------------------- ------------- ------------
Assets
Investment in storage facilities:
Land $ 206,169 $ 162,900
Building and equipment 917,701 731,080
------------- ------------
1,123,870 893,980
Less: accumulated depreciation (148,866) (130,550)
------------- ------------
Investment in storage facilities, net 975,004 763,430
Cash and cash equivalents 10,851 4,911
Accounts receivable 1,934 1,643
Receivable from related parties 37 75
Notes receivable from joint ventures - 2,780
Investment in joint ventures - 825
Prepaid expenses 7,533 3,075
Fair value of interest rate swap
agreements 2,169 1,411
Other assets 6,195 6,226
------------- ------------
Total Assets $ 1,003,723 $ 784,376
============= ============
Liabilities
Line of credit $ 66,000 $ 90,000
Term notes 350,000 200,000
Accounts payable and accrued liabilities 22,275 10,865
Deferred revenue 5,506 4,227
Accrued dividends 11,216 10,801
Mortgages payable 112,387 49,144
------------- ------------
Total Liabilities 567,384 365,037
Minority interest - Operating Partnership 8,321 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 193 187
Additional paid-in capital 488,993 466,839
Unearned restricted stock - (1,838)
Dividends in excess of net income (79,469) (71,995)
Accumulated other comprehensive income 2,080 1,454
Treasury stock at cost (27,175) (27,175)
------------- ------------
Total Shareholders' Equity 411,235 394,085
------------- ------------
Total Liabilities and Shareholders'
Equity $ 1,003,723 $ 784,376
============= ============
CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
July 1, 2006 July 1, 2005
(dollars in thousands, except to to
share data) September 30, 2006 September 30, 2005
------------------ ------------------
Revenues:
Rental income $ 43,354 $ 34,811
Other operating income 1,430 1,192
------------------ ------------------
Total operating revenues 44,784 36,003
Expenses:
Property operations and
maintenance 12,163 9,278
Real estate taxes 4,112 3,182
General and administrative 3,430 2,945
Depreciation and amortization 6,683 5,425
------------------ ------------------
Total operating expenses 26,388 20,830
------------------ ------------------
Income from operations 18,396 15,173
Other income (expense)
Interest expense (8,421) (5,291)
Interest income 135 109
Minority interest - Operating
Partnership (225) (285)
Minority interest -
consolidated joint ventures (462) (158)
Equity in income of joint
ventures 42 63
------------------ ------------------
Net Income 9,465 9,611
Preferred stock dividends (628) (983)
------------------ ------------------
Net income available to common
shareholders $ 8,837 $ 8,628
================== ==================
Earnings per common share -
basic $ 0.49 $ 0.52
================== ==================
Earnings per common share -
diluted $ 0.49 $ 0.52
================== ==================
Common shares used in basic
earnings per share calculation 17,919,342 16,542,635
Common shares used in diluted
earnings per share calculation 17,989,000 16,658,709
Dividends declared per common
share $ 0.6200 $ 0.6150
================== ==================
CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
January 1, 2006 January 1, 2005
(dollars in thousands, except to to
share data) September 30, 2006 September 30, 2005
------------------ ------------------
Revenues:
Rental income $ 117,797 $ 98,918
Other operating income 3,940 3,240
------------------ ------------------
Total operating revenues 121,737 102,158
Expenses:
Property operations and
maintenance 31,915 26,421
Real estate taxes 11,372 9,294
General and administrative 10,530 8,846
Depreciation and amortization 18,362 15,683
------------------ ------------------
Total operating expenses 72,179 60,244
------------------ ------------------
Income from operations 49,558 41,914
Other income (expense)
Interest expense (20,992) (14,956)
Interest income 490 329
Minority interest - Operating
Partnership (690) (794)
Minority interest -
consolidated joint ventures (1,068) (381)
Equity in income of joint
ventures 148 145
------------------ ------------------
Net Income 27,446 26,257
Preferred stock dividends (1,884) (3,495)
------------------ ------------------
Net income available to common
shareholders $ 25,562 $ 22,762
================== ==================
Earnings per common share -
basic $ 1.44 $ 1.40
================== ==================
Earnings per common share -
diluted $ 1.44 $ 1.39
================== ==================
Common shares used in basic
earnings per share calculation 17,692,367 16,256,432
Common shares used in diluted
earnings per share calculation 17,758,535 16,399,512
Dividends declared per common
share $ 1.8500 $ 1.8250
================== ==================
COMPUTATION OF FUNDS FROM OPERATIONS (FFO) (1) - (unaudited)
July 1, 2006 July 1, 2005
to to
September 30, September 30,
(dollars in thousands, except share data) 2006 2005
-------------- -------------
Net income $ 9,465 $ 9,611
Minority interest in income 687 443
Depreciation of real estate and
amortization of intangible assets
exclusive of deferred financing fees 6,683 5,405
Depreciation and amortization from
unconsolidated joint ventures 14 121
Preferred dividends (628) (983)
Funds from operations allocable to
minority interest in Operating
Partnership (366) (408)
Funds from operations allocable to
minority interest in consolidated joint
ventures (462) (413)
-------------- -------------
Funds from operations available to common
shareholders 15,393 13,776
FFO per share - diluted (a) $ 0.85 $ 0.80
Common shares - diluted 17,989,000 16,658,709
Common shares if Series C Preferred Stock
is converted 920,244 1,730,979
-------------- -------------
Total shares used in FFO per share
calculation (a) 18,909,244 18,389,688
January 1, January 1,
2006 2005
to to
September 30, September 30,
(dollars in thousands, except share data) 2006 2005
-------------- -------------
Net income $ 27,446 $ 26,257
Minority interest in income 1,758 1,175
Depreciation of real estate and
amortization of intangible assets
exclusive of deferred financing fees 18,362 15,682
Depreciation and amortization from
unconsolidated joint ventures 148 358
Preferred dividends (1,884) (3,495)
Funds from operations allocable to
minority interest in Operating
Partnership (1,091) (1,140)
Funds from operations allocable to
minority interest in consolidated joint
ventures (1,323) (1,135)
-------------- -------------
Funds from operations available to common
shareholders 43,416 37,702
FFO per share - diluted (a) $ 2.42 $ 2.26
Common shares - diluted 17,758,535 16,399,512
Common shares if Series C Preferred Stock
is converted 920,244 1,803,584
-------------- -------------
Total shares used in FFO per share
calculation (a) 18,678,779 18,203,096
(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
September 2006 and 1,730,979 common shares at September 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) July 1, 2006 July 1, 2005
to to
September September Percentage
(dollars in thousands) 30, 2006 30, 2005 Change
------------ ------------------------
Revenues:
Rental income $ 36,882 $ 34,940 5.6%
Other operating income 1,272 1,127 12.9%
------------ ------------ -----------
Total operating revenues 38,154 36,067 5.8%
Expenses:
Property operations,
maintenance, and real estate
taxes 13,333 12,244 8.9%
------------ ------------ -----------
Operating income $ 24,821 $ 23,823 4.2%
(2) Includes the 271 stabilized stores owned and/or managed by the
Company for the entire periods presented.
YEAR TO DATE SAME STORE DATA (3)
January 1, January 1,
2006 2005
to to
September September Percentage
(dollars in thousands) 30, 2006 30, 2005 Change
------------ ------------ -----------
Revenues:
Rental income $ 105,070 $ 99,221 5.9%
Other operating income 3,527 3,038 16.1%
------------ ------------ -----------
Total operating revenues 108,597 102,259 6.2%
Expenses:
Property operations,
maintenance, and real estate
taxes 37,413 35,281 6.0%
------------ ------------ -----------
Operating income $ 71,184 $ 66,978 6.3%
(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 87.8% 87.7% 86.7% 86.9%
Occupancy at September 30 86.8% 87.7% 85.9% 87.1%
Rent per occupied square foot $10.22 $9.75 $10.25 $9.81
Investment in Storage Facilities:
- ----------------------------------------------------------------------
The following summarizes activity in storage facilities during the
nine months ended September 30, 2006:
Beginning balance $ 893,980
Property acquisitions 161,514
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 2,400
Expansions 9,924
Roofing, paving, painting, and equipment:
Stabilized stores 6,801
Recently acquired and joint venture stores 1,989
Rental trucks 692
Dispositions (77)
-----------
Storage facilities at cost at period end $1,123,870
===========
September 30, September 30,
2006 2005
------------- -------------
Common shares outstanding at September 30 18,090,066 16,981,442
Operating Partnership Units outstanding
at September 30 427,927 486,352
CONTACT: Sovran Self Storage, Inc
David Rogers or Diane Piegza, 716-633-1850