Sovran Self Storage, Inc. (NYSE:SSS), a self storage real estate
investment trust (REIT), reported operating results for the quarter
ended June 30, 2016.
Net income attributable to common shareholders for the second
quarter of 2016 was $43.5 million or $1.03 per fully diluted common
share. For the same period in 2015, net income attributable to
common shareholders was $28.5 million or $0.80 per fully diluted
common share.
Highlights for the 2nd Quarter
Included:
- Increased same store revenue by 5.7%
and net operating income ("NOI")(1) by 6.8% as compared to the
second quarter of 2015.
- Grew same store average occupancy for
the quarter by 30 basis points to 92.3% compared to the same period
in 2015.
- Completed a follow-on equity offering
of 6,900,000 shares of the Company’s common stock, resulting in net
proceeds to the Company of approximately $665 million.
- Issued $600 million of 10 year notes at
an interest rate of 3.5% via an inaugural public debt
offering.
- Achieved adjusted funds from operations
(“FFO”)(2) per fully diluted common share of $1.32. This includes
approximately $0.09 of dilution resulting from the early issuance
of the above referenced equity and debt for the LifeStorage
acquisition. Absent these carry costs adjusted FFO was $1.41 per
diluted share.
- Acquired nine self storage facilities
at a cost of approximately $106 million.
- Sold eight non-core properties for net
proceeds of approximately $34 million.
- Paid a quarterly dividend of $0.95 per
share of common stock.
Subsequent to the end of the quarter, the
Company:
- Completed its previously announced
acquisition of 84 LifeStorage properties for $1.3 billion on July
15, 2016.
- Issued $200 million of 12 year
unsecured term notes at a fixed rate of 3.67% on July 21,
2016.
- Announced that in August, 2016 it will
change its name from Sovran Self Storage, Inc. to Life Storage,
Inc. and will no longer operate its stores under the Uncle Bob’s
Self Storage name, but will rebrand its existing portfolio to Life
Storage®.
Funds from operations for the quarter were $1.10 per fully
diluted common share compared to $1.22 for the same period last
year. Absent $9.0 million of acquisition related costs (including
bridge loan fees) incurred in the second quarter of 2016, and $0.8
million of acquisition costs in the second quarter of 2015,
adjusted FFO per fully diluted common share was $1.32 and $1.24 for
the quarters ended June 30, 2016 and 2015, respectively. The
quarter ended June 30, 2016 adjusted FFO includes approximately
$0.09 per share of dilution resulting from early issuance of 6.9
million shares of common stock and $600 million of long term debt
to fund the LifeStorage acquisition.
Increased rental rates were the primary driver of the Company’s
adjusted FFO growth during the quarter.
OPERATIONS:
Total revenues increased 17.9% over last year’s second quarter
while operating costs increased 19.4%, resulting in an NOI increase
of 17.3%. Overall occupancy averaged 91.4% for the period, and
rental rates averaged $13.16 per sq. ft.
Revenues for the 420 stabilized stores wholly owned by the
Company since December 31, 2014 increased 5.7% from those of the
second quarter of 2015, the result of a 30 basis point increase in
average occupancy, a 5.2% increase in rental rates and increases in
tenant insurance administrative fees.
Same store operating expenses increased 3.3% for the second
quarter of 2016 compared to the prior year period. Higher property
taxes and internet advertising expenses were offset by reductions
in utility costs and insurance expense.
Consequently, same store NOI increased 6.8% this period over the
second quarter of 2015.
General and administrative expenses increased by approximately
$0.4 million over the same period in 2015. Increases in personnel
costs associated with operating 32 more stores during the quarter
than at this time last year and higher legal fees were offset by
reduced income taxes pertaining to the Company’s taxable REIT
subsidiaries.
During the second quarter of 2016, the Company experienced same
store revenue growth in 28 of its 29 major markets in the same
store pool. Overall, the markets with the strongest revenue impact
include Atlanta, GA; all Florida markets, particularly Miami and
Tampa; Dallas and San Antonio, TX.
PROPERTIES:
The Company acquired nine stores during the quarter at a cost of
$105.7 million. These include two stores each in southern
Connecticut; downstate New York; and Buffalo, NY; also, one each in
Los Angeles, CA; Dallas, TX; and Port St. Lucie, FL. Together they
comprise a total of approximately 640,000 sq. ft. of storage
space.
The Company also sold eight of its non-core stores for net
proceeds of approximately $34 million. The stores sold were in
Lynchburg, VA (4); Greenville, MS; Kingsland, GA; Birmingham, AL;
and Dallas, TX.
At June 30, 2016, the Company was in contract to acquire four
stores for $40 million upon issuance of a certificate of occupancy,
anticipated at various dates between the third quarter 2016 and the
first quarter 2017. These properties are located in Charleston, SC;
Charlotte, NC; and Chicago, IL (2). The Charleston, SC property was
acquired for $8.4 million in July 2016. At June 30, 2016 the
Company was also under contract to acquire one stabilized store in
Denver, CO for $9.5 million. The aforementioned purchases are
subject to customary closing conditions, and there is no assurance
that these properties will be acquired as described herein.
Subsequent to the end of the quarter, on July 15, 2016, the
Company completed its acquisition of LifeStorage, LP for
approximately $1.3 billion. This transaction added 84 wholly owned
stores to the Company’s portfolio, and four third-party managed
locations.
CAPITAL TRANSACTIONS:
On April 26, 2016, the Company repaid a ten year term note
maturing on that date in the amount of $150 million. Funds were
provided by a draw on the Company’s line of credit.
On May 19, 2016, the Company agreed to issue and sell 6,000,000
shares of the Company’s common stock, par value $.01 per share,
plus up to 900,000 shares of common stock pursuant to the
underwriters’ option, at a price to the public of $100.00 per
share. The offering of 6,900,000 shares of the Company’s common
stock closed on May 25, 2016 resulting in net proceeds to the
Company of approximately $665 million.
On June 13, 2016 the Company offered for sale $600 million of
unsecured 10 year notes. The notes were issued on June 20, 2016 at
99.45% of par value and a coupon rate of 3.5%, with the Company
receiving net proceeds of approximately $591 million.
At June 30, 2016, the Company had approximately $901.9 million
of cash on hand, and $500 million available on its line of credit.
The cash on hand and the availability on the credit line were
unusually high at quarter’s end due to the Company’s common share
offering in May and its issuance of corporate debentures in June.
The funds were ultimately used for the July acquisition of
LifeStorage, LP.
In April, the Company issued approximately 22,974 shares at a
price of $107.51 through its Dividend Reinvestment Plan.
Subsequent to the end of the quarter, the Company issued $200
million of 12 year notes at an interest rate of 3.67%.
COMMON STOCK DIVIDEND:
Subsequent to quarter-end, the Company’s Board of Directors
approved a quarterly dividend of $0.95 per share or $3.80
annualized.
YEAR 2016 EARNINGS GUIDANCE:
The following assumptions covering operations have been utilized
in formulating guidance for the third quarter and full year
2016:
Same Store
Projected Increases Over
2015
3Q 2016 Full Year 2016 Revenue 5.0 – 6.0%
5.5 – 6.5% Operating Costs (excluding property taxes) 2.0 – 3.0%
2.0 – 3.0% Property Taxes
5.0 – 6.0% 6.0 –
7.0% Total Operating Expenses 3.0 – 4.0% 3.0 – 4.0% Net
Operating Income 5.5 – 6.5% 6.5 – 7.5%
The Company’s 2016 same store pool consists of the 420
stabilized stores owned since December 31, 2014. The stores
purchased in 2014 at certificate of occupancy or that were in the
early stages of lease-up are not included, regardless of their
current occupancies. The Company believes that occupancy levels
achieved during the lease-up period, using discounted rates, are
not truly indicative of a new store’s performance, and therefore do
not result in a meaningful year-over-year comparison in future
years. The Company will include such stores in its same store pool
in the second year after the stores achieve 80% sustained occupancy
using market rates and incentives.
The Houston market is expected to comprise approximately 9.4% of
the 2016 forecasted NOI of the Company’s wholly owned stores.
Forecasts for the 41 same store pool of properties in the Company’s
Houston market include revenue growth of 4.0% – 5.0%, operating
expense increases of 4.0% – 5.0% (inclusive of a 6% projected
increase in property taxes), and NOI growth of between 3.5% and
4.5%.
The Company plans to complete $25 – $30 million of expansions in
2016, and expects to incur up to $22 million in costs pertaining to
the rebranding of Uncle Bob’s Self Storage to Life Storage. It is
expected that the rebranding process will commence in August, 2016
and proceed on a market by market basis through April, 2017.
The Company has assumed an additional $20 million of accretive
acquisitions in the second half of 2016. Per share FFO guidance is
projected after adding back third party acquisition costs.
Purchases of these additional properties are expected to be funded
via draws on its line of credit which carries an interest rate of
LIBOR plus 1.10%. The Company expects acquisition costs related to
the LifeStorage purchase to be $32 - $33 million in the third
quarter of 2016 including ordinary closing costs, loan defeasance,
and employee severance costs.
At the conclusion of 2015, the Company operated six self-storage
facilities that it acquired during 2014 and 2015 upon issuance of
certificate of occupancy or in the early stages of lease-up. It
also acquired one in Phoenix, AZ and one in Miami, FL in February
2016, and one in Los Angeles, CA in March 2016. Further, it expects
to acquire four more such certificate of occupancy facilities at
various dates later in 2016 and early 2017. Upon acquisition, these
properties have insufficient rental revenue to cover operating
costs; accordingly, for the first 24 to 36 months of operation,
ownership of these facilities is dilutive to FFO per share. The
Company expects that during the second half of 2016, it will incur
such dilution to the extent of $0.03 to $0.04 per share due to the
aforementioned acquisitions.
Annual general and administrative expenses are expected to be
approximately $42 – $43 million. The increase over the prior year
is primarily due to the need for additional personnel required for
recent acquisitions.
The Company incurred dilution to FFO during the second quarter
of approximately $.09 per share as a result of issuing 6.9 million
shares of its common stock and $600 million of 10 year notes in
advance of its July purchase of LifeStorage, LP. Similarly, $.05 of
dilution is expected in the 3rd quarter due to these funds not
being applied to the acquisition until July 15th. Another $.05 -
$.06 of dilution is expected in 2016 as the properties grow to
occupancy and rental rate stabilization. Further dilution of
approximately $.02 per share is expected in the second half of 2016
as a result of the Company’s sale of eight properties in June.
Proceeds of $34 million are in escrow awaiting investment pursuant
to anticipated Section 1031 transactions.
As a result of the above assumptions, management expects
adjusted funds from operations for the full year 2016 to be
approximately $5.30 to $5.34 per share, and between $1.37 and $1.39
per share for the third quarter of 2016.
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 21E of the 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 enter new markets where it has little or no
operational experience; 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 Company’s ability to comply with debt covenants; the
future ratings on the Company’s debt instruments; 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 reliance on its call center; the Company’s cash flow
may be insufficient to meet required payments of principal,
interest and dividends; 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 Time on Thursday,
August 4, 2016. To help avoid connection delays, participants are
encouraged to pre-register using this link. Anyone unable to
pre-register may access the conference call at 877.737.7051
(domestic) or 201.689.8878 (international). Management will accept
questions from registered financial analysts after prepared
remarks; all others are encouraged to listen to the call via
webcast by accessing “news and events” under the investor relations
tab at www.unclebobs.com/company/.
The webcast will be archived for 90 days; a telephone replay
will also be available for 72 hours by calling 877.660.6853 and
entering conference ID 13640578.
ABOUT SOVRAN SELF STORAGE, INC:
Sovran Self Storage, Inc. is a self-administered and
self-managed equity REIT that is in the business of acquiring and
managing self storage facilities. The Company operates
approximately 650 self storage facilities in 29 states under the
names Uncle Bob’s Self Storage and Life Storage. For more
information, visit http://invest.unclebobs.com/.
SOVRAN SELF STORAGE, INC.
BALANCE SHEET DATA June 30, 2016 December 31,
(dollars in thousands) (unaudited) 2015
Assets Investment in
storage facilities: Land $ 626,454 $ 480,176 Building, equipment
and construction in progress
2,295,840
2,011,526 2,922,294 2,491,702 Less:
accumulated depreciation
(486,521
) (465,195 )
Investment in storage facilities, net 2,435,773 2,026,507 Cash and
cash equivalents 901,897 7,032 Accounts receivable 4,670 6,805
Receivable from joint venture 1,045 929 Investment in joint venture
67,157 62,520 Prepaid expenses 6,446 5,431 Fair value of interest
rate swap agreements - 550 Intangible asset - in-place customer
leases (net of accumulated amortization of $23,912 in 2016 and
$21,017 in 2015) 4,325 1,303 Other assets
5,140
7,745 Total Assets
$
3,426,453 $ 2,118,822
Liabilities Line of credit $ - $ 79,000 Term
notes, net 1,187,770 746,650 Accounts payable and accrued
liabilities 37,160 47,839 Deferred revenue 8,075 7,511 Fair value
of interest rate swap agreements 22,010 15,343 Mortgages payable
10,205 1,993
Total Liabilities 1,265,220 898,336 Noncontrolling
redeemable Operating Partnership Units at redemption value 20,191
18,171
Equity Common stock 464 367 Additional paid-in
capital 2,339,074 1,388,343 Accumulated deficit (167,901 ) (171,980
) Accumulated other comprehensive loss
(30,863
) (14,415 ) Total
Shareholders' Equity 2,140,774 1,202,315 Noncontrolling interest in
consolidated subsidiary
268
- Total Equity
2,141,042
1,202,315 Total Liabilities and
Equity
$ 3,426,453 $
2,118,822
CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited) April 1, 2016 April 1, 2015 to to (dollars in
thousands, except share data) June 30, 2016 June 30,
2015
Revenues Rental income $ 98,795 $ 83,487 Other
operating income 6,741 5,784 Management fee income
1,469 1,455 Total
operating revenues 107,005 90,726
Expenses Property
operations and maintenance 23,153 19,486 Real estate taxes 11,021
9,145 General and administrative 10,114 9,686 Acquisition related
costs 1,694 788 Depreciation and amortization 16,414 13,611
Amortization of in-place customer leases
1,837
973 Total operating expenses
64,233 53,689
Income from operations 42,772 37,037 Other income
(expense) Interest expense
(A) (8,244 ) (9,216 ) Interest
expense - acquisition bridge loan commitment fee (7,329 ) -
Interest income 37 2 Gain on sale of real estate 15,270 - Equity in
income of joint ventures
998
853 Net income 43,504 28,676
Noncontrolling interests in the Operating Partnership (208 ) (144 )
Noncontrolling interests in consolidated subsidiaries
160 - Net income
attributable to common shareholders $
43,456 $ 28,532
Earnings per common share attributable to common
shareholders - basic $ 1.04
$ 0.81 Earnings per
common share attributable to common shareholders - diluted
$ 1.03 $
0.80 Common shares used in basic
earnings per share calculation 41,980,389 35,377,694 Common
shares used in diluted earnings per share calculation 42,227,388
35,603,020
Dividends declared per common share
$ 0.95 $
0.75 (A) Interest expense for
the three months ending June 30 consists of the following
Interest expense $ 7,894 $ 8,920 Amortization of debt issuance
costs
350 296
Total interest expense
$ 8,244
$ 9,216 January 1,
2016 January 1, 2015 to to (dollars in thousands, except share
data) June 30, 2016 June 30, 2015
Revenues Rental income $ 190,337 $ 162,373 Other operating
income 12,888 10,941 Management fee income
2,904 2,820 Total
operating revenues 206,129 176,134
Expenses Property
operations and maintenance 46,014 40,046 Real estate taxes 21,568
18,064 General and administrative 20,578 19,092 Acquisition related
costs 4,078 1,369 Operating leases of storage facilities - 683
Depreciation and amortization 31,665 26,779 Amortization of
in-place customer leases
3,011
1,987 Total operating expenses
126,914 108,020
Income from operations 79,215 68,114 Other income
(expense) Interest expense
(A) (17,377 ) (18,377 ) Interest
expense - acquisition bridge loan commitment fee (7,329 ) -
Interest income 43 4 Gain (loss) on sale of real estate 15,270 (7 )
Equity in income of joint ventures
1,913
1,499 Net income 71,735
51,233 Noncontrolling interests in the Operating Partnership (338 )
(250 ) Noncontrolling interests in consolidated subsidiaries
399 - Net income
attributable to common shareholders $
71,796 $ 50,983
Earnings per common share attributable to common
shareholders - basic $ 1.79
$ 1.46 Earnings per
common share attributable to common shareholders - diluted
$ 1.78 $
1.45 Common shares used in basic
earnings per share calculation 40,195,603 34,853,731 Common
shares used in diluted earnings per share calculation 40,445,263
35,078,946
Dividends declared per common share
$ 1.80 $
1.50 (A) Interest expense for
the six months ending June 30 consists of the following
Interest expense $ 16,671 $ 17,785 Amortization of debt issuance
costs
706 592
Total interest expense
$ 17,377
$ 18,377 COMPUTATION OF
FUNDS FROM OPERATIONS (FFO) (2) - (unaudited)
April 1, 2016 April 1, 2015 to to
(dollars in thousands, except share data) June 30, 2016
June 30, 2015 Net income attributable to common
shareholders $ 43,456 $ 28,532 Noncontrolling interests in the
Operating Partnership 208 144 Depreciation of real estate and
amortization of intangible assets exclusive of debt issuance costs
17,855 14,308 Depreciation and amortization from unconsolidated
joint ventures 581 617 Gain on sale of real estate (15,270 ) -
Funds from operations allocable to noncontrolling interest in
Operating Partnership
(223 )
(220 ) Funds from operations
available to common shareholders
46,607
43,381 FFO per share - diluted $ 1.10 $
1.22
Adjustments to FFO Acquisition costs expensed
1,694 788 Interest expense - acquisition bridge loan commitment fee
7,329 - Funds from operations resulting from non-recurring items
allocable to noncontrolling interest in Operating Partnership
(43 ) (4
) Adjusted funds from operations available to common
shareholders
55,587
44,165 Adjusted FFO per share - diluted $ 1.32
$ 1.24 Common shares - diluted 42,227,388 35,603,020
January 1, 2016 January 1, 2015 to to (dollars in thousands,
except share data) June 30, 2016 June 30, 2015
Net income attributable to common shareholders $ 71,796 $ 50,983
Noncontrolling interests in the Operating Partnership 338 250
Depreciation of real estate and amortization of intangible assets
exclusive of debt issuance costs 33,889 28,219 Depreciation and
amortization from unconsolidated joint ventures 1,153 1,235 (Gain)
loss on sale of real estate (15,270 ) 7 Funds from operations
allocable to noncontrolling interest in Operating Partnership
(429 ) (394
) Funds from operations available to common
shareholders
91,477
80,300 FFO per share - diluted $ 2.26 $ 2.29
Adjustments to FFO Acquisition costs expensed 4,078
1,369 Interest expense - acquisition bridge loan commitment fee
7,329 - Operating leases straight line rent adjustment - 146 Funds
from operations resulting from non-recurring items allocable to
noncontrolling interest in Operating Partnership
(54 ) (7
) Adjusted funds from operations available to common
shareholders
102,830
81,808 Adjusted FFO per share - diluted $ 2.54
$ 2.33 Common shares - diluted 40,445,263 35,078,946
QUARTERLY SAME STORE DATA (3)
* 420 mature stores owned since 12/31/14 (unaudited) April 1,
2016 April 1, 2015 to to Percentage (dollars in thousands) June 30,
2016 June 30, 2015 Change Change
Revenues: Rental income $ 85,320 $ 80,845 $ 4,475 5.5 %
Tenant insurance 3,259 2,851 408 14.3 % Other operating income
1,559 1,602
(43 ) -2.7
% Total operating revenues 90,138 85,298 4,840 5.7 %
Expenses: Payroll and benefits 7,447 7,167 280 3.9 %
Real estate taxes 9,337 8,856 481 5.4 % Utilities 2,595 2,676 (81 )
-3.0 % Repairs and maintenance 3,001 2,954 47 1.6 % Office and
other operating expense 2,918 2,809 109 3.9 % Insurance 993 1,107
(114 ) -10.3 % Advertising & yellow pages 284 361 (77 ) -21.3 %
Internet marketing
1,660
1,401 259
18.5 % Total operating expenses
28,235 27,331
904 3.3 %
Net operating income (1)
$ 61,903
$ 57,967 $
3,936 6.8 %
QTD Same store move ins 43,784 47,759 (3,975 )
QTD Same store move outs 38,798 40,747 (1,949 )
OTHER COMPARABLE QUARTERLY SAME STORE DATA * (unaudited)
April 1, 2016 April 1, 2015 to to Percentage June 30, 2016
June 30, 2015 Change Change
Stores owned since 12/31/13
(391 stores) Revenues $ 82,433 $ 78,125 $ 4,308 5.5 % Expenses
25,616 24,787
829 3.3
% Net operating income
$
56,817 $ 53,338
$ 3,479
6.5 % Stores
owned since 12/31/12 (376 stores) Revenues $ 77,138 $ 73,127 $
4,011 5.5 % Expenses
24,006
23,164 842
3.6 % Net operating income
$
53,132 $ 49,963
$ 3,169
6.3 % * See exhibit A for
supplemental quarterly same store data.
YEAR TO
DATE SAME STORE DATA (3) * 420 mature stores owned since 12/31/14
(unaudited) January 1, 2016 January 1, 2015 to to Percentage
(dollars in thousands) June 30, 2016 June 30, 2015 Change
Change
Revenues: Rental income $ 167,845 $
158,321 $ 9,524 6.0 % Tenant insurance 6,401 5,569 832 14.9 % Other
operating income
2,908
2,954 (46 )
-1.6 % Total operating revenues
177,154 166,844 10,310 6.2 %
Expenses: Payroll and
benefits 14,842 14,298 544 3.8 % Real estate taxes 18,672 17,605
1,067 6.1 % Utilities 5,316 5,845 (529 ) -9.1 % Repairs and
maintenance 6,456 6,911 (455 ) -6.6 % Office and other operating
expense 5,828 5,538 290 5.2 % Insurance 2,061 2,210 (149 ) -6.7 %
Advertising & yellow pages 584 710 (126 ) -17.7 % Internet
marketing
3,380
2,900 480
16.6 % Total operating expenses
57,139 56,017
1,122 2.0 %
Net operating income (1)
$ 120,015
$ 110,827 $
9,188 8.3 %
YTD Same store move ins 83,582 89,187 (5,605 )
YTD Same store move outs 75,721 77,447 (1,726 )
OTHER DATA - unaudited Same Store (3) All Stores (4)
2016
2015
2016
2015
Weighted average quarterly occupancy 92.3 % 92.0 % 91.4 %
91.4 % Occupancy at June 30 92.7 % 92.7 % 91.8 % 92.2 %
Rent per occupied square foot $ 13.05 $ 12.40 $ 13.16 $
12.28
Investment in
Storage Facilities: (unaudited)
The following summarizes activity in storage facilities during the
six months ended June 30, 2016: Beginning balance $
2,491,702 Property acquisitions 431,460 Improvements and equipment
additions: Expansions 1,930 Roofing, paving, and equipment:
Stabilized stores 8,772 Recently acquired stores 2,922 Additions to
consolidated subsidiary 2,117 Change in construction in progress
(Total CIP $19.7 million) 12,724 Dispositions and Impairments
(29,333 ) Storage facilities at
cost at period end
$ 2,922,294
Comparison of
Selected G&A Costs (unaudited)
Quarter Ended
June 30, 2016 June 30, 2015
Management and administrative salaries and benefits 6,163
5,720 Training 214 225 Call center 601 491 Uncle Bob's Management
costs 73 105 Income taxes 11 617 Legal, accounting and professional
1,027 662 Other administrative expenses (5)
2,025 1,866
$ 10,114 $
9,686
Net rentable square
feet
June 30, 2016 Wholly owned properties 32,594,332 Joint
venture properties 5,186,901 Third party managed properties
897,433 38,678,666
June 30,
2016
June 30,
2015
Common shares outstanding 46,369,391 35,833,639 Operating
Partnership Units outstanding 196,008 178,866 (1) Net
operating income or "NOI" is a non-GAAP (generally accepted
accounting principles) financial measure that we define as total
continuing revenues less continuing property operating expenses.
NOI also can be calculated by adding back to net income: interest
expense, impairment and casualty losses, depreciation and
amortization expense, acquisition related costs, general and
administrative expense, and deducting from net income: income from
discontinued operations, interest income, gain on sale of real
estate, and equity in income of joint ventures. We believe that NOI
is a meaningful measure to investors in evaluating our operating
performance, because we utilize NOI in making decisions with
respect to capital allocations, in determining current property
values, and comparing period-to-period and market-to-market
property operating results. Additionally, NOI is widely used in the
real estate industry and the self storage industry to measure the
performance and value of real estate assets without regard to
various items included in net income that do not relate to or are
not indicative of operating performance, such as depreciation and
amortization, which can vary depending on accounting methods and
book value of assets. NOI should be considered in addition to, but
not as a substitute for, other measures of financial performance
reported in accordance with GAAP, such as total revenues, operating
income and net income. (2) 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
available to common shareholders computed in accordance with
generally accepted accounting principles (“GAAP”), excluding gains
or losses on sales of properties, plus impairment of real estate
assets, 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. (3) Includes the stores
owned and/or managed by the Company for the entire periods
presented that are consolidated in our financial statements. Does
not include unconsolidated joint ventures or other stores managed
by the Company.
(4) Does not include unconsolidated joint
venture stores or other stores managed by the Company.
(5) Other administrative expenses include office rent,
travel expense, investor relations and miscellaneous other
expenses.
Exhibit A
Sovran Self Storage, Inc. Same Store
Performance Summary by Market Three Months Ended June 30,
2016 (unaudited)
Square
Feet
Avg Qtrly Rent per
Occupied Square Foot
Avg Qtrly Occupancy for the
Three Months Ended June 30,
Revenuefor the Three Months
Ended June 30,
Expenses for the Three
Months Ended June 30,
NOI for the Three Months
Ended June 30,
Market Stores
2016 2015 2016
2015 % Change 2016
2015 % Change 2016
2015 % Change Houston-The
Woodlands-Sugar Land, TX 41 3,169 $ 13.45 92.7 % 92.4 % $ 10,390 $
9,908 4.9 % $ 3,541 $ 3,380 4.8 % $ 6,849 $ 6,528 4.9 % New
England-CT-RI-NH-MA-ME 33 2,027 16.91 91.3 % 91.5 % 8,210 7,782 5.5
% 2,398 2,333 2.8 % 5,812 5,449 6.7 % New York-Newark-Jersey City,
NY-NJ-PA 24 1,401 21.51 91.5 % 90.0 % 7,195 6,826 5.4 % 2,356 2,313
1.9 % 4,839 4,513 7.2 % Atlanta-Sandy Springs-Roswell, GA 21 1,450
12.46 92.4 % 93.2 % 4,465 4,041 10.5 % 1,165 1,124 3.6 % 3,300
2,917 13.1 % Buffalo-Upstate, NY 19 1,268 13.02 89.3 % 92.6 % 3,887
3,784 2.7 % 1,246 1,204 3.5 % 2,641 2,580 2.4 % Dallas-Fort
Worth-Arlington, TX 19 1,287 11.95 95.2 % 95.1 % 3,807 3,592 6.0 %
1,228 1,233 -0.4 % 2,579 2,359 9.3 % Austin-Round Rock, TX 17 1,351
12.35 90.2 % 89.9 % 3,952 3,887 1.7 % 1,391 1,339 3.9 % 2,561 2,548
0.5 % Miami-Fort Lauderdale-West Palm Beach, FL 15 1,071 18.36 91.3
% 91.1 % 4,712 4,407 6.9 % 1,334 1,282 4.1 % 3,378 3,125 8.1 % San
Antonio-New Braunfels, TX 15 909 12.89 92.8 % 91.6 % 2,873 2,672
7.5 % 1,077 973 10.7 % 1,796 1,699 5.7 % New Orleans-Lafayette, LA
15 919 11.60 91.3 % 92.6 % 2,575 2,580 -0.2 % 740 750 -1.3 % 1,835
1,830 0.3 % St. Louis, MO 14 881 13.28 90.7 % 93.3 % 2,794 2,639
5.9 % 971 838 15.9 % 1,823 1,801 1.2 % Tampa-St.
Petersburg-Clearwater, FL 13 815 13.99 95.8 % 94.4 % 2,904 2,673
8.6 % 825 779 5.9 % 2,079 1,894 9.8 % Virginia
Beach-Norfolk-Newport News, VA 12 908 10.23 94.0 % 88.9 % 2,302
2,224 3.5 % 756 738 2.4 % 1,546 1,486 4.0 %
Chicago-Naperville-Elgin, IL 10 777 14.02 92.8 % 90.3 % 2,659 2,473
7.5 % 933 922 1.2 % 1,726 1,551 11.3 % Phoenix-Mesa-Scottsdale, AZ
10 667 10.88 90.5 % 88.8 % 1,758 1,621 8.5 % 531 498 6.6 % 1,227
1,123 9.3 % Cleveland-Elyria, OH 9 624 11.35 89.0 % 90.0 % 1,675
1,644 1.9 % 559 518 7.9 % 1,116 1,126 -0.9 % Raleigh-Durham, NC 8
527 12.10 95.6 % 95.4 % 1,604 1,549 3.6 % 392 368 6.5 % 1,212 1,181
2.6 % Jacksonville, FL 8 546 10.71 96.3 % 95.4 % 1,514 1,376 10.0 %
453 450 0.7 % 1,061 926 14.6 % Pensacola-Ferry Pass-Brent, FL 8 602
8.13 94.5 % 84.4 % 1,264 1,171 7.9 % 440 435 1.1 % 824 736 12.0 %
Space Coast, FL 7 523 12.07 93.5 % 93.7 % 1,588 1,391 14.2 % 397
402 -1.2 % 1,191 989 20.4 % Beaumont-Port Arthur, TX 7 426 13.32
94.1 % 96.6 % 1,417 1,343 5.5 % 447 462 -3.2 % 970 881 10.1 %
Charlotte-Concord-Gastonia, NC 7 441 11.67 96.1 % 95.8 % 1,311
1,195 9.7 % 361 330 9.4 % 950 865 9.8 % Montgomery, AL 7 490 9.78
88.2 % 90.3 % 1,129 1,038 8.8 % 337 332 1.5 % 792 706 12.2 %
Jackson, MS 6 396 11.15 92.9 % 92.0 % 1,079 1,058 2.0 % 298 298 0.0
% 781 760 2.8 % Cape Coral-Fort Myers, FL 6 314 12.02 95.1 % 94.2 %
964 848 13.7 % 293 280 4.6 % 671 568 18.1 %
Orlando-Kissimmee-Sanford, FL 5 358 11.46 91.0 % 96.3 % 993 916 8.4
% 294 306 -3.9 % 699 610 14.6 % Chattanooga, TN-GA 5 353 11.29 94.1
% 90.3 % 992 878 13.0 % 320 307 4.2 % 672 571 17.7 % Columbia, SC 5
287 10.11 95.0 % 94.6 % 745 723 3.0 % 276 276 0.0 % 469 447 4.9 %
Youngstown-Warren-Boardman, OH-PA 5 336 8.75 90.3 % 91.7 % 705 702
0.4 % 244 240 1.7 % 461 462 -0.2 % Other markets 49 3,217 11.01
91.7 % 91.9 % 8,675 8,357 3.8 % 2,632 2,621 0.4 % 6,043 5,736 5.4 %
Portfolio Total 420 28,340 $
13.05 92.3 % 92.0 % $ 90,138 $ 85,298
5.7 % $ 28,235 $ 27,331 3.3 % $ 61,903 $
57,967 6.8 % Properties owned since 12/31/14
(detail shown above) 420 28,340 13.05 92.3 % 92.0 % 90,138 85,298
5.7 % 28,235 27,331 3.3 % 61,903 57,967 6.8 % Properties owned
since 12/31/13 391 26,228 12.87 92.4 % 92.1 % 82,433 78,125 5.5 %
25,616 24,787 3.3 % 56,817 53,338 6.5 % Properties owned since
12/31/12 376 25,125 12.55 92.4 % 92.2 % 77,138 73,127 5.5 % 24,006
23,164 3.6 % 53,132 49,963 6.3 %
Dollars in
thousands except for average quarterly rent per occupied square
foot. Square feet in thousands. List includes markets where
the Company has five or more stores. Exhibit
B
Sovran Self Storage, Inc.
Debt Maturity Schedule June 30, 2016 (unaudited)
CurrentInterestRate (**)
MaturityDate
Basis ofRate (dollars in thousands)
2016 2017
2018 2019 2020 Thereafter
Total Line of credit Dec-2019 Variable 1.54 %
$ - $ - $ - $ - $ - $ - $ - Term note Jun-2020 Swapped to
fixed 3.52 % - - - - 125,000 - 125,000 Term note Jun-2020 Swapped
to fixed 2.76 % - - - - 100,000 - 100,000 Term note Jun-2020
Swapped to fixed 2.52 % - - - - 100,000 - 100,000 Term note
Aug-2021 Fixed 5.54 % - - - - - 100,000 100,000 Term note Apr-2024
Fixed 4.53 % - - - - - 175,000 175,000 Term note Jul-2026 Fixed
3.50 % - - - - - 600,000 600,000 Mortgage note Apr-2023 Fixed 4.07
% 42 88 92 96 99 3,832 4,249 Mortgage note Nov-2023 Fixed 5.26 % 30
63 67 71 74 3,728 4,033 Mortgage note May-2026 Fixed 5.99 % 71 151
160 170 181 1,190 1,923
$ 143 $ 302 $ 319 $ 337 $ 325,354 $
883,750 $ 1,210,205 (**) Rate as of June 30, 2016 based on
existing debt rating. Interest rates shown do not include
amortization of debt issuance costs, bond discount, and facility
fees which are expected to be $1.9 million in 2016.
Exhibit C
Sovran Self Storage, Inc.
Certificate of Occupancy / Lease Up Performance Summary
June 30, 2016 (unaudited) (dollars in thousands)
# of Stores
Net Rentable Square Feet
Occupancy at June 30,
Revenue for the Three Months
Ended June 30,
Expenses for the Three
Months Ended June 30,
NOI for the Three Months
Ended June 30,
Market Acquired
Cost 2016 2015 2016 2015
2016 2015 2016 2015 Chicago, IL
May-2014 1 $ 5,500 52,168 88.8 % 86.4 % $ 178 $ 141 $ 91 $ 62 $ 87
$ 79 Chattanooga, TN Sep-2014 1 6,550 57,260 94.8 % 85.5 % 201 123
69 56 132 67 Chicago, IL Nov-2014 1 5,750 97,611 85.4 % 54.1 % 189
68 131 82 58 (14 ) Chicago, IL Mar-2015 1 8,690 64,780 61.6 % 17.8
% 122 19 87 57 35 (38 ) Phoenix, AZ Jun-2015 1 7,904 64,401 71.9 %
36.4 % 166 26 79 50 87 (24 ) Boston, MA Jun-2015 1 10,291 63,475
59.7 % 0.0 % 100 - 108 6 (8 ) (6 ) Phoenix, AZ Feb-2016 1 9,275
67,825 71.3 % 0.0 % 141 - 75 - 66 - Miami, FL Feb-2016 1 11,274
69,361 36.1 % 0.0 % 70 - 89 - (19 ) - Los Angeles, CA Mar-2016 1
18,600 79,835 18.7 % 0.0 % 35 - 101 - (66 ) -
9 $ 83,834 616,716 $
1,202 $ 377 $ 830 $ 313 $ 372 $ 64
Certificate of Occupancy Properties Currently Under Contract
Expected Expected Acquisition # of
Stores Expected Net Rentable Square Feet
Market Date
Cost Charleston, SC Jul-2016 1 $ 8,430
70,735 Chicago, IL Aug-2016 1 9,000 71,520 Chicago, IL Dec-2016 1
9,800 79,670 Charlotte, NC May-2017 1 12,425 71,780 4 $
39,655 293,705
View source
version on businesswire.com: http://www.businesswire.com/news/home/20160803006630/en/
Sovran Self Storage, Inc.Diane Piegza, 716-650-6115Vice
PresidentInvestor Relations and Community Affairs
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