Maryland
|
16-1194043
|
(State
or other jurisdiction of
incorporation
or organization)
|
(I.R.S.
Employer
Identification
No.)
|
Part
I.
Item
1.
|
Financial
Information
Financial
Statements
|
(dollars in thousands,
except share data)
|
March
31,
2009
(unaudited)
|
December
31,
2008
|
Assets
|
||
Investment
in storage facilities:
|
||
Land
|
$ 240,525
|
$ 240,525
|
Building,
equipment, and construction in progress
|
1,155,454
|
1,148,676
|
1,395,979
|
1,389,201
|
|
Less:
accumulated depreciation
|
(225,009)
|
(216,644)
|
Investment
in storage facilities, net
|
1,170,970
|
1,172,557
|
Cash
and cash equivalents
|
7,416
|
4,486
|
Accounts
receivable
|
1,842
|
2,971
|
Receivable
from related parties
|
-
|
14
|
Receivable
from unconsolidated joint venture
|
183
|
336
|
Investment
in unconsolidated joint ventures
|
20,010
|
20,111
|
Prepaid
expenses
|
3,626
|
4,691
|
Other
assets
|
6,987
|
7,460
|
Total
Assets
|
$ 1,211,034
======== |
$ 1,212,626
======== |
Liabilities
|
||
Line
of credit
|
$ 23,000
|
$ 14,000
|
Term
notes
|
500,000
|
500,000
|
Accounts
payable and accrued liabilities
|
18,532
|
23,979
|
Deferred
revenue
|
5,747
|
5,659
|
Fair
value of interest rate swap agreements
|
25,493
|
25,490
|
Accrued
dividends
|
14,136
|
14,090
|
Mortgages
payable
|
108,777
|
109,261
|
Total
Liabilities
|
695,685
|
692,479
|
Noncontrolling
redeemable Operating Partnership Units
|
9,142
|
15,118
|
Equity
|
||
Common
stock $.01 par value, 100,000,000 shares authorized,
22,086,901
shares
outstanding (22,016,348 at December 31, 2008)
|
233
|
232
|
Additional
paid-in capital
|
668,402
|
666,633
|
Accumulated
deficit
|
(123,232)
|
(122,581)
|
Accumulated
other comprehensive loss
|
(25,103)
|
(25,162)
|
Treasury
stock at cost, 1,171,886 shares
|
(27,175)
|
(27,175)
|
Total
Shareholders' Equity
|
493,125
|
491,947
|
Noncontrolling
interest - consolidated joint venture
|
13,082
|
13,082
|
Total
Equity
|
506,207
|
505,029
|
Total
Liabilities and Equity
|
$ 1,211,034
========= |
$ 1,212,626
========= |
See
notes to financial statements.
|
(dollars in thousands,
except per share data)
|
January
1, 2009
to
March 31,
2009
|
January
1, 2008
to
March 31,
2008
|
||
Revenues
|
||||
Rental
income
|
$ 47,660
|
$ 48,057
|
||
Other
operating income
|
1,886
|
1,562
|
||
Total
operating revenues
|
49,546
|
49,619
|
||
Expenses
|
||||
Property
operations and maintenance
|
13,438
|
13,795
|
||
Real
estate taxes
|
5,144
|
4,740
|
||
General
and administrative
|
4,387
|
4,125
|
||
Depreciation
and amortization
|
8,541
|
8,601
|
||
Total
operating expenses
|
31,510
|
31,261
|
||
Income
from operations
|
18,036
|
18,358
|
||
Other
income (expenses)
|
||||
Interest
expense
|
(9,979)
|
(8,955)
|
||
Interest
income
|
33
|
92
|
||
Equity
in income of joint ventures
|
30
|
12
|
||
Income
from continuing operations
|
8,120
|
9,507
|
||
Income
from discontinued operations
|
-
|
82
|
||
Consolidated
net income
|
8,120
|
9,589
|
||
Less:
net income attributable to noncontrolling interests
|
(485)
|
(636)
|
||
Net
income attributable to controlling interests
|
$ 7,635
=======
|
$ 8,953
=======
|
||
Earnings
per common share attributable to
controlling
interests – basic
|
||||
Continuing
operations
|
$ 0.35
|
$ 0.41
|
||
Discontinued
operations
|
0.00
|
0.00
|
||
Earnings
per common share – basic
|
$ 0.35
=======
|
$ 0.41
=======
|
||
Earnings
per common share attributable to
controlling
interests – diluted
|
||||
Continuing
operations
|
$ 0.35
|
$ 0.41
|
||
Discontinued
operations
|
0.00
|
0.00
|
||
Earnings
per common share – diluted
|
$ 0.35
=======
|
$ 0.41
=======
|
||
Common
shares used in basic earnings per share calculation
|
21,969,065
|
21,647,366
|
||
Common
shares used in diluted earnings per share calculation
|
21,972,360
|
21,664,445
|
||
Dividends
declared per common share
|
$ 0.64
=======
|
$ 0.63
=======
|
(dollars in
thousands)
|
January
1, 2009
to
March 31,
2009
|
January
1, 2008
to
March 31,
2008
|
||
Operating
Activities
|
||||
Net
income
|
$ 8,120
|
$ 9,589
|
||
Adjustments
to reconcile net income attributable to controlling interests
to
net
cash provided by operating activities:
|
||||
Depreciation
and amortization
|
8,856
|
8,920
|
||
Equity
in income of joint ventures
|
(30)
|
(12)
|
||
Distributions
from unconsolidated joint venture
|
205
|
-
|
||
Non-vested
stock earned
|
365
|
361
|
||
Stock
option expense
|
71
|
47
|
||
Changes
in assets and liabilities:
|
||||
Accounts
receivable
|
1,129
|
382
|
||
Prepaid
expenses
|
1,078
|
(1,910)
|
||
Accounts
payable and other liabilities
|
(5,383)
|
(4,006)
|
||
Deferred
revenue
|
88
|
311
|
||
Net
cash provided by operating activities
|
14,499
|
13,682
|
||
Investing
Activities
|
||||
Acquisition
of storage facilities
|
-
|
(14,037)
|
||
Improvements,
equipment additions, and construction in progress
|
(6,810)
|
(9,453)
|
||
Investment
in unconsolidated joint venture
|
(75)
|
-
|
||
Reimbursement
of advances to joint ventures
|
153
|
-
|
||
Property
deposits
|
-
|
(1,519)
|
||
Receipts
from related parties
|
14
|
13
|
||
Net
cash used in investing activities
|
(6,718)
|
(24,996)
|
||
Financing
Activities
|
||||
Net
proceeds from sale of common stock
|
1,334
|
3,384
|
||
Proceeds
from line of credit
|
9,000
|
-
|
||
Proceeds
from term note
|
-
|
26,000
|
||
Financing
costs
|
-
|
(39)
|
||
Dividends
paid-common stock
|
(14,093)
|
(13,668)
|
||
Distributions
to noncontrolling interest holders
|
(608)
|
(728)
|
||
Redemption
of operating partnership units
|
-
|
(9)
|
||
Mortgage
principal and capital lease payments
|
(484)
|
(403)
|
||
Net
cash (used in) provided by financing activities
|
(4,851)
|
14,537
|
||
Net
increase in cash
|
2,930
|
3,223
|
||
Cash
at beginning of period
|
4,486
|
4,010
|
||
Cash
at end of period
|
$ 7,416
=======
|
$ 7,233
=======
|
||
Supplemental
cash flow information
Cash
paid for interest
|
$ 8,786
|
$ 8,184
|
||
Fair
value of net liabilities assumed on the acquisition of
storage
facilities
*
|
-
|
68
|
||
* See
Note 4 for fair value of land, building, and equipment
acquired
during
the period
|
January
1, 2009
|
January
1, 2008
|
|
to
|
to
|
|
(dollars
in thousands)
|
March 31,
2009
|
March 31,
2008
|
Consolidated
net income
|
$ 8,120
|
$ 9,589
|
Other
comprehensive income:
|
||
Change
in fair value of derivatives
|
59
|
(2,853)
|
Total
other comprehensive income
|
8,179
|
6,736
|
Less:
comprehensive income attributable to noncontrolling
interest
|
(486)
|
(581)
|
Comprehensive
income attributable to controlling interest
|
$ 7,693
====== |
$ 6,155
======= |
1.
|
BASIS
OF PRESENTATION
|
2.
|
ORGANIZATION
|
(dollars
in thousands)
|
Parent
|
Noncontrolling
Interests |
Total
|
Balance
at December 31, 2008
|
$ 491,947
|
$ 13,082
|
$ 505,029
|
Net
income attributable to the parent
|
7,635
|
-
|
7,635
|
Net
income attributable to noncontrolling interest holders
|
-
|
340
|
340
|
Change
in fair value of derivatives
|
59
|
-
|
59
|
Dividends
|
(14,136)
|
-
|
(14,136)
|
Distributions
to noncontrolling interest holders
|
-
|
(340)
|
(340)
|
Adjustment
of noncontrolling redeemable Operating
Partnership
units to carrying value
|
5,853
|
-
|
5,853
|
Net
proceeds from issuance of stock through Dividend
Reinvestment
and Stock Purchase Plan
|
1,293
|
-
|
1,293
|
Other
|
474
|
-
|
474
|
Balance
at March 31, 2009
|
$ 493,125
|
$ 13,082
|
$ 506,207
|
3.
|
STOCK
BASED COMPENSATION
|
4.
|
INVESTMENT
IN STORAGE FACILITIES
|
Cost:
|
|
Beginning
balance
|
$ 1,389,201
|
Improvements
and equipment additions
|
6,709
|
Net
increase in construction in progress
|
110
|
Dispositions
|
(41)
|
Ending
balance
|
$ 1,395,979
|
Accumulated
Depreciation:
|
|
Beginning
balance
|
$ 216,644
|
Depreciation
expense during the period
|
8,396
|
Dispositions
|
(31)
|
Ending
balance
|
$ 225,009
|
5.
|
DISCONTINUED
OPERATIONS
|
(dollars in
thousands)
|
Jan.
1, 2009
to
Mar. 31,
2009
|
Jan.
1, 2008
to
Mar. 31,
2008
|
|
Total
revenue
|
$ -
|
$ 218
|
|
Property
operations and maintenance expense
|
-
|
(64)
|
|
Real
estate tax expense
|
-
|
(26)
|
|
Depreciation
and amortization expense
|
-
|
(46)
|
|
Total
income from discontinued operations
|
$ -
======= |
$ 82
======= |
6.
|
UNSECURED
LINE OF CREDIT AND TERM NOTES
|
7.
|
MORTGAGES
PAYABLE
|
(dollars in
thousands)
|
March
31,
2009
|
December
31,
2008 |
7.80%
mortgage note due December 2011, secured by 11 self-storage facilities
(Locke Sovran I) with an aggregate net book value of $43.4 million,
principal and interest paid monthly
|
$ 28,884
|
$ 29,033
|
7.19%
mortgage note due March 2012, secured by 27 self-storage facilities (Locke
Sovran II) with an aggregate net book value of $80.9 million, principal
and interest paid monthly
|
42,318
|
42,603
|
7.25%
mortgage note due December 2011, secured by 1 self-storage facility with
an aggregate net book value of $5.8 million, principal and interest paid
monthly. Estimated market rate at time of acquisition
5.40%
|
3,475
|
3,510
|
6.76%
mortgage note due September 2013, secured by 1 self-storage facility with
an aggregate net book value of $2.0 million, principal and interest paid
monthly
|
995
|
1,000
|
6.35%
mortgage note due March 2014, secured by 1 self-storage facility with an
aggregate net book value of $3.8 million, principal and interest paid
monthly
|
1,091
|
1,098
|
5.55%
mortgage notes due November 2009, secured by 8 self-storage facilities
with an aggregate net book value of $34.7 million, interest only paid
monthly. Estimated market rate at time of acquisition
6.44%
|
25,979
|
25,930
|
7.50%
mortgage notes due August 2011, secured by 3 self-storage facilities with
an aggregate net book value of $14.2 million, principal and interest paid
monthly. Estimated market rate at time of acquisition
6.42%
|
6,035
|
6,087
|
Total
mortgages payable
|
$ 108,777
======= |
$ 109,261
======= |
Expected
Maturity Date Including
Discount
|
|
|||||||
(dollars
in thousands)
|
2009
|
2010
|
2011
|
2012
|
2013
|
Thereafter
|
Total
|
Fair
Value
|
Line
of credit - variable rate LIBOR + 1.375
(1.90%
at March 31, 2009)………………...
|
-
|
-
|
$23,000
|
-
|
-
|
-
|
$23,000
|
$23,000
|
Notes
Payable:
|
||||||||
Term
note - variable rate LIBOR+1.625%
(2.14%
at March 31, 2009)………………......
|
-
|
-
|
-
|
$250,000
|
-
|
-
|
$250,000
|
$250,000
|
Term
note - variable rate LIBOR+1.50%
(3.30%
at March 31, 2009)………………......
|
-
|
-
|
-
|
-
|
$ 20,000
|
-
|
$ 20,000
|
$ 20,000
|
Term
note - fixed rate 6.26%...............................
|
-
|
-
|
-
|
-
|
$ 80,000
|
-
|
$ 80,000
|
$ 80,279
|
Term
note - fixed rate 6.38%...............................
|
-
|
-
|
-
|
-
|
-
|
$ 150,000
|
$150,000
|
$146,171
|
Mortgage
note - fixed rate 7.80%......................
|
$
437
|
$ 630
|
$ 27,817
|
-
|
-
|
-
|
$ 28,884
|
$ 29,877
|
Mortgage
note - fixed rate 7.19%......................
|
$ 843
|
$ 1,211
|
$ 1,301
|
$ 38,963
|
-
|
-
|
$ 42,318
|
$ 43,919
|
Mortgage
note - fixed rate 7.25%......................
|
$ 106
|
$ 149
|
$ 3,220
|
-
|
-
|
-
|
$ 3,475
|
$ 3,453
|
Mortgage
note - fixed rate 6.76%......................
|
$ 18
|
$ 25
|
$ 27
|
$ 29
|
$ 896
|
-
|
$ 995
|
$ 1,016
|
Mortgage
note - fixed rate 6.35%......................
|
$ 19
|
$ 28
|
$ 30
|
$ 31
|
$ 34
|
$ 949
|
$ 1,091
|
$ 1,099
|
Mortgage
notes - fixed rate 5.55%....................
|
$ 25,979
|
-
|
-
|
-
|
-
|
-
|
$ 25,979
|
$ 26,348
|
Mortgage
notes - fixed rate 7.50%....................
|
$ 156
|
$ 222
|
$ 5,657
|
-
|
-
|
-
|
$ 6,035
|
$ 6,188
|
Interest
rate derivatives – liability…………….
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
$ 25,493
|
Notional
Amount
|
Effective
Date
|
Expiration
Date
|
Fixed
Rate
Paid
|
Floating
Rate
Received
|
$50
Million…………..
|
11/14/05
|
9/1/09
|
4.3900%
|
1
month LIBOR
|
$20
Million…………..
|
9/4/05
|
9/4/13
|
4.4350%
|
6
month LIBOR
|
$50
Million…………..
|
10/10/06
|
9/1/09
|
4.4800%
|
1
month LIBOR
|
$50
Million…………..
|
7/1/08
|
6/25/12
|
4.2825%
|
1
month LIBOR
|
$100
Million…………
|
7/1/08
|
6/22/12
|
4.2965%
|
1
month LIBOR
|
$75
Million…………..
|
9/1/09
|
6/22/12
|
4.7100%
|
1
month LIBOR
|
$25
Million…………..
|
9/1/09
|
6/22/12
|
4.2875%
|
1
month LIBOR
|
(dollars in
thousands)
|
Jan.
1, 2009
to
Mar. 31,
2009
|
Jan.
1, 2008
to
Mar. 31,
2008
|
Adjustments
to interest expense:
|
||
Realized
(loss) gain reclassified from accumulated other comprehensive
loss
to interest expense
|
$ (2,454)
|
$ 93
|
Adjustments
to other comprehensive income (loss):
|
||
Realized
loss (gain) reclassified to interest expense for 2009 and
2008,
respectively
|
2,454
|
(93)
|
Unrealized
loss from changes in the fair value of the effective portion
of
the
interest rate swaps for 2009 and 2008, respectively
|
(2,395)
|
(2,760)
|
Gain
(loss) included in other comprehensive loss
|
$ 59
======= |
$ (2,853)
======= |
Asset
(Liability)
|
Level
1
|
Level
2
|
Level
3
|
|
Interest
rate swaps.....................................
|
(25,493)
|
-
|
(25,493)
|
-
|
10.
|
COMMITMENTS
AND CONTINGENCIES
|
11.
|
INVESTMENT
IN JOINT VENTURES
|
(dollars
in thousands)
|
Sovran
HHF
Storage
Holdings
LLC
|
Iskalo
Office
Holdings,
LLC
|
Balance Sheet
Data:
|
||
Investment
in storage facilities, net
|
$ 169,569
|
$ -
|
Investment
in office building
|
-
|
5,463
|
Other
assets
|
3,831
|
636
|
Total
Assets
|
$ 173,400
=======
|
$ 6,099
=======
|
Due
to the Company
|
$ 183
|
$ -
|
Mortgages
payable
|
79,609
|
7,135
|
Other
liabilities
|
2,240
|
245
|
Total
Liabilities
|
82,032
|
7,380
|
Unaffiliated
partners' equity (deficiency)
|
73,094
|
(729)
|
Company
equity (deficiency)
|
18,274
|
(552)
|
Total
Liabilities and Partners' Equity (deficiency)
|
$ 173,400
=======
|
$ 6,099
======
|
Income Statement
Data:
|
||
Total
revenues
|
$ 4,425
|
$ 280
|
Total
expenses
|
4,282
|
297
|
Net
income (loss)
|
$ 143
=======
|
$ (17)
======
|
12.
|
INCOME
TAXES
|
13.
|
EARNINGS
PER SHARE
|
Three months ended March
31,
|
||||
(Amounts in thousands,
except per share data)
|
2009
|
2008
|
||
Numerator:
Net
income from continuing operations attributable
to
controlling interests
|
$ 7,635
|
$ 8,871
|
||
Denominator:
Denominator
for basic earnings per share - weighted
average
shares
|
21,969
|
21,647
|
||
Effect
of Dilutive Securities:
Stock
options and warrants and non-vested stock
|
3
|
17
|
||
Denominator
for diluted earnings per share - adjusted
weighted
average shares and assumed conversion
|
21,972
|
21,664
|
Basic
Earnings per Common Share from continuing
operations
|
$ 0.35
|
$ 0.41
|
||
Basic
Earnings per Common Share
|
$ 0.35
|
$ 0.41
|
||
Diluted
Earnings per Common Share from continuing
operations
|
$ 0.35
|
$ 0.41
|
||
Diluted
Earnings per Common Share
|
$ 0.35
|
$ 0.41
|
14.
|
RECENT
ACCOUNTING PRONOUNCEMENTS
|
Item
2.
|
Management's
Discussion and Analysis of Financial Condition and Results
of Operations
|
Three months
ended
|
||
(in
thousands)
|
March 31,
2009
|
March 31,
2008
|
Net
income attributable to controlling interests
|
$ 7,635
|
$ 8,953
|
Net
income attributable to noncontrolling interest
|
485
|
636
|
Depreciation
of real estate and amortization
of
intangible assets exclusive of deferred
financing
fees
|
8,541
|
8,647
|
Depreciation
and amortization from
unconsolidated
joint ventures
|
208
|
15
|
Funds
from operations allocable to
noncontrolling
redeemable Operating Partnership Units
|
(309)
|
(339)
|
Funds
from operations allocable to
noncontrolling
interest in consolidated joint venture
|
(340)
|
(462)
|
FFO
available to controlling shareholders
|
$ 16,220
=======
|
$ 17,450
======
|
*
|
7.80%
mortgage note due December 2011, secured by 11 self-storage facilities
(Locke Sovran I) with an aggregate net book value of $43.4 million,
principal and interest paid monthly. The outstanding balance at
March 31, 2009 on this mortgage was $28.9 million.
|
*
|
7.19%
mortgage note due March 2012, secured by 27 self-storage facilities (Locke
Sovran II) with an aggregate net book value of $80.9 million, principal
and interest paid monthly. The outstanding balance at March 31,
2009 on this mortgage was $42.3 million.
|
*
|
7.25%
mortgage note due December 2011, secured by 1 self-storage facility with
an aggregate net book value of $5.8 million, principal and interest paid
monthly. Estimated market rate at time of acquisition
5.40%. The outstanding balance at March 31, 2009 on this
mortgage was $3.5 million.
|
*
|
6.76%
mortgage note due September 2013, secured by 1 self-storage facility with
an aggregate net book value of $2.0 million, principal and interest paid
monthly. The outstanding balance at March 31, 2009 on this
mortgage was $1.0 million.
|
*
|
6.35%
mortgage note due March 2014, secured by 1 self-storage facility with an
aggregate net book value of $3.8 million, principal and interest paid
monthly. The outstanding balance at March 31, 2009 on this
mortgage was $1.1 million.
|
*
|
5.55%
mortgage notes due November 2009, secured by 8 self-storage facilities
with an aggregate net book value of $34.7 million, interest only paid
monthly. Estimated market rate at time of acquisition
6.44%. The outstanding balance at March 31, 2009 on this
mortgage was $26.0 million.
|
*
|
7.50%
mortgage notes due August 2011, secured by 3 self-storage facilities with
an aggregate net book value of $14.2 million, principal and interest paid
monthly. Estimated market rate at time of acquisition
6.42%. The outstanding balance at March 31, 2009 on this
mortgage was $6.0 million.
|
Notional
Amount
|
Effective
Date
|
Expiration
Date
|
Fixed
Rate
Paid
|
Floating
Rate
Received
|
$50
Million…………..
|
11/14/05
|
9/1/09
|
4.3900%
|
1
month LIBOR
|
$20
Million…………..
|
9/4/05
|
9/4/13
|
4.4350%
|
6
month LIBOR
|
$50
Million…………..
|
10/10/06
|
9/1/09
|
4.4800%
|
1
month LIBOR
|
$50
Million…………..
|
7/1/08
|
6/25/12
|
4.2825%
|
1
month LIBOR
|
$100
Million…………
|
7/1/08
|
6/22/12
|
4.2965%
|
1
month LIBOR
|
$75
Million…………..
|
9/1/09
|
6/22/12
|
4.7100%
|
1
month LIBOR
|
$25
Million…………..
|
9/1/09
|
6/22/12
|
4.2875%
|
1
month LIBOR
|
Item
3.
|
Quantitative
and Qualitative Disclosures About Market
Risk
|
Item
4.
|
Controls
and Procedures
|
PART
II.
Item
1.
|
Other
Information
Legal
Proceedings
|
Item
1A.
|
Risk
Factors
|
Item
2.
|
Unregistered
Sales of Equity Securities and Use of
Proceeds
|
Item
3.
|
Defaults
Upon Senior Securities
|
Item
4.
|
Submission
of Matters to a Vote of Security
Holders
|
Item
5.
|
Other
Information
|
Item
6.
|
Exhibits
|
||
31.1
|
Certification
of Chief Executive Officer pursuant to Rule 13a-14(a) and Rule 15d-14(a)
of the Securities Exchange Act, as amended.
|
||
31.2
|
Certification
of Chief Financial Officer pursuant to Rule 13a-14(a) and Rule 15d-14(a)
of the Securities Exchange Act, as amended.
|
||
32
|
Certification
of Chief Executive Officer and Chief Financial Officer Pursuant to 18
U.S.C. Section 1350 as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.
|
Sovran
Self Storage, Inc.
|
|
By: / S / David
L.
Rogers
David
L. Rogers
Chief
Financial Officer
|
|
May 11,
2009
Date
|