SOVRAN SELF STORAGE, INC. 09
A N N U A L
P O R T
R E
D E A R F E L L O W S H A R E H O L D E R :
As expected, 2009 was a very challenging year for the self-storage industry. Long considered “recession resistant”, the current
economic downturn has put self storage operators into uncharted territory. Certainly, it is the worst operating environment
Sovran/Uncle Bob’s has encountered in 25 years in the business.
Because we saw it coming, at the start of 2009 we re-examined our strategies and implemented many measures to cut costs
and improve efficiencies, including:
• Re-negotiating vendor contracts and/or cutting services to reduce store operating costs.
• Reducing store personnel expenses.
•
Increasing move-in incentives for new customers so as to maintain occupancy and market share.
• Severely curtailing our expansion & enhancement program.
Even with these measures, operating results fell by 3.1% on a same store basis and occupancy declined to 80%. We determined
it prudent to defer the acquisition of new properties and, for the first time in our 15 years as a publicly traded company, reduce
our common stock dividend. Despite these measures, industry and operating pressures were such that one of the two firms who
rate our corporate debentures reduced our rating from “investment grade” to one notch below, resulting in increased borrowing
costs for part of the year.
In October, we took advantage of the relative strengthening of the equity markets to bolster our balance sheet, raising almost
$115 million via the sale of common shares, and reducing debt and liabilities by the same amount. This shored up an already
strong capital position, and enabled a reinstatement of our credit rating back to investment grade. With our borrowing costs
reduced to favorable rates, and our liquidity greatly enhanced, we began 2010 in the enviable position of having no significant
debt maturing until 2012 and up to $175 million of unused credit available to us.
We plan to continue to grow our Company’s value by focusing on operating fundamentals – marketing, pricing, cost containment
and property upkeep. To that end, we will:
• Continue to press our advantages of size and scale as one of the four largest companies in the industry to drive
market presence and operating efficiencies.
• Expand our use of leading edge technology to optimize rental rates, leasing incentives, and occupancy levels.
• Maintain our advertising and marketing programs to drive more calls to our Call Center and new business to our
stores. In the spring of 2010, we will introduce a completely re-designed Uncle Bob’s website that will provide
additional user-friendly features to encourage more customers to rent a space online.
• Cautiously begin re-investing in our properties, resuming the “lightening and brightening” of the stores to enhance
curb appeal.
• Revisit some of our more promising expansion and enhancement projects, adding new space and converting
existing space to premium climate and humidity controlled environments.
Certainly, economic challenges remain, but as a result of the steps we’ve taken, few companies are better structured to capitalize
on the opportunities we see emerging in the next few years. We look forward to growing our Company’s value.
Thank you for your continued support.
Robert J. Attea
Chairman and CEO
Kenneth F. Myszka
President and COO
David Rogers
CFO
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2009
Commission File Number: 1-13820
SOVRAN SELF STORAGE, INC.
(Exact name of Registrant as specified in its charter)
Maryland
(State of incorporation or organization)
16-1194043
(I.R.S. Employer Identification No.)
6467 Main Street
Williamsville, NY 14221
(Address of principal executive offices) (Zip code)
(716) 633-1850
(Registrant's telephone number including area code)
Title of Securities
Common Stock, $.01 Par Value
Exchanges on which Registered
New York Stock Exchange
Securities registered pursuant to Section 12(b) of the Act:
Securities registered pursuant to section 12(g) of the Act: None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes [ ]
No [ X ]
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Exchange Act.
Yes [ ] No [ X ]
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and
(2) has been subject to such filing requirements for the past 90 days. Yes [ X ] No [ ]
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every
Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the
preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes [ ] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not
be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this
Form 10-K or any amendment to this Form 10-K. [ ]
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller
reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of
the Exchange Act. (Check one):
Large accelerated filer [ X ] Accelerated filer [ ] Non-accelerated filer [ ] Smaller reporting company [ ]
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes [ ]
No [ X ]
As of June 30, 2009, 23,391,184 shares of Common Stock, $.01 par value per share, were outstanding, and the aggregate market value
of the Common Stock held by non-affiliates was approximately $558,480,713 (based on the closing price of the Common Stock on the
New York Stock Exchange on June 30, 2009).
As of February 15, 2010, 27,547,027 shares of Common Stock, $.01 par value per share, were outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Definitive Proxy Statement for the Annual Meeting of Shareholders of the Registrant to be held on May 26, 2010
(Part III).
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TABLE OF CONTENTS
Part I
Item 1. Business
Item 1A. Risk Factors
Item 1B. Unresolved Staff Comments
Item 2. Properties
Item 3. Legal Proceedings
Item 4. Submission of Matters to a Vote of Security Holders
Part II
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity
Securities
Item 6. Selected Financial Data
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
Item 8. Financial Statements and Supplementary Data
Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure
Item 9A. Controls and Procedures
Part III
Item 10. Directors, Executive Officers and Corporate Governance
Item 11. Executive Compensation
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
Item 13. Certain Relationships and Related Transactions, and Director Independence
Item 14. Principal Accountant Fees and Services
Part IV
Item 15. Exhibits, Financial Statement Schedules
SIGNATURES
EX-3.4 – see SEC filing
EX-10.2 – see SEC filing
EX-10.14 – see SEC filing
EX-12.1
EX-21 .1 – see SEC filing
EX-23 .1 – see SEC filing
EX-31.1 – see SEC filing
EX-31.2 – see SEC filing
EX-32.1 – see SEC filing
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Part I
When used in this discussion and elsewhere in this document, 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 would 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 effectively compete in the industry in which it does business; 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; any future ratings on the Company’s debt instruments; 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 that may change the taxability of future income.
Item 1.
Business
Sovran Self Storage, Inc. together with its direct and indirect subsidiaries and the consolidated joint
ventures, to the extent appropriate in the applicable context, (the “Company,” “We,” “Our,” or ”Sovran”) is a self-
administered and self-managed real estate investment trust ("REIT") that acquires, owns and manages self-storage
properties. We refer to the self-storage properties in which we have an ownership interest and are managed by us as
"Properties." We began operations on June 26, 1995. We were formed to continue the business of our predecessor
company, which had engaged in the self-storage business since 1985. At February 15, 2010, we held ownership
interests in and managed 381 Properties consisting of approximately 24.7 million net rentable square feet, situated in
24 states. Among our 381 Properties are 27 Properties that we manage for a consolidated joint venture of which we
are a majority owner and 25 Properties that we manage for a joint venture of which we are a 20% owner. We believe
we are the fourth largest operator of self-storage properties in the United States based on facilities owned and
managed. Our Properties conduct business under the user-friendly name Uncle Bob's Self-Storage ®.
We own an indirect interest in each of the Properties through a limited partnership (the "Partnership"). In
total, we own a 98.5% economic interest in the Partnership and unaffiliated third parties own collectively a 1.5%
limited partnership interest at December 31, 2009. We believe that this structure, commonly known as an umbrella
partnership real estate investment trust ("UPREIT"), facilitates our ability to acquire properties by using units of the
Partnership as currency. By utilizing interests in the Partnership as currency in facility acquisitions, we may
partially defer the seller’s income tax liability which in turn may allow us to obtain more favorable pricing.
We were incorporated on April 19, 1995 under Maryland law. Our principal executive offices are located
at 6467 Main Street, Williamsville, New York 14221, our telephone number is (716) 633-1850 and our web site is
www.sovranss.com.
We seek to enhance shareholder value through internal growth and acquisition of additional storage
properties. Internal growth is achieved through aggressive property management: increasing rents, increasing
occupancy levels, controlling costs, maximizing collections and strategically expanding and improving the
Properties. Should economic conditions warrant, we may develop new properties. We believe that there continue to
be opportunities for growth through acquisitions, and constantly seek to acquire self-storage properties that are
susceptible to realization of increased economies of scale and enhanced performance through application of our
expertise.
Industry Overview
We believe that self-storage facilities offer inexpensive storage space to residential and commercial users.
In addition to fully enclosed and secure storage space, many facilities also offer outside storage for automobiles,
recreational vehicles and boats. Better facilities, such as those managed by the Company, are usually fenced and
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well lighted with gates that are either manually operated or automated and have a full-time manager. Our customers
rent space on a month-to-month basis and have access to their storage area during business hours and in certain
circumstances are provided with 24-hour access. Individual storage units are secured by the customer's lock, and the
customer has sole control of access to the unit.
According to the 2010 Self-Storage Almanac, of the approximately 48,700 facilities in the United States,
less than 11% are managed by the ten largest operators. The remainder of the industry is characterized by numerous
small, local operators. The shortage of skilled operators, the scarcity of capital available to small operators for
acquisitions and expansions, and the potential for savings through economies of scale are factors that are leading to
consolidation in the industry. We believe that, as a result of this trend, significant growth opportunities exist for
operators with proven management systems and sufficient capital resources.
Property Management
We believe that we have developed substantial expertise in managing self-storage facilities. Key elements
of our management system include the following:
Personnel:
Property managers undergo continuous training that emphasizes closing techniques, identification of
selected marketing opportunities, networking with possible referral sources, and familiarization with our customized
management information system. In addition to frequent contact with Area Managers and other Company
personnel, property managers receive periodic newsletters via our intranet regarding a variety of operational issues,
and from time to time attend "roundtable" seminars with other property managers.
Marketing and Sales:
Responding to the increased customer demand for services, we have implemented several programs
expected to increase profitability. These programs include:
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A Customer Care Center (call center) that services new and existing customers' inquiries and
facilitates the capture of sales leads that were previously lost;
Internet marketing, which provides customers information about all of our stores via numerous
portals and e-mail;
A rate management system, that matches product availability with market demand for each type of
storage unit at each store, and determines appropriate pricing. The Company credits this program in
achieving higher yields and controlling discounting;
Dri-guard, that provides humidity-controlled spaces. We became the first self-storage operator to
utilize this humidity protection technology. These environmental control systems are a premium
storage feature intended to protect metal, electronics, furniture, fabrics and paper from moisture; and
Uncle Bob's trucks, that provide customers with convenient, affordable access to vehicles to help
move their goods into storage, and which also serve as moving billboards to help advertise our
storage facilities.
Ancillary Income:
Our stores are essentially retail operations and we have in excess of 160,000 customers. As a convenience
to those customers, we sell items such as locks, boxes, tarps, etc. to make their storage experience easier. We also
make available renters insurance through a third party carrier, on which we earn a commission. Income from
incidental truck rentals, billboards and cell towers is also earned by our Company.
Information Systems:
Our customized computer system performs billing, collections and reservation functions for each Property.
It also tracks information used in developing marketing plans based on occupancy levels and customer
demographics and histories. The system generates daily, weekly and monthly financial reports for each Property
that are transmitted to our principal office each night. The system also requires a property manager to input a
descriptive explanation for all debit and credit transactions, paid-to-date changes, and all other discretionary
activities, which allows the accounting staff at our principal office to promptly review all such transactions. Late
charges are automatically imposed. More sensitive activities, such as rental rate changes and unit size or number
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changes, are completed only by Area Managers. Our customized management information system permits us to add
new facilities to our portfolio with minimal additional overhead expense.
Property Maintenance:
All of our Properties are subject to regular and routine maintenance procedures, which are designed to
maintain the structure and appearance of our buildings and grounds. A staff headquartered in our principal office is
responsible for the upkeep of the Properties, and all maintenance service is contracted through local providers, such
as lawn service, snowplowing, pest control, gate maintenance, HVAC repairs, paving, painting, roofing, etc. A
codified set of specifications has been designed and is applied to all work performed on our Uncle Bob's stores. As
with many other aspects of our Company, our size has allowed us to enjoy relatively low maintenance costs because
we have the benefit of economies of scale in purchasing, travel and overhead absorption.
Environmental and Other Regulations
We are subject to federal, state, and local environmental regulations that apply generally to the ownership
of real property. We have not received notice from any governmental authority or private party of any material
environmental noncompliance, claim, or liability in connection with any of the Properties, and are not aware of any
environmental condition with respect to any of the Properties that could have a material adverse effect on our
financial condition or results of operations.
The Properties are also generally subject to the same types of local regulations governing other real
property, including zoning ordinances. We believe that the Properties are in substantial compliance with all such
regulations.
Insurance
Each of the Properties is covered by fire and property insurance (including comprehensive liability), and
all-risk property insurance policies, which are provided by reputable companies and on commercially reasonable
terms. In addition, we maintain a policy insuring against environmental liabilities resulting from tenant storage on
terms customary for the industry, and title insurance insuring fee title to the Company-owned Properties in an
amount that we believe to be adequate.
Federal Income Tax
We operate, and intend to continue to operate, in such a manner as to continue to qualify as a REIT under
the Internal Revenue Code of 1986 (the "Code"), but no assurance can be given that we will at all times so qualify.
To the extent that we continue to qualify as a REIT, we will not be taxed, with certain limited exceptions, on the
taxable income that is distributed to our shareholders. See Item 7, "Management's Discussion and Analysis of
Financial Condition and Results of Operations - Liquidity and Capital Resources - REIT Qualification and
Distribution Requirements."
Competition
The primary factors upon which competition in the self-storage industry is based are location, rental rates,
suitability of the property's design to prospective customers' needs, and the manner in which the property is operated
and marketed. We believe we compete successfully on these bases. The extent of competition depends significantly
on local market conditions. We seek to locate facilities so as not to cause our Properties to compete with one
another for customers, but the number of self-storage facilities in a particular area could have a material adverse
effect on the performance of any of the Properties.
Several of our competitors, including Public Storage, U-Haul, and Extra Space Storage, are larger and have
substantially greater financial resources than we do. These larger operators may, among other possible advantages,
be capable of greater leverage and the payment of higher prices for acquisitions.
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Investment Policy
While we emphasize equity real estate investments, we may, at our discretion, invest in mortgage and other
real estate interests related to self-storage properties in a manner consistent with our qualification as a REIT. We
may also retain a purchase money mortgage for a portion of the sale price in connection with the disposition of
Properties from time to time. Should investment opportunities become available, we may look to acquire self-
storage properties via a joint-venture partnership or similar entity. We may or may not elect to have a significant
investment in such a venture, but would use such an opportunity to expand our portfolio of branded and managed
properties.
Subject to the percentage of ownership limitations and gross income tests necessary for REIT qualification,
we also may invest in securities of entities engaged in real estate activities or securities of other issuers, including
for the purpose of exercising control over such entities.
Disposition Policy
Any disposition decision of our Properties is based on a variety of factors, including, but not limited to, the
(i) potential to continue to increase cash flow and value, (ii) sale price, (iii) strategic fit with the rest of our portfolio,
(iv) potential for, or existence of, environmental or regulatory issues, (v) alternative uses of capital, and
(vi) maintaining qualification as a REIT.
During 2009 we sold five non-strategic storage facilities located in Massachusetts, North Carolina and
Pennsylvania for net cash proceeds of $16.3 million resulting in a loss of $1.6 million. During 2008 we sold one
non-strategic storage facility located in Michigan for net cash proceeds of $7.0 million resulting in a gain of $0.7
million. No storage facilities were sold in 2007.
Distribution Policy
We intend to pay regular quarterly distributions to our shareholders. However, future distributions by us
will be at the discretion of the Board of Directors and will depend on the actual cash available for distribution, our
financial condition and capital requirements, the annual distribution requirements under the REIT provisions of the
Code and such other factors as the Board of Directors deems relevant. In order to maintain our qualification as a
REIT, we must make annual distributions to shareholders of at least 90% of our REIT taxable income (which does
not include capital gains). Under certain circumstances, we may be required to make distributions in excess of cash
available for distribution in order to meet this requirement.
On May 6, 2009, recognizing the need to maintain maximum financial flexibility in light of the current
state of the capital markets, our Board of Directors reduced the quarterly common stock dividend from $0.64 per
share to $0.45 per share, for an annual rate of $1.80 per share.
Borrowing Policy
Our Board of Directors currently limits the amount of debt that may be incurred by us to less than 50% of
the sum of the market value of our issued and outstanding Common and Preferred Stock plus our debt. We,
however, may from time to time re-evaluate and modify our borrowing policy in light of then current economic
conditions, relative costs of debt and equity capital, market values of properties, growth and acquisition
opportunities and other factors.
On June 25, 2008, we entered into agreements relating to new unsecured credit arrangements, and received
funds under those arrangements. As part of the agreements, we entered into a $250 million unsecured term note
maturing in June 2012 bearing interest at LIBOR plus 1.625%. The proceeds from this term note were used to repay
the Company’s previous line of credit that was to mature in September 2008, the Company’s term note that was to
mature in September 2009, the term note maturing in July 2008, and to provide for working capital. In October
2009, the Company repaid $100 million of the term note entered into in June 2008. The 2008 agreements also
provide for a $125 million (expandable to $175 million) revolving line of credit maturing June 2011 bearing interest
at a variable rate equal to LIBOR plus 1.375%, and requires a 0.25% facility fee. At December 31, 2009, there was
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$125 million available on the unsecured line of credit.
We also maintain an $80 million term note maturing September 2013 bearing interest at a fixed rate of
6.26%, a $20 million term note maturing September 2013 bearing interest at a variable rate equal to LIBOR plus
1.50%, and a $150 million unsecured term note maturing in April 2016 bearing interest at 6.38%.
To the extent that we desire to obtain additional capital to pay distributions, to provide working capital, to
pay existing indebtedness or to finance acquisitions, expansions or development of new properties, we may utilize
amounts available under the expanded line of credit, common or preferred stock offerings, floating or fixed rate debt
financing, retention of cash flow (subject to satisfying our distribution requirements under the REIT rules) or a
combination of these methods. Additional debt financing may also be obtained through mortgages on our
Properties, which may be recourse, non-recourse, or cross-collateralized and may contain cross-default provisions.
We have not established any limit on the number or amount of mortgages that may be placed on any single Property
or on our portfolio as a whole, although certain of our existing term loans contain limits on overall mortgage
indebtedness. For additional information regarding borrowings, see Item 7, "Management's Discussion and
Analysis of Financial Condition and Results of Operations - Liquidity and Capital Resources" and Note 7 to the
Consolidated Financial Statements filed herewith.
Employees
We currently employ a total of 1,051 employees, including 381 property managers, 24 area managers, and
511 assistant managers and part-time employees. At our headquarters, in addition to our three senior executive
officers, we employ 132 people engaged in various support activities, including accounting, human resources,
customer care, and management information systems. None of our employees are covered by a collective
bargaining agreement. We consider our employee relations to be excellent.
Available Information
We file with the U.S. Securities and Exchange Commission quarterly and annual reports on Forms 10-Q
and 10-K, respectively, current reports on Form 8-K, and proxy statements pursuant to the Securities Exchange Act
of 1934, in addition to other information as required. The public may read and copy any materials that we file with
the SEC at the SEC's Public Reference Room at 100 F Street, NE, Washington, D.C. 20549. The public may obtain
information on the operation of the Public Reference Room by calling the SEC at 1 (800) SEC-0330. We file this
information with the SEC electronically, and the SEC maintains an Internet site that contains reports, proxy and
information statements, and other information regarding issuers that file electronically with the SEC at
http://www.sec.gov. Our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-
K, and all amendments to those reports are available free of charge on our web site at http://www.sovranss.com as
soon as reasonably practicable after such material is electronically filed with or furnished to the SEC. In addition,
our codes of ethics and Charters of our Governance, Audit Committee, and Compensation Committee are available
free of charge on our website at http://www.sovranss.com.
Also, copies of our annual report and Charters of our Governance, Audit Committee, and Compensation
Committee will be made available, free of charge, upon written request to Sovran Self Storage, Inc., Attn: Investor
Relations, 6467 Main Street, Williamsville, NY 14221.
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Item 1A.
Risk Factors
You should carefully consider the risks described below, together with all of the other information included
in or incorporated by reference into our Form 10-K, as part of your evaluation of the Company. If any of the
following risks actually occur, our business could be harmed. In such case, the trading price of our securities could
decline, and you may lose all or part of your investment.
Our Acquisitions May Not Perform as Anticipated
We have completed many acquisitions of self-storage facilities since our initial public offering of common
stock in June 1995. Our strategy is to continue to grow by acquiring additional self-storage facilities. Acquisitions
entail risks that investments will fail to perform in accordance with our expectations and that our judgments with
respect to the prices paid for acquired self-storage facilities and the costs of any improvements required to bring an
acquired property up to standards established for the market position intended for that property will prove
inaccurate. Acquisitions also involve general investment risks associated with any new real estate investment.
We May Incur Problems with Our Real Estate Financing
Unsecured Credit Facility and Term Notes. We have a line of credit and term note agreements with a
syndicate of financial institutions and other lenders. This unsecured credit facility and the term notes are recourse to
us and the required payments are not reduced if the economic performance of any of the properties declines. The
unsecured credit facility limits our ability to make distributions to our shareholders, except in limited circumstances.
Rising Interest Rates. Indebtedness that we incur under the unsecured credit facility and bank term notes
bear interest at a variable rate. Accordingly, increases in interest rates could increase our interest expense, which
would reduce our cash available for distribution and our ability to pay expected distributions to our shareholders.
We manage our exposure to rising interest rates using interest rate swaps and other available mechanisms. If the
amount of our indebtedness bearing interest at a variable rate increases, our unsecured credit facility may require us
to enter into additional interest rate swaps.
Refinancing May Not Be Available. It may be necessary for us to refinance our unsecured credit facility
through additional debt financing or equity offerings. If we were unable to refinance this indebtedness on
acceptable terms, we might be forced to dispose of some of our self-storage facilities upon disadvantageous terms,
which might result in losses to us and might adversely affect the cash available for distribution. If prevailing interest
rates or other factors at the time of refinancing result in higher interest rates on refinancings, our interest expense
would increase, which would adversely affect our cash available for distribution and our ability to pay expected
distributions to shareholders.
Recent turmoil in the credit markets could affect our ability to obtain debt financing on reasonable terms
and have other adverse effects on us. The United States credit markets have recently experienced significant
dislocations and liquidity disruptions which have caused the spreads on available debt financings to widen
considerably. These circumstances have materially impacted liquidity in the debt markets, making financing terms
for borrowers less attractive. A prolonged downturn in the credit markets could cause us to seek alternative sources
of potentially less attractive financing, and may require us to adjust our business plan accordingly. Continued
uncertainty in the credit markets may negatively impact our ability to make acquisitions.
Covenants and Risk of Default. Our unsecured credit facility and term notes require us to operate within
certain covenants, including financial covenants with respect to leverage, fixed charge coverage, minimum net
worth, limitations on additional indebtedness and dividend limitations. If we violate any of these covenants or
otherwise default under our unsecured credit facility or term notes, then our lenders could declare all indebtedness
under these facilities to be immediately due and payable which would have a material adverse effect on our business
and could require us to sell self-storage facilities under distress conditions and seek replacement financing on
substantially more expensive terms.
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Our Debt Levels May Increase
Our Board of Directors currently has a policy of limiting the amount of our debt at the time of incurrence to
less than 50% of the sum of the market value of our issued and outstanding common stock and preferred stock plus
the amount of our debt at the time that debt is incurred. However, our organizational documents do not contain any
limitation on the amount of indebtedness we might incur. Accordingly, our Board of Directors could alter or
eliminate the current policy limitation on borrowing without a vote of our shareholders. We could become highly
leveraged if this policy were changed. However, our ability to incur debt is limited by covenants in our bank credit
arrangements.
We Are Subject to the Risks Posed by Fluctuating Demand and Significant Competition in the Self-Storage
Industry
Our self-storage facilities are subject to all operating risks common to the self-storage industry. These risks
include but are not limited to the following:
• Decreases in demand for rental spaces in a particular locale;
• Changes in supply of similar or competing self-storage facilities in an area;
• Changes in market rental rates; and
•
Inability to collect rents from customers.
Our current strategy is to acquire interests only in self-storage facilities. Consequently, we are subject to
risks inherent in investments in a single industry. Our self-storage facilities compete with other self-storage facilities
in their geographic markets. As a result of competition, the self-storage facilities could experience a decrease in
occupancy levels and rental rates, which would decrease our cash available for distribution. We compete in
operations and for acquisition opportunities with companies that have substantial financial resources. Competition
may reduce the number of suitable acquisition opportunities offered to us and increase the bargaining power of
property owners seeking to sell. The self-storage industry has at times experienced overbuilding in response to
perceived increases in demand. A recurrence of overbuilding might cause us to experience a decrease in occupancy
levels, limit our ability to increase rents and compel us to offer discounted rents.
Our Real Estate Investments Are Illiquid and Are Subject to Uninsurable Risks and Government Regulation
General Risks. Our investments are subject to varying degrees of risk generally related to the ownership of
real property. The underlying value of our real estate investments and our income and ability to make distributions
to our shareholders are dependent upon our ability to operate the self-storage facilities in a manner sufficient to
maintain or increase cash available for distribution. Income from our self-storage facilities may be adversely
affected by the following factors:
• Changes in national economic conditions;
• Changes in general or local economic conditions and neighborhood characteristics;
• Competition from other self-storage facilities;
• Changes in interest rates and in the availability, cost and terms of financing;
• The impact of present or future environmental legislation and compliance with environmental laws;
• The ongoing need for capital improvements, particularly in older facilities;
• Changes in real estate tax rates and other operating expenses;
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• Adverse changes in governmental rules and fiscal policies;
• Uninsured losses resulting from casualties associated with civil unrest, acts of God, including natural
disasters, and acts of war;
• Adverse changes in zoning laws; and
• Other factors that are beyond our control.
Illiquidity of Real Estate May Limit its Value. Real estate investments are relatively illiquid. Our ability to
vary our portfolio of self-storage facilities in response to changes in economic and other conditions is limited. In
addition, provisions of the Code may limit our ability to profit on the sale of self-storage facilities held for fewer
than two years. We may be unable to dispose of a facility when we find disposition advantageous or necessary and
the sale price of any disposition may not equal or exceed the amount of our investment.
Uninsured and Underinsured Losses Could Reduce the Value of our Self Storage Facilities. Some losses,
generally of a catastrophic nature, that we potentially face with respect to our self-storage facilities may be
uninsurable or not insurable at an acceptable cost. Our management uses its discretion in determining amounts,
coverage limits and deductibility provisions of insurance, with a view to acquiring appropriate insurance on our
investments at a reasonable cost and on suitable terms. These decisions may result in insurance coverage that, in the
event of a substantial loss, would not be sufficient to pay the full current market value or current replacement cost of
our lost investment. Inflation, changes in building codes and ordinances, environmental considerations, and other
factors also might make it infeasible to use insurance proceeds to replace a property after it has been damaged or
destroyed. Under those circumstances, the insurance proceeds received by us might not be adequate to restore our
economic position with respect to a particular property.
Possible Liability Relating to Environmental Matters. Under various federal, state and local environmental
laws, ordinances and regulations, a current or previous owner or operator of real property may be liable for the costs
of removal or remediation of hazardous or toxic substances on, under or in that property. Those laws often impose
liability even if the owner or operator did not cause or know of the presence of hazardous or toxic substances and
even if the storage of those substances was in violation of a customer’s lease. In addition, the presence of hazardous
or toxic substances, or the failure of the owner to address their presence on the property, may adversely affect the
owner’s ability to borrow using that real property as collateral. In connection with the ownership of the self-storage
facilities, we may be potentially liable for any of those costs.
Americans with Disabilities Act. The Americans with Disabilities Act of 1990, or ADA, generally requires
that buildings be made accessible to persons with disabilities. A determination that we are not in compliance with
the ADA could result in imposition of fines or an award of damages to private litigants. If we were required to make
modifications to comply with the ADA, our results of operations and ability to make expected distributions to our
shareholders could be adversely affected.
There Are Limitations on the Ability to Change Control of Sovran
Limitation on Ownership and Transfer of Shares. To maintain our qualification as a REIT, not more than
50% in value of our outstanding shares of stock may be owned, directly or indirectly, by five or fewer individuals, as
defined in the Code. To limit the possibility that we will fail to qualify as a REIT under this test, our Amended and
Restated Articles of Incorporation include ownership limits and transfer restrictions on shares of our stock. Our
Articles of Incorporation limit ownership of our issued and outstanding stock by any single shareholder to 9.8% of
the aggregate value of our outstanding stock, except that the ownership by some of our shareholders is limited to
15%.
These ownership limits may:
• Have the effect of precluding an acquisition of control of Sovran by a third party without consent of our Board
of Directors even if the change in control would be in the interest of shareholders; and
10
• Limit the opportunity for shareholders to receive a premium for shares of our common stock they hold that
might otherwise exist if an investor were attempting to assemble a block of common stock in excess of 9.8%
or 15%, as the case may be, of the outstanding shares of our stock or to otherwise effect a change in control of
Sovran.
Our Board of Directors may waive the ownership limits if it is satisfied that ownership by those
shareholders in excess of those limits will not jeopardize our status as a REIT under the Code or in the event it
determines that it is no longer in our best interests to be a REIT. Waivers have been granted to the former holders of
our Series C preferred stock, FMR Corporation and Cohen & Steers, Inc. A transfer of our common stock and/or
preferred stock to a person who, as a result of the transfer, violates the ownership limits may not be effective under
some circumstances.
Other Limitations. Other limitations could have the effect of discouraging a takeover or other transaction
in which holders of some, or a majority, of our outstanding common stock might receive a premium for their shares
of our common stock that exceeds the then prevailing market price or that those holders might believe to be
otherwise in their best interest. The issuance of additional shares of preferred stock could have the effect of delaying
or preventing a change in control of Sovran even if a change in control were in the shareholders’ interest. In
addition, the Maryland General Corporation Law, or MGCL, imposes restrictions and requires that specified
procedures with respect to the acquisition of stated levels of share ownership and business combinations, including
combinations with interested shareholders. These provisions of the MGCL could have the effect of delaying or
preventing a change in control of Sovran even if a change in control were in the shareholders’ interest. Waivers
and exemptions have been granted to the initial purchasers of our former Series C preferred stock in connection with
these provisions of the MGCL. In addition, under the Partnership’s agreement of limited partnership, in general, we
may not merge, consolidate or engage in any combination with another person or sell all or substantially all of our
assets unless that transaction includes the merger or sale of all or substantially all of the assets of the Partnership,
which requires the approval of the holders of 75% of the limited partnership interests thereof. If we were to own less
than 75% of the limited partnership interests in the Partnership, this provision of the limited partnership agreement
could have the effect of delaying or preventing us from engaging in some change of control transactions.
Our Failure to Qualify as a REIT Would Have Adverse Consequences
We intend to operate in a manner that will permit us to qualify as a REIT under the Code. Qualification as a
REIT involves the application of highly technical and complex Code provisions for which there are only limited
judicial and administrative interpretations. Continued qualification as a REIT depends upon our continuing ability to
meet various requirements concerning, among other things, the ownership of our outstanding stock, the nature of our
assets, the sources of our income and the amount of our distributions to our shareholders.
In addition, a REIT is limited with respect to the services it can provide for its tenants. In the past, we have
provided certain conveniences for our tenants, including property insurance underwritten by a third party insurance
company that pays us commissions. We believe the insurance provided by the insurance company would not
constitute a prohibited service to our tenants. No assurances can be given, however, that the IRS will not challenge
our position. If the IRS successfully challenged our position, our qualification as a REIT could be adversely
affected.
If we were to fail to qualify as a REIT in any taxable year, we would not be allowed a deduction for
distributions to shareholders in computing our taxable income and would be subject to federal income tax (including
any applicable alternative minimum tax) on our taxable income at regular corporate rates. Unless entitled to relief
under certain Code provisions, we also would be ineligible for qualification as a REIT for the four taxable years
following the year during which our qualification was lost. As a result, distributions to the shareholders would be
reduced for each of the years involved. Although we currently intend to operate in a manner designed to qualify as a
REIT, it is possible that future economic, market, legal, tax or other considerations may cause our Board of
Directors to revoke our REIT election.
We May Pay Some Taxes, Reducing Cash Available for Shareholders
Even if we qualify as a REIT for federal income tax purposes, we are required to pay some federal, foreign,
11
state and local taxes on our income and property. Certain of our corporate subsidiaries have elected to be treated as
“taxable REIT subsidiaries” of the Company for federal income tax purposes. A taxable REIT subsidiary is taxable
as a regular corporation and is limited in its ability to deduct interest payments made to us in excess of a certain
amount. In addition, if we receive or accrue certain amounts and the underlying economic arrangements among our
taxable REIT subsidiaries and us are not comparable to similar arrangements among unrelated parties, we will be
subject to a 100% penalty tax on those payments in excess of amounts deemed reasonable between unrelated parties.
Finally, some state and local jurisdictions may tax some of our income even though as a REIT we are not subject to
federal income tax on that income because not all states and localities follow the federal income tax treatment of
REITs. To the extent that the Company or any taxable REIT subsidiary is required to pay federal, foreign, state or
local taxes, we will have less cash available for distribution to shareholders.
We May Change the Dividend Policy for Our Common Stock in the Future
In 2009, our board of directors authorized and we declared quarterly common stock dividends of $0.64 per
share for the first fiscal quarter; the equivalent of an annual rate of $2.56 per share. With respect to the second
quarter of 2009, recognizing the need to maintain maximum financial flexibility in light of the current state of the
capital markets, our board of directors reduced the quarterly common stock dividend to $0.45 per share, for an
annual rate of $1.80 per share. A $0.45 per share quarterly common stock dividend was also declared with respect
to the third and fourth quarters of 2009. We can provide no assurance that the board will not reduce or eliminate
entirely dividend distributions on our common stock in the future.
A recent Internal Revenue Service revenue procedure allows us to satisfy the REIT income distribution
requirements with respect to our 2010 and 2011 taxable years by distributing up to 90% of our dividends for such
years on our common stock in shares of our common stock in lieu of paying dividends entirely in cash, so long as
we follow a process allowing our shareholders to elect cash or stock subject to a cap that we impose on the
maximum amount of cash that will be paid. Although we may utilize this procedure in the future, we currently have
no intent to do so. In the event that we pay a portion of a dividend in shares of our common stock, taxable
U.S. shareholders would be required to pay tax on the entire amount of the dividend, including the portion paid in
shares of common stock, in which case such shareholders might have to pay the tax using cash from other sources.
If a U.S. shareholder sells the stock it receives as a dividend in order to pay this tax, the sales proceeds may be less
than the amount included in income with respect to the dividend, depending on the market price of our stock at the
time of the sale. Furthermore, with respect to non-U.S. shareholders, we may be required to withhold U.S. tax with
respect to such dividend, including in respect to all of or a portion of such dividend that is payable in stock. In
addition, if a significant number of our shareholders sell shares of our common stock in order to pay taxes owed on
dividends, such sales could put downward pressure on the market price of our common stock.
Our board of directors will continue to evaluate our distribution policy on a quarterly basis as they monitor
the capital markets and the impact of the economy on our operations. The decision to authorize and pay dividends
on our common stock in the future, as well as the timing, amount and composition of any such future dividends, will
be at the sole discretion of our board of directors in light of conditions then existing, including our earnings,
financial condition, capital requirements, debt maturities, the availability of capital, applicable REIT and legal
restrictions and the general overall economic conditions and other factors. Any change in our dividend policy could
have a material adverse effect on the market price of our common stock.
We May Have Rescission Liability in Connection with Sales of Unregistered Shares to Certain Investors
As previously disclosed in our Form 10-Q for the three months ended March 31, 2009, from December
2008 through April 2009, we sold an aggregate of 653,757 shares of common stock under our dividend reinvestment
and stock purchase plan (the "DRSPP") which were not registered under the Securities Act as a result of the
expiration in November 2008 of our registration statement covering the DRSPP. Some or all of those sales, which
resulted in proceeds to us of approximately $14.0 million, may have violated Section 5 of the Securities Act.
Purchasers of shares issued in violation of Section 5 have a right to rescind their purchases for a period of twelve
months following the date of original purchase under Section 13 of the Securities Act. As a result, we could be
required to repurchase some or all of the shares issued under the DRSPP during this period at the original sale price
plus statutory interest.
12
Market Interest Rates May Influence the Price of Our Common Stock
One of the factors that may influence the price of our common stock in public trading markets or in private
transactions is the annual yield on our common stock as compared to yields on other financial instruments. An
increase in market interest rates will result in higher yields on other financial instruments, which could adversely
affect the price of our common stock.
Regional Concentration of Our Business May Subject Us to Economic Downturns in the States of Texas and
Florida
As of December 31, 2009, 147 of our 381 self-storage facilities are located in the states of Texas and
Florida. For the year ended December 31, 2009, these facilities accounted for approximately 42.0% of store
revenues. This concentration of business in Texas and Florida exposes us to potential losses resulting from a
downturn in the economies of those states. If economic conditions in those states continue to deteriorate, we will
experience a reduction in existing and new business, which may have an adverse effect on our business, financial
condition and results of operations.
Changes in Taxation of Corporate Dividends May Adversely Affect the Value of Our Common Stock
The maximum marginal rate of tax payable by domestic noncorporate taxpayers on dividends received
from a regular “C” corporation under current law is 15% through 2010, as opposed to higher ordinary income rates.
The reduced tax rate, however, does not apply to distributions paid to domestic noncorporate taxpayers by a REIT
on its stock, except for certain limited amounts. Although the earnings of a REIT that are distributed to its
stockholders generally remain subject to less federal income taxation than earnings of a non-REIT “C” corporation
that are distributed to its stockholders net of corporate-level income tax, legislation that extends the application of a
lower rate of taxation to dividends paid after 2010 by “C” corporations could cause domestic noncorporate investors
to view the stock of regular “C” corporations as more attractive relative to the stock of a REIT, because the
dividends from regular “C” corporations would continue to be taxed at a lower rate while distributions from REITs
(other than distributions designated as capital gain dividends) are generally taxed at the same rate as other ordinary
income of domestic noncorporate taxpayers and the maximum rate for domestic noncorporate taxpayers will
increase in 2011 unless current tax laws are changed.
Item 1B.
Unresolved Staff Comments
None.
13
Item 2.
Properties
At December 31, 2009, we held ownership interests in and managed a total of 381 Properties situated in
twenty-four states. Among the 381 self-storage facilities are 27 Properties that we manage for a consolidated joint
venture of which we are a majority owner and 25 Properties that we manage for a joint venture of which we are a
20% owner.
Our self-storage facilities offer inexpensive, easily accessible, enclosed storage space to residential and
commercial users on a month-to-month basis. Most of our Properties are fenced with computerized gates and are
well lighted. A majority of the Properties are single-story, thereby providing customers with the convenience of
direct vehicle access to their storage spaces. Our stores range in size from 21,000 to 181,000 net rentable square
feet, with an average of approximately 65,000 net rentable square feet. The Properties generally are constructed of
masonry or steel walls resting on concrete slabs and have standing seam metal, shingle, or tar and gravel roofs. All
Properties have a property manager on-site during business hours. Customers have access to their storage areas
during business hours, and some commercial customers are provided 24-hour access. Individual storage spaces are
secured by a lock furnished by the customer to provide the customer with control of access to the space.
All of the Properties conduct business under the user-friendly name Uncle Bob's Self-Storage ®.
The following table provides certain information regarding the Properties in which we have an ownership
interest and manage as of December 31, 2009:
Alabama................................................
Arizona .................................................
Connecticut...........................................
Colorado ...............................................
Florida...................................................
Georgia .................................................
Kentucky...............................................
Louisiana ..............................................
Maine ....................................................
Maryland...............................................
Massachusetts .......................................
Michigan...............................................
Mississippi ............................................
Missouri ................................................
New Hampshire ....................................
New York .............................................
North Carolina ......................................
Ohio ......................................................
Pennsylvania .........................................
Rhode Island .........................................
South Carolina ......................................
Tennessee..............................................
Texas.....................................................
Virginia.................................................
Total....................................................
Square
Feet
1,587,552
532,834
300,860
276,927
3,641,512
1,710,528
144,872
836,350
114,265
172,083
664,614
354,608
922,933
432,039
259,555
1,590,577
723,262
1,558,905
208,400
168,346
443,158
291,204
6,624,499
1,130,226
24,690,109
Number of
Stores at
December 31,
2009
22
9
5
4
57
27
2
14
2
4
12
6
12
7
4
28
14
23
4
4
8
4
90
19
381
14
Number of
Spaces
11,895
4,723
2,866
2,374
33,394
13,935
1,323
7,309
1,010
2,037
6,067
3,035
7,116
3,791
2,331
14,566
6,223
12,900
1,630
1,565
3,782
2,457
54,563
10,528
211,420
Percentage
of Store
Revenue
4.9%
2.3%
1.9%
1.3%
15.1%
6.1%
0.6%
3.7%
0.5%
0.9%
3.2%
1.1%
3.4%
2.0%
1.0%
8.4%
2.7%
5.5%
0.8%
0.8%
1.7%
0.9%
26.9%
4.3%
100.0%
At December 31, 2009, the Properties had an average occupancy of 80.0% and an annualized rent per
occupied square foot of $10.29.
Item 3.
Legal Proceedings
In the normal course of business, we are subject to various claims and litigation. While the outcome of any
litigation is inherently unpredictable, we do not believe that any matters currently pending against the Company will
have a material adverse impact on our financial condition, results of operations or cash flows.
Item 4.
Submission of Matters to a Vote of Security Holders
No matters were submitted during the fourth quarter of the fiscal year covered by this report to a vote of
security holders, through the solicitation of proxies or otherwise.
Part II
Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of
Equity Securities
Our Common Stock is traded on the New York Stock Exchange under the symbol "SSS." Set forth below
are the high and low sales prices for our Common Stock for each full quarterly period within the two most recent
fiscal years.
Quarter 2008
1st ..............................................................................
2nd .............................................................................
3rd..............................................................................
4th..............................................................................
Quarter 2009
1st ..............................................................................
2nd .............................................................................
3rd..............................................................................
4th..............................................................................
High
$44.62
46.50
46.15
44.16
High
$36.12
26.95
33.33
38.06
Low
$33.56
41.37
35.77
19.18
Low
$16.40
19.28
22.69
28.88
As of February 15, 2010, there were approximately 1,335 holders of record of our Common Stock.
We have paid quarterly dividends to our shareholders since our inception. Reflected in the table below are
the dividends paid in the last two years.
For federal income tax purposes, distributions to shareholders are treated as ordinary income, capital gain,
return of capital or a combination thereof. Distributions to shareholders for 2009 represent 45% ordinary income,
and 55% return of capital.
History of Dividends Declared on Common Stock
March 2008................................................................
June 2008...................................................................
September 2008 .........................................................
December 2008..........................................................
$0.630 per share
$0.630 per share
$0.640 per share
$0.640 per share
March 2009................................................................
July 2009 ...................................................................
October 2009 .............................................................
$0.640 per share
$0.450 per share
$0.450 per share
January 2010..............................................................
$0.450 per share
15
EQUITY COMPENSATION PLAN INFORMATION
The following table sets forth certain information as of December 31, 2009, with respect to equity
compensation plans under which shares of the Company’s Common Stock may be issued.
Plan Category
Equity compensation plans approved by
shareholders:
2005 Award and Option Plan..............................
1995 Award and Option Plan..............................
2009 Outside Directors' Stock Option and
Award Plan ......................................................
1995 Outside Directors' Stock Option Plan ........
Deferred Compensation Plan for Directors (1) ...
Equity compensation plans not approved by
shareholders:....................................................
Number of
securities to be
issued upon
exercise of
outstanding
options, warrants
and rights (#)
Weighted average
exercise price of
outstanding
options, warrants
and rights ($)
Number of
securities
remaining available
for future issuance
(#)
316,163
46,300
9,500
25,505
29,390
N/A
$42.86
$27.23
$23.15
$46.23
N/A
N/A
998,330
0
137,044
0
27,671
N/A
(1)
Under the Deferred Compensation Plan for Directors, non-employee Directors may defer all or part of their
Directors’ fees that are otherwise payable in cash. Directors’ fees that are deferred under the Plan will be credited to
each Directors’ account under the Plan in the form of Units. The number of Units credited is determined by dividing
the amount of Directors’ fees deferred by the closing price of the Company’s Common Stock on the New York
Stock Exchange on the day immediately preceding the day upon which Directors’ fees otherwise would be paid by
the Company. A Director is credited with additional Units for dividends on the shares of Common Stock
represented by Units in such Directors’ Account. A Director may elect to receive the shares in a lump sum on a date
specified by the Director or in quarterly or annual installments over a specified period and commencing on a
specified date.
16
CORPORATE PERFORMANCE GRAPH
The following chart and line-graph presentation compares (i) the Company’s shareholder return on an
indexed basis since December 31, 2004 with (ii) the S&P Stock Index and (iii) the National Association of Real
Estate Investment Trusts Equity Index.
175
150
125
100
75
50
Dec. 31, 2004
Dec. 31, 2005
Dec. 31, 2006
Dec. 31, 2007
Dec. 31, 2008
Dec. 31, 2009
S&P 500
NAREIT
SSS
CUMULATIVE TOTAL SHAREHOLDER RETURN
SOVRAN SELF STORAGE, INC.
DECEMBER 31, 2004 - DECEMBER 31, 2009
S&P
NAREIT
SSS
Dec. 31,
2004
Dec. 31,
2005
Dec. 31,
2006
Dec. 31,
2007
Dec. 31,
2008
Dec. 31,
2009
100.00
100.00
100.00
104.91
112.17
117.89
121.48
151.49
150.77
128.15
127.72
110.72
80.74
79.54
105.80
102.11
101.80
114.07
The foregoing item assumes $100.00 invested on December 31, 2004, with dividends reinvested.
17
Item 6.
Selected Financial Data
The following selected financial and operating information should be read in conjunction with
“Management’s Discussion and Analysis of Financial Condition and Results of Operations,” and the financial
statements and related notes included elsewhere in this Annual Report on Form 10-K:
(dollars in thousands, except per
share data)
Operating Data
Operating revenues .................................
Income from continuing operations........
(Loss) income from discontinued
operations (1).......................................
Net income..............................................
Net income attributable to common
shareholders.........................................
Income from continuing operations
per common share attributable to
common shareholders– diluted ............
Net income per common share
attributable to common
shareholders – basic.............................
Net income per common share
attributable to common
shareholders – diluted.........................
Dividends declared per common
share (2) ...............................................
At or For Year Ended December 31,
2009
2008
2007
2006
2005
$ 195,011
22,438
$ 200,193
37,803
$ 190,013
40,184
$ 162,541 $ 134,524
34,379
37,306
(784)
21,654
1,880
39,683
1,661
41,845
1,738
39,044
1,940
36,319
19,916
37,399
37,958
34,098
30,667
0.87
1.63
1.73
1.80
1.72
0.84
1.72
1.81
1.90
1.86
0.84
1.54
1.72
2.54
1.81
2.50
1.89
2.47
1.84
2.44
Balance Sheet Data
Investment in storage facilities at cost.... $1,387,583
1,185,201
Total assets .............................................
481,219
Total debt................................................
520,142
Total liabilities........................................
-
Series C preferred stock..........................
$1,366,615
1,212,528
623,261
692,381
-
$1,300,847
1,164,475
566,517
610,644
-
$1,115,255
1,053,033
462,027
495,175
26,613
$865,692
784,195
339,144
364,856
26,613
Other Data
Net cash provided by operating
activities...............................................
Net cash used in investing activities .......
Net cash (used in) provided by
financing activities...............................
$59,123
(4,448)
$77,132
(82,711)
$85,175
(190,267)
$64,656
(176,567)
$60,724
(79,156)
(48,451)
6,055
61,372
154,730
20,238
(1) In 2009 we sold five stores and in 2008 we sold one store whose results of operations and (loss) gain on
disposal are classified as discontinued operations for all previous years presented.
(2) In 2009 we declared dividends in March, July, and October (see Item 5). On January 4, 2010 we declared a
dividend of $0.45 per common share, and therefore it is not included in the 2009 column.
18
Item 7.
Management's Discussion and Analysis of Financial Condition and Results of Operations
The following discussion and analysis of the consolidated financial condition and results of operations
should be read in conjunction with the financial statements and notes thereto included elsewhere in this report.
Disclosure Regarding Forward-Looking Statements
When used in this discussion and elsewhere in this document, 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 our actual results, performance or achievements 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 would 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 effectively compete in the industry in which it does business; 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; any 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 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
that may change the taxability of future income.
Business and Overview
We believe we are the fourth largest operator of self-storage properties in the United States based on
facilities owned and managed. All of our stores are operated under the user-friendly name “Uncle Bob’s Self-
Storage”®.
Operating Strategy
Our operating strategy is designed to generate growth and enhance value by:
A.
Increasing operating performance and cash flow through aggressive management of our stores:
-
-
-
We seek to differentiate our self-storage facilities from our competition through innovative
marketing and value-added product offerings including:
-
Our Customer Care Center, which answers sales inquiries and makes reservations for all of
our Properties on a centralized basis,
The Uncle Bob’s truck move-in program, under which, at present, 258 of our stores offer a
free Uncle Bob’s truck to assist our customers in moving into their spaces,
Our dehumidification system, known as Dri-guard, which provides our customers with a
better environment to store their goods and improves yields on our Properties, and
Internet marketing and sales.
-
-
-
Our “Name your Price” concession differentiates us from the “free month” offer now prevalent in
our industry, and allows us to engage the customer in a unique manner. We are able to customize
this offer based on occupancies and demand.
Our customized property management systems enable us to improve our ability to track trends, set
optimal pricing levels, enjoy considerable economies of scale in vendor and supply pricing, and
control collections and accounts receivable.
19
-
In addition, our managers are better qualified and receive a significantly higher level of training than
they did in the past, customer access and security are greatly enhanced as a result of advances in
technology, and property appearance and functionality have been improved.
B. Acquiring additional stores:
-
-
Our objective is to acquire new stores one or two at a time in markets we currently operate in. By so
doing, we can add to our existing base, which should improve market penetration in those areas, and
contribute to the benefits achieved from economies of scale.
We may also enter new markets if we can do so by acquiring a group of stores in those markets. We
feel that our marketing efforts and control systems would enhance even those portfolios that have
been managed efficiently by independent operators, and that attractive returns can be generated by
such acquisitions.
C.
Expanding our management business:
-
We see our management business as a source of future acquisitions. We may develop additional
joint ventures in which we are minority owners and managers of the self-storage facilities acquired
by these joint ventures. The joint venture agreements will give us first right of refusal to purchase
the managed properties in the event they are offered for sale.
D.
Expanding and enhancing our existing stores:
-
Over the past five years, we have undertaken a program of expanding and enhancing our Properties.
In 2007, we expended approximately $25 million to add some 444,000 square feet of premium space
(i.e., air-conditioned and/or humidity controlled) to our Properties; in 2008, we spent approximately
$26 million to add 403,000 square feet and to convert 95,000 square feet to premium storage; and in
2009, we completed construction of a new 78,000 square foot facility in Richmond Virginia, added
175,000 square feet to other existing Properties, and converted 64,000 square feet to premium
storage for a total cost of approximately $18 million.
Supply and Demand
We believe the supply and demand model in the self-storage industry is micro market specific in that a
majority of our business comes from within a five mile radius of our stores. The current economic conditions and
the credit market environment have resulted in a decrease in new supply on a national basis in 2008 and 2009. With
the decrease of debt and equity capital brought about by the credit market tightening in the past year, we have seen
capitalization rates on acquisitions (expected annual return on investment) increase to approximately 8.0% and
expect continued increases in 2010. From 2003 to 2007, the historically low interest rates available to developers
resulted in increased supply on a national basis. We experienced some of this excess supply in certain markets in
Texas and Florida from 2003 to 2007, but because of the demand model, we did not see a widespread effect on our
stores in those years. In 2008, the Florida market was negatively affected by the current economic downturn and in
2009 many markets were affected as consumers pulled back spending.
Operating Trends
Since 2007, our industry has experienced some softness in demand. This was due to the economic
slowdown that began in late 2007, and in part to regional issues, such as the reduction of hurricane driven demand in
Florida and the Gulf Coast states, and to an overall slowdown in the housing sector. We believe the housing
slowdown has impacted our industry in two ways: 1.) a reduction in lease-up activity resulting from fewer
residential real estate transactions (both buyers and sellers of residences use our product in times of transition) and
2.) a contraction of housing construction activity which has reduced the number of people working in the
construction trades (trades people are a measurable part of our usual customer base.)
20
While we enjoyed same store revenue growth from 2003 through 2008, in 2009 our same store revenue
decreased 3.1%, primarily because of the aforementioned issues. We expect conditions in most of our markets to
remain challenging and are forecasting -2% to 0% revenue growth on a same store basis in 2010.
We were able to reduce many expenses at the store operating level in 2009 to mitigate the effect of the
revenue decline. Expenses related to operating a self-storage facility had increased substantially over the previous
five years as a result of expanded hours, increased health care costs, property insurance costs, and the costs of
amenities (such as Uncle Bob’s trucks). While we do not expect further expense decreases in 2010, we do believe
expense increases will be at a manageable level of between 2% and 4%.
Critical Accounting Policies and Estimates
The discussion and analysis of our financial condition and results of operations are based upon our
consolidated financial statements, which have been prepared in accordance with U.S. generally accepted accounting
principles. The preparation of these financial statements requires us to make estimates and judgments that affect the
amounts reported in our financial statements and the accompanying notes. On an on-going basis, we evaluate our
estimates and judgments, including those related to carrying values of storage facilities, bad debts, and contingencies
and litigation. We base these estimates on experience and on various other assumptions that we believe to be
reasonable under the circumstances, the results of which form the basis for making judgments about the carrying
values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these
estimates under different assumptions or conditions.
Carrying value of storage facilities: We believe our judgment regarding the impairment of the carrying
value of our storage facilities is a critical accounting policy. Our policy is to assess any impairment of value
whenever events or circumstances indicate that the carrying value of a storage facility may not be recoverable. Such
events or circumstances would include negative operating cash flow, significant declining revenue per storage
facility, or an exception that, more likely than not, a property will be sold or otherwise disposed of significantly
before the end of its previously estimated useful life. Impairment is evaluated based upon comparing the sum of the
expected undiscounted future cash flows to the carrying value of the storage facility, on a property by property basis.
If the sum of the undiscounted cash flow is less than the carrying amount, an impairment loss is recognized for the
amount by which the carrying amount exceeds the fair value of the asset. If cash flow projections are inaccurate and
in the future it is determined that storage facility carrying values are not recoverable, impairment charges may be
required at that time and could materially affect our operating results and financial position. Estimates of
undiscounted cash flows could change based upon changes in market conditions, expected occupancy rates, etc. At
December 31, 2009 and 2008, no assets had been determined to be impaired under this policy.
Estimated useful lives of long-lived assets: We believe that the estimated lives used for our depreciable,
long-lived assets is a critical accounting policy. We periodically evaluate the estimated useful lives of our long-
lived assets to determine if any changes are warranted based upon various factors, including changes in the planned
usage of the assets, customer demand, etc. Changes in estimated useful lives of these assets could have a material
adverse impact on our financial condition or results of operations. We have not made significant changes to the
estimated useful lives of our long-lived assets in the past and we don’t have any current expectation of making
significant changes in 2010.
Consolidation and investment in joint ventures: We consolidate all wholly owned subsidiaries. Partially
owned subsidiaries and joint ventures are consolidated when we control the entity. Investments in joint ventures
that we do not control but for which we have significant influence over are reported using the equity method. Under
the equity method, our investment in joint ventures are stated at cost and adjusted for our share of net earnings or
losses and reduced by distributions. Equity in earnings of real estate ventures is generally recognized based on our
ownership interest in the earnings of each of the unconsolidated real estate ventures.
Revenue and Expense Recognition: Rental income is recognized when earned pursuant to month-to-month
leases for storage space. Promotional discounts are recognized as a reduction to rental income over the promotional
period, which is generally during the first month of occupancy. Rental income received prior to the start of the
rental period is included in deferred revenue.
21
Qualification as a REIT: We operate, and intend to continue to operate, as a REIT under the Code, but no
assurance can be given that we will at all times so qualify. To the extent that we continue to qualify as a REIT, we
will not be taxed, with certain limited exceptions, on the taxable income that is distributed to our shareholders. If we
fail to qualify as a REIT, any requirement to pay federal income taxes could have a material adverse impact on our
financial conditions and results of operations.
Recent Accounting Pronouncements
In June 2009, the FASB issued revised accounting guidance under ASC Topic 810, "Consolidation" by
issuing SFAS No. 167, "Amendments to FASB Interpretation No. 46(R)" ("SFAS 167"). The revised guidance
amends previous guidance (as previously required under FASB Interpretation No. 46(R), "Variable Interest
Entities") for determining whether an entity is a variable interest entity ("VIE") and requires an enterprise to perform
an analysis to determine whether the enterprise's variable interest or interests give it a controlling financial interest
in a VIE. Under the revised guidance, an enterprise has a controlling financial interest when it has a) the power to
direct the activities of a VIE that most significantly impact the entity's economic performance and b) the obligation
to absorb losses of the entity or the right to receive benefits from the entity that could potentially be significant to the
VIE. The revised guidance also requires an enterprise to assess whether it has an implicit financial responsibility to
ensure that a VIE operates as designed when determining whether it has power to direct the activities of the VIE that
most significantly impact the entity's economic performance. The revised guidance also requires ongoing
assessments of whether an enterprise is the primary beneficiary of a VIE, requires enhanced disclosures and
eliminates the scope exclusion for qualifying special-purpose entities. The revised guidance is effective for the first
annual reporting period that begins after November 15, 2009, with early adoption prohibited. The Company is
currently evaluating the impact that the adoption of the revised guidance will have on its consolidated financial
statements.
YEAR ENDED DECEMBER 31, 2009 COMPARED TO
YEAR ENDED DECEMBER 31, 2008
We recorded rental revenues of $186.9 million for the year ended December 31, 2009, a decrease of $5.6
million or 2.9% when compared to 2008 rental revenues of $192.5 million. Of the decrease in rental revenue, $6.2
million resulted from a 3.2% decrease in rental revenues at the 352 core properties considered in same store sales
(those properties included in the consolidated results of operations since January 1, 2008). The decrease in same
store rental revenues was a result of a 2.1% decrease in average rental income per square foot as a result of increased
move-in incentives used in 2009 to attract customers. We also experienced a decrease in square foot occupancy of
115 basis points, which we believe resulted from general economic conditions, in particular the housing sector.
These decreases were partially offset by a $0.6 million increase in rental revenues resulting from having the three
stores acquired in 2008 included for a full year of operations. Other income, which includes merchandise sales,
insurance commissions, truck rentals, management fees and acquisition fees, increased in 2009 primarily as a result
of $0.3 million increase in commissions earned from our customer insurance program.
Property operating and real estate tax expense decreased $2.0 million, or 2.7%, in 2009 compared to 2008.
Much of the decrease resulted from numerous expense control initiatives and from a reduction in yellow page
advertising at the 352 core properties considered same stores. These expense decreases were partially offset by a
4.1% increase in same store property tax expense and $0.3 million of additional expenses incurred from having the
2008 acquisitions included for a full year of operations. We expect same-store operating costs to increase only
moderately in 2010 with increases primarily attributable to utilities and property taxes.
General and administrative expenses increased $1.4 million or 7.9% from 2008 to 2009. The increase
primarily resulted from the write-off of construction in progress projects that were terminated and an increase in
internet advertising.
Depreciation and amortization expense decreased to $33.4 million in 2009 from $33.9 million in 2008,
primarily as a result of a $1.0 million decrease in amortization of in-place customers leases relating to previous year
acquisitions, offset partially by a full year of depreciation on those acquisitions.
22
Interest expense increased from $38.1 million in 2008 to $50.1 million in 2009 as a result of the following
factors:
A credit ratings downgrade by Fitch Ratings in May 2009 on our unsecured floating rate notes
triggered a 1.75% increase in the interest rate on our $150 million term notes and a 0.375% increase in
the interest rate on our $250 million term notes. The increase was effective from May to October of
2009, at which time our credit rating was upgraded back to investment grade rating after our common
stock offering in October 2009;
At March 31, 2009, the Company had violated the leverage ratio covenant contained in the line of
credit and term note agreements. In May 2009, the Company obtained a waiver of the violation as of
March 31, 2009. The fees paid to obtain the waiver were approximately $0.9 million and are included
in 2009 interest expense and;
On October 5, 2009, the Company used proceeds from the issuance of common stock to terminate the
interest rate swap agreements with notional amounts of $75 million and $25 million (see Note 9 of our
financial statements). The total cost to terminate the swaps was $8.4 million and is included as
additional interest expense in 2009 and;
In October 2009, we wrote-off to interest expense $0.6 million of unamortized financing fees related to
the $100 million term note that was repaid with the proceeds of the common stock offering.
The casualty loss recorded in 2009 relates to insurance proceeds received that were less than the carrying
value of a building damaged by a fire at one of our facilities.
During 2009, we sold a parcel of land to the State of Georgia Department of Transportation for their use as
part of a road widening project for net cash proceeds of $1.1 million resulting in a gain on sale of $1.1 million.
As described in Note 5 to the financial statements, during 2009 the Company sold five non-strategic storage
facilities for net cash proceeds of $16.3 million resulting in a loss of $1.6 million. During 2008 the Company sold
one non-strategic storage facility for net cash proceeds of $7.0 million resulting in a gain of $0.7 million. The 2009,
2008, and 2007 operations of these facilities and the loss/gain associated with the disposal are reported in income
from discontinued operations for all periods presented.
YEAR ENDED DECEMBER 31, 2008 COMPARED TO
YEAR ENDED DECEMBER 31, 2007
We recorded rental revenues of $192.5 million for the year ended December 31, 2008, an increase of $8.7
million or 4.7% when compared to 2007 rental revenues of $183.8 million. Of the increase in rental revenue, $1.3
million resulted from a 0.7% increase in rental revenues at the 321 core properties considered in same store sales
(those properties included in the consolidated results of operations since January 1, 2007). The increase in same
store rental revenues was achieved primarily through rate increases on select units averaging 1.9%, offset by a
decrease in square foot occupancy of 150 basis points, which we believe resulted from general economic conditions,
in particular the housing sector. The remaining $7.4 million increase in rental revenues resulted from the acquisition
of three stores during 2008 and from having the 31 stores acquired in 2007 included for a full year of operations.
Other income, which includes merchandise sales, insurance commissions, truck rentals, management fees and
acquisition fees, increased in 2008 primarily as a result of $1.1 million of management and acquisition fees
generated from our unconsolidated joint venture, Sovran HHF Storage Holdings LLC.
Property operating and real estate tax expense increased $5.0 million, or 7.3%, in 2008 compared to 2007.
Of this increase, $2.7 million were expenses incurred by the facilities acquired in 2008 and from having expenses
from the 2007 acquisitions included for a full year of operations. $2.3 million of the increase was due to increased
payroll, property taxes, utilities, and maintenance expenses at the 321 core properties considered same stores.
General and administrative expenses increased $2.0 million or 13.4% from 2007 to 2008. The increase
primarily resulted from the costs associated with operating the properties acquired in 2008 and 2007, and from
managing the 25 properties acquired by our joint venture in 2008.
23
Depreciation and amortization expense increased to $33.9 million in 2008 from $33.4 million in 2007,
primarily as a result of additional depreciation taken on real estate assets acquired in 2008, and a full year of
depreciation on 2007 acquisitions, offset by a decrease in amortization of in-place customers leases relating to these
acquisitions.
Interest expense increased from $33.9 million in 2007 to $38.1 million in 2008 as a result of additional
borrowings under our line of credit and term notes to purchase three stores in 2008, as well as an increase in interest
rates as a result of our debt refinancing in June 2008.
As described in Note 5 to the financial statements, during 2009, the Company sold five non-strategic
storage facilities in Massachusetts, North Carolina, and Pennsylvania for net cash proceeds of $16.3 million
resulting in a loss of $1.6 million. In 2008, the Company sold one non-strategic storage facility located in Michigan
for net cash proceeds of $7.0 million resulting in a gain of $0.7 million. The 2008 and 2007 operations of these
facilities are reported as discontinued operations.
The decrease in preferred stock dividends from 2007 to 2008 was a result of the conversion of
all remaining 1,200,000 shares of our Series C Preferred Stock into 920,244 shares of common stock in July 2007.
FUNDS FROM OPERATIONS
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.
FFO 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.
24
Reconciliation of Net Income to Funds From Operations
(dollars in thousands)
Net income attributable to common
For Year Ended December 31,
2005
2007
2008
2006
2009
shareholders .........................................
$19,916
$37,399
$37,958
$34,098
$30,667
Net income attributable to
noncontrolling interests........................
1,738
2,284
2,631
2,434
1,529
Depreciation of real estate and
amortization of intangible assets
exclusive of deferred financing fees.....
Depreciation of real estate included in
discontinued operations........................
Depreciation and amortization from
unconsolidated joint ventures...............
Casualty gain ...........................................
Loss (gain) on sale of real estate..............
Funds from operations allocable to
noncontrolling interest in Operating
Partnership ...........................................
Funds from operations allocable to
noncontrolling interest in consolidated
joint ventures........................................
Funds from operations available to
33,385
33,876
33,360
24,653
20,604
434
820
-
509
591
333
-
(716)
676
59
(114)
-
652
168
-
-
618
484
-
-
(984)
(1,366)
(1,425)
(1,450)
(1,519)
(1,360)
(1,564)
(1,848)
(1,785)
(1,499)
common shareholders ..........................
$54,458
$70,837
$71,297
$58,770
$50,884
LIQUIDITY AND CAPITAL RESOURCES
Our line of credit and term notes require us to meet certain financial covenants measured on a quarterly
basis, including prescribed leverage, fixed charge coverage, minimum net worth, limitations on additional
indebtedness and limitations on dividend payouts. At December 31, 2009, the Company was in compliance with all
debt covenants. The most sensitive covenant is the leverage ratio covenant contained in our line of credit and term
note agreements. This covenant limits our total consolidated liabilities to 55% of our gross asset value. At
December 31, 2009, our leverage ratio as defined in the agreements was approximately 42.8%. The agreements
define total consolidated liabilities to include the liabilities of the Company plus our share of liabilities of
unconsolidated joint ventures. The agreements also define a prescribed formula for determining gross asset value
which incorporates the use of a 9.25% capitalization rate applied to annualized earnings before interest, taxes,
depreciation and amortization ("EBITDA") as defined in the agreements. At March 31, 2009, the Company had
violated the leverage ratio covenant contained in the line of credit and term note agreements. In May 2009, the
Company obtained a waiver of the violation as of March 31, 2009. The fees paid to obtain the waiver were
approximately $0.9 million and are included in interest expense in 2009. In the event that the Company violates
debt covenants in the future, the amounts due under the agreements could be callable by the lenders.
On May 6, 2009, we announced a reduction in our quarterly dividend for the remainder of 2009 from $0.64
per share to $0.45 per share. In addition to the reduction in the dividend, in the second quarter of 2009 we changed
our policy of declaring the dividend from the last week in the quarter to the first week following the quarter end. As
a result of this date change, no dividend was declared in the three months ended June 30, 2009. A dividend of $0.45
per common share was declared on January 4, 2010 and paid on January 26, 2010. The dividend paid amounted to
$12.4 million. In 2010, we expect to declare and pay four dividends in the calendar year.
On October 5, 2009, the Company completed the public offering of 4,025,000 shares of its common stock
at $29.75 per share. Net proceeds to the Company after deducting underwriting discounts and commissions and
estimated offering expenses were approximately $114.0 million. The Company used the net proceeds from the
offering to repay $100 million of the Company's unsecured term note due June 2012 and to terminate two interest
rate swaps relating to the debt repaid at a cost of $8.4 million. The Company used the remaining proceeds along
with operating cash flows to payoff a maturing mortgage in December 2009 of $26.1 million.
25
We believe that the steps the Company has taken, including but not limited to the equity raised from our
common stock offering of approximately $114.0 million, the pay down of $100 million of our term notes, and the
reduction in the quarterly dividend, will be adequate to avoid future covenant violations under the current terms of
our line of credit and term note agreements.
Our ability to retain cash flow is limited because we operate as a REIT. In order to maintain our REIT
status, a substantial portion of our operating cash flow must be used to pay dividends to our shareholders. We
believe that our internally generated net cash provided by operating activities and our availability on our line of
credit will be sufficient to fund ongoing operations, capital improvements, dividends and debt service requirements
through June 2011, at which time our revolving line of credit matures. Future draws on our line of credit may be
limited due to covenant restrictions.
Cash flows from operating activities were $59.1 million, $77.1 million and $85.2 million for the years
ended December 31, 2009, 2008, and 2007, respectively. The decrease in operating cash flows from 2008 to 2009
was primarily due to a decrease in net income. The decrease in net income was primarily a result of lower rental
income and increased interest expense. The decrease in operating cash from 2007 to 2008 was primarily attributable
to a decrease in net income and accounts payable remaining consistent with the prior year.
Cash used in investing activities was $4.4 million, $82.7 million, and $190.3 million for the years ended
December 31, 2009, 2008, and 2007 respectively. The decrease in cash used from 2008 to 2009 was due to (i)
reduced acquisition and capital improvement activity in 2009, (ii) an increase in proceeds from the sale of storage
facilities, and (iii) a reduction in the funding of our share of the joint venture entered into in 2008. The decrease in
cash used from 2007 to 2008 was attributable to reduced acquisition activity in 2008 as many of the properties
acquired were acquired through a joint venture of which we are a 20% owner.
Cash used in financing activities was $48.5 million in 2009, compared to cash provided by financing
activities of $6.0 million in 2008 and $61.4 million in 2007. In 2009, we used our operating cash flow and the
proceeds from our common stock offering to paydown $14.0 million of our line of credit, $100 million of term
notes, and a $26.1 million mortgage. Our reduced acquisition activity in 2008 was the driver behind the decrease in
cash provided from financing activities from 2007 to 2008.
On June 25, 2008, we entered into agreements relating to new unsecured credit arrangements, and received
funds under those arrangements. As part of the agreements, the Company entered into a $250 million unsecured
term note maturing in June 2012 bearing interest at LIBOR plus 1.625% (based on the Company's December 31,
2009 credit rating). The proceeds from this term note were used to repay the Company's previous line of credit that
was to mature in September 2008, the Company's term note that was to mature in September 2009, the term note
maturing in July 2008, and to provide for working capital. We repaid $100 million of this term note with the
proceeds of our common stock offering. The agreements also provide for a $125 million (expandable to $175
million) revolving line of credit maturing June 2011 bearing interest at a variable rate equal to LIBOR plus 1.375%
(based on the Company's credit rating at December 31, 2009), and requires a 0.25% facility fee. The interest rate at
December 31, 2009 on the Company's available line of credit was approximately 1.61% (1.8% at December 31,
2008). At December 31, 2009, there was $125 million available on the unsecured line of credit. We believe that if
operating results remain consistent with historical levels and levels of other debt and liabilities remain consistent
with amounts outstanding at December 31, 2009, the entire $125 million line of credit could be drawn without
violating our debt covenants.
We also maintain a $80 million term note maturing September 2013 bearing interest at a fixed rate of
6.26%, a $20 million term note maturing September 2013 bearing interest at a variable rate equal to LIBOR plus
1.50%, and a $150 million unsecured term note maturing in April 2016 bearing interest at 6.38% (based on our
December 31, 2009 credit ratings).
Prior to our October 2009 common stock offering, the line of credit facility and term notes had an
investment grade rating from Standard and Poor's (BBB-). Due to our debt covenant violation and operating trends,
Fitch Ratings downgraded the Company's rating on its revolving credit facility and term notes to non-investment
26
grade (BB+) in May 2009. As a result of our common stock offering in October 2009 and the use of proceeds to
repay $100 million of term notes, Fitch Ratings upgraded our rating on our line of credit and term notes again to
investment grade (BBB-). Combined, this credit rating upgrade, the repayment of $100 million of term notes and
the termination of the interest rate swaps related to these term notes are expected to reduce our annualized interest
by approximately $9.8 million.
In addition to the unsecured financing mentioned above, our consolidated financial statements also include
$81.2 million of mortgages payable as detailed below:
*
7.80% mortgage note due December 2011, secured by 11 self-storage facilities (Locke Sovran I) with an
aggregate net book value of $42.7 million, principal and interest paid monthly. The outstanding balance
at December 31, 2009 on this mortgage was $28.4 million.
*
7.19% mortgage note due March 2012, secured by 27 self-storage facilities (Locke Sovran II) with an
*
*
*
aggregate net book value of $80.3 million, principal and interest paid monthly. The outstanding balance
at December 31, 2009 on this mortgage was $41.5 million.
7.25% mortgage note due December 2011, secured by 1 self-storage facility with an aggregate net book value
of $5.7 million, principal and interest paid monthly. Estimated market rate at time of acquisition 5.40%.
The outstanding balance at December 31, 2008 on this mortgage was $3.4 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 December 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
$3.7 million, principal and interest paid monthly. The outstanding balance at December 31, 2009 on this
mortgage was $1.1 million.
*
7.50% mortgage notes due August 2011, secured by 3 self-storage facilities with an aggregate net book value
of $14.0 million, principal and interest paid monthly. Estimated market rate at time of acquisition 6.42%.
The outstanding balance at December 31, 2009 on this mortgage was $5.9 million.
The 7.80% and 7.19% mortgages were incurred in 2001 and 2002 respectively as part of the financing of
the consolidated joint ventures. The Company assumed the 7.25%, 6.76%, 6.35%, and 7.50% mortgage notes in
connection with the acquisitions of storage facilities in 2005 and 2006.
During 2009, we issued approximately 1.4 million shares via our Dividend Reinvestment and Stock
Purchase Plan and Employee Stock Option Plan. We received $32.6 million from the sale of such shares. Our
Dividend Reinvestment and Stock Purchase Plan was suspended in November 2009. We plan to reinstate our
Dividend Reinvestment and Stock Purchase Plan in 2010 and expect to issue shares when our share price and capital
needs warrant such issuance.
During 2009 and 2008, we did not acquire any shares of our common stock via the Share Repurchase
Program authorized by the Board of Directors. From the inception of the Share Repurchase Program through
December 31, 2009, we have reacquired a total of 1,171,886 shares pursuant to this program. From time to time,
subject to market price and certain loan covenants, we may reacquire additional shares.
Future acquisitions, our expansion and enhancement program, and share repurchases are expected to be
funded with draws on our line of credit, sale of properties and private placement solicitation of joint venture equity.
Current capital market conditions may prevent us from accessing other traditional sources of capital including the
issuance of common and preferred stock and the issuance of unsecured term notes. Should these capital market
conditions persist, we may have to curtail acquisitions, our expansion and enhancement program, and share
repurchases as we approach June 2011, when our line of credit matures.
27
CONTRACTUAL OBLIGATIONS
The following table summarizes our future contractual obligations:
Payments due by period
Contractual
obligations
Line of credit............
Term notes ...............
Mortgages payable ...
Interest payments .....
Interest rate swap
payments ................
Land lease ................
Building leases .........
Total .........................
Total
2010
2011-2012
2013-2014
2015 and thereafter
-
$400.0 million
$81.2 million
$99.2 million
-
-
$2.2 million
$23.8 million
-
$150.0 million
$77.1 million
$40.6 million
-
$100.0 million
$1.9 million
$22.9 million
$11.5 million
$1.1 million
$0.1 million
$593.1 million
$7.0 million
$0.1 million
$0.1 million
$33.2 million
$4.2 million
$0.1 million
-
$272.0 million
$0.3 million
$0.1 million
-
$125.2 million
-
$150.0 million
-
$11.9 million
-
$0.8 million
-
$162.7 million
Interest payments include actual interest on fixed rate debt and estimated interest for floating-rate debt
based on December 31, 2009 rates. Interest rate swap payments include net settlements of swap liabilities based on
forecasted variable rates.
ACQUISITION OF PROPERTIES
We acquired no properties in 2009. During 2008, we used operating cash flow, borrowings pursuant to the
line of credit, borrowings under the bank term note, and proceeds from our Dividend Reinvestment and Stock
Purchase Plan to acquire three Properties in Mississippi and Ohio comprising 0.2 million square feet from
unaffiliated storage operators. During 2007, we used operating cash flow, borrowings pursuant to the line of credit,
borrowings under the bank term note, proceeds from our Dividend Reinvestment and Stock Purchase Plan, and
proceeds from the December 2006 common stock offering to acquire 31 Properties in Alabama, Florida, Mississippi,
New York, and Texas comprising 2.3 million square feet from unaffiliated storage operators.
FUTURE ACQUISITION AND DEVELOPMENT PLANS
Our external growth strategy is to increase the number of facilities we own by acquiring suitable facilities
in markets in which we already have operations, or to expand in new markets by acquiring several facilities at once
in those new markets. No properties were acquired in 2009 and acquisitions in 2010 may be limited due to the fact
that, at present, seller’s asking prices remain considerably higher than the Company believes market conditions
warrant.
In 2009 we scaled back a planned $550 million program to expand and enhance our existing properties.
Instead we spent approximately $18 million to add 175,000 square feet to existing Properties, and to convert 64,000
square feet to premium storage. We also completed construction of a new 78,000 square foot facility in Richmond,
Virginia. Although we do not expect to construct any new facilities in 2010, we do plan to expend up to $20 million
to expand and enhance existing facilities.
DISPOSITION OF PROPERTIES
During 2009, we sold five non-strategic storage facilities in Massachusetts, North Carolina, and
Pennsylvania for net cash proceeds of $16.3 million resulting in a loss of $1.6 million. During 2008, we sold one
non-strategic storage facility located in Michigan for net cash proceeds of $7.0 million resulting in a gain of $0.7
million. No sales took place in 2007.
We may seek to sell additional Properties to third parties or joint venture programs in 2010.
28
OFF-BALANCE SHEET ARRANGEMENTS
We have a 20% ownership interest in Sovran HHF Storage Holdings LLC (“Sovran HHF”), a joint venture
that was formed in May 2008 to acquire self-storage properties that are managed by us. The carrying value of our
investment at December 31, 2009 was $19.9 million. Twenty five properties were acquired by Sovran HHF as of
December 31, 2008 for approximately $171.5 million. We contributed $18.6 million to the joint venture as our
share of capital required to fund the acquisitions.
As manager of Sovran HHF, we earn a management and call center fee of 7% of gross revenues which
totaled $1.2 million and $0.5 million for 2009 and 2008, respectively. We also received an acquisition fee of 0.5%
or $0.7 million of purchase price for securing purchases for the joint venture in 2008. Our share of Sovran HHF’s
income for 2009 and 2008 was $0.2 million and $0.1 million, respectively. At December 31, 2009, Sovran HHF
owed us $0.2 million for payments made by us on behalf of the joint venture.
We also have a 49% ownership interest in Iskalo Office Holdings, LLC, which owns the building that
houses the Company's headquarters and other tenants. Our investment includes a capital contribution of $49. The
carrying value of our investment is a liability of $0.5 million at December 31, 2009 and 2008, and is included in
accounts payable and accrued liabilities in the accompanying consolidated balance sheets. For the years ended
December 31, 2009, 2008 and 2007, our share of Iskalo Office Holdings, LLC's income (loss) was $7,000, ($6,000),
and $80,000, respectively. We paid rent to Iskalo Office Holdings, LLC of $608,000, $600,000 and $561,000 in
2009, 2008, and 2007, respectively. Future minimum lease payments under the lease are $0.6 million per year
through 2010.
A summary of the unconsolidated joint venture’s financial statements as of and for the year ended December
31, 2009 is as follows:
(dollars in thousands)
Balance Sheet Data:
Investment in storage facilities, net
Investment in office building
Other assets
Total Assets
Due to the Company
Mortgages payable
Other liabilities
Total Liabilities
Unaffiliated partners' equity (deficiency)
Company equity (deficiency)
Total Liabilities and Partners' Equity (deficiency)
Income Statement Data:
Total revenues
Total expenses
Net income
Sovran HHF
Storage
Holdings LLC
Iskalo Office
Holdings, LLC
$ 168,237
-
3,575
$ 171,812
=======
$ 173
78,512
2,087
80,772
72,832
18,208
$ 171,812
=======
$ -
5,322
688
$ 6,010
=======
$ -
7,037
224
7,261
(714)
(537)
$ 6,010
======
$ 17,702
16,761
$ 941
=======
$ 1,129
1,115
$ 14
======
We do not expect to have material future cash outlays relating to these joint ventures outside our share of
capital for future acquisitions of properties by Sovran HHF. We do not guarantee the debt of Sovran HHF or Iskalo
Office Holdings, LLC. A summary of our cash flows arising from the off-balance sheet arrangements with Sovran
29
HHF and Iskalo Office Holdings, LLC for the three years ended December 31, 2009 are as follows:
(dollars in thousands)
Statement of Operations
Other operating income (management fees and acquisition fee
income)...................................................................................
General and administrative expenses (corporate office rent).......
Equity in income of joint ventures...............................................
Distributions from unconsolidated joint ventures ........................
Investing activities
Investment in joint ventures.........................................................
Reimbursement of advances to (advances to) joint ventures .......
Year ended December 31,
2009
2008
2007
$ 1,243
608
235
686
(331)
163
$ 1,135
600
104
345
(20,287)
(336)
$ -
561
119
98
-
-
REIT QUALIFICATION AND DISTRIBUTION REQUIREMENTS
As a REIT, we are not required to pay federal income tax on income that we distribute to our shareholders,
provided that the amount distributed is equal to at least 90% of our taxable income. These distributions must be
made in the year to which they relate, or in the following year if declared before we file our federal income tax
return, and if it is paid before the first regular dividend of the following year. The first distribution of 2010 may be
applied toward our 2009 distribution requirement.
As a REIT, we must derive at least 95% of our total gross income from income related to real property,
interest and dividends. In 2009, our percentage of revenue from such sources was approximately 98%, thereby
passing the 95% test, and no special measures are expected to be required to enable us to maintain our REIT
designation. Although we currently intend to operate in a manner designed to qualify as a REIT, it is possible that
future economic, market, legal, tax or other considerations may cause our Board of Directors to revoke our REIT
election.
INTEREST RATE RISK
We have entered into interest rate swap agreements in order to mitigate the effects of fluctuations in interest
rates on our variable rate debt. At December 31, 2009, we have three outstanding interest rate swap agreements as
summarized below:
Notional Amount
Effective Date
Expiration Date
Fixed
Rate Paid
Floating Rate
Received
$20 Million ...........................
$50 Million ...........................
$100 Million .........................
9/4/05
7/1/08
7/1/08
9/4/13
6/25/12
6/22/12
4.4350%
4.2825%
4.2965%
6 month LIBOR
1 month LIBOR
1 month LIBOR
Upon renewal or replacement of the credit facility, our total interest may change dependent on the terms we
negotiate with the lenders; however, the LIBOR base rates have been contractually fixed on $170 million of our debt
through the interest rate swap termination dates.
Through June 2012, all of our $400 million of unsecured debt is on a fixed rate basis after taking into
account the interest rate swaps noted above. Based on our outstanding unsecured debt of $400 million at December
31, 2009, a 100 basis point increase in interest rates would have no effect on our interest expense.
The table below summarizes our debt obligations and interest rate derivatives at December 31, 2009. The
estimated fair value of financial instruments is subjective in nature and is dependent on a number of important
assumptions, including discount rates and relevant comparable market information associated with each financial
30
instrument. The use of different market assumptions and estimation methodologies may have a material effect on
the reported estimated fair value amounts. Accordingly, the estimates presented below are not necessarily indicative
of the amounts the Company would realize in a current market exchange.
(dollars in thousands)
2010
2011
2012
2013
2014
Thereafter
Total
Fair
Value
Expected Maturity Date Including Discount
Line of credit - variable rate LIBOR + 1.375
(1.61% at December 31, 2009) .....................
-
-
-
-
-
-
-
-
Notes Payable:
Term note - variable rate LIBOR+1.625%
(1.86% at December 31, 2009) .....................
Term note - variable rate LIBOR+1.50%
(2.23% at December 31, 2009) .....................
Term note - fixed rate 6.26%.............................
Term note - fixed rate 6.38%.............................
-
-
-
-
-
-
-
-
$150,000
-
-
-
-
-
$ 20,000
$ 80,000
-
-
-
-
-
-
-
-
-
-
-
-
-
$150,000
$150,000
-
-
$ 20,000
$ 20,000
$ 80,000
$ 76,958
$ 150,000
$150,000
$136,630
-
-
-
-
-
-
-
$ 28,447
$ 29,454
$ 41,475
$ 43,133
$ 3,369
$ 3,385
$ 977
$ 1,011
$ 1,072
$ 1,059
$ 5,879
$ 6,003
-
$ 11,524
Mortgage note - fixed rate 7.80% ......................
$ 630
$ 27,817
Mortgage note - fixed rate 7.19% ......................
$ 1,211
$ 1,301
$ 38,963
Mortgage note - fixed rate 7.25% ......................
$ 149
$ 3,220
-
Mortgage note - fixed rate 6.76% ......................
$ 25
$ 27
$ 29
$ 896
Mortgage note - fixed rate 6.35% ......................
$ 28
$ 30
$ 31
$ 34
$ 949
Mortgage notes - fixed rate 7.50% ....................
$ 222
$ 5,657
Interest rate derivatives – liability .....................
-
-
-
-
-
-
-
-
INFLATION
We do not believe that inflation has had or will have a direct effect on our operations. Substantially all of
the leases at the facilities are on a month-to-month basis which provides us with the opportunity to increase rental
rates as each lease matures.
SEASONALITY
Our revenues typically have been higher in the third and fourth quarters, primarily because we increase
rental rates on most of our storage units at the beginning of May and because self-storage facilities tend to
experience greater occupancy during the late spring, summer and early fall months due to the greater incidence of
residential moves during these periods. However, we believe that our customer mix, diverse geographic locations,
rental structure and expense structure provide adequate protection against undue fluctuations in cash flows and net
revenues during off-peak seasons. Thus, we do not expect seasonality to affect materially distributions to
shareholders.
Item 7A.
Quantitative and Qualitative Disclosures About Market Risk
The information required is incorporated by reference to the information appearing under the caption
"Interest Rate Risk" in Item 7. Management's Discussion and Analysis of Financial Condition and Results of
Operations" above.
31
Item 8.
Financial Statements and Supplementary Data
Report of Independent Registered Public Accounting Firm
The Board of Directors and Shareholders of Sovran Self Storage, Inc.
We have audited the accompanying consolidated balance sheets of Sovran Self Storage, Inc. as of
December 31, 2009 and 2008, and the related consolidated statements of operations, shareholders’ equity and
comprehensive income, and cash flows for each of the three years in the period ended December 31, 2009. Our
audits also included the financial statement schedule listed in the Index at Item 15(a). These financial statements and
schedule are the responsibility of the Company’s management. Our responsibility is to express an opinion on these
financial statements and schedule based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight
Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance
about whether the financial statements are free of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing
the accounting principles used and significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the
consolidated financial position of Sovran Self Storage, Inc. at December 31, 2009 and 2008, and the consolidated
results of its operations and its cash flows for each of the three years in the period ended December 31, 2009, in
conformity with U.S. generally accepted accounting principles. Also, in our opinion, the related financial statement
schedule, when considered in relation to the basic financial statements taken as a whole, presents fairly in all
material respects the information set forth therein.
As discussed in Note 2 to the consolidated financial statements, the Company retrospectively adjusted the
consolidated financial statements as a result of the Company’s adoption of Statement of Financial Accounting
Standards No. 160, “Noncontrolling Interests in Consolidated Financial Statements – an Amendment of ARB No.
51” (codified in FASB ASC Topic 810 “Consolidation”) on January 1, 2009.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight
Board (United States), Sovran Self Storage, Inc.’s internal control over financial reporting as of December 31, 2009,
based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring
Organizations of the Treadway Commission and our report dated February 26, 2010 expressed an unqualified
opinion thereon.
/s/ Ernst & Young LLP
Buffalo, New York
February 26, 2010
32
SOVRAN SELF STORAGE, INC.
CONSOLIDATED BALANCE SHEETS
(dollars in thousands, except share data)
Assets
Investment in storage facilities:
Land..............................................................................................................
Building, equipment, and construction in progress ......................................
Less: accumulated depreciation....................................................................
Investment in storage facilities, net ...............................................................
Cash and cash equivalents .............................................................................
Accounts receivable.......................................................................................
Receivable from related parties .....................................................................
Receivable from unconsolidated joint venture ..............................................
Investment in unconsolidated joint venture ...................................................
Prepaid expenses ...........................................................................................
Other assets....................................................................................................
Net assets of discontinued operations............................................................
Total Assets .................................................................................................
Liabilities
Line of credit .................................................................................................
Term notes .....................................................................................................
Accounts payable and accrued liabilities.......................................................
Deferred revenue ...........................................................................................
Fair value of interest rate swap agreements...................................................
Accrued dividends .........................................................................................
Mortgages payable.........................................................................................
Total Liabilities ...........................................................................................
December 31,
2008
2009
$ 237,684
1,149,899
1,387,583
(245,178)
1,142,405
10,710
2,405
-
173
19,944
4,250
5,314
-
$ 1,185,201
$ -
400,000
22,339
5,060
11,524
-
81,219
520,142
$ 236,655
1,129,960
1,366,615
(212,301)
1,154,314
4,486
2,934
14
336
20,111
4,647
7,460
18,226
$ 1,212,528
$ 14,000
500,000
23,970
5,570
25,490
14,090
109,261
692,381
Noncontrolling redeemable Operating Partnership Units at
redemption value .......................................................................................
15,005
15,118
Shareholders' Equity
Common stock $.01 par value, 100,000,000 shares authorized, 27,547,027
shares outstanding (22,016,348 at December 31, 2008) ............................
Additional paid-in capital ..............................................................................
Dividends in excess of net income ................................................................
Accumulated other comprehensive income ...................................................
Treasury stock at cost, 1,171,886 shares .......................................................
Total Shareholders' Equity...........................................................................
Noncontrolling interest- consolidated joint venture.......................................
Total Equity .................................................................................................
Total Liabilities and Shareholders' Equity...................................................
See notes to consolidated financial statements.
287
814,988
(139,863)
(11,265)
(27,175)
636,972
13,082
650,054
$ 1,185,201
232
666,633
(122,581)
(25,162)
(27,175)
491,947
13,082
505,029
$ 1,212,528
33
SOVRAN SELF STORAGE, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(dollars in thousands, except per share data)
2009
2008
2007
Year Ended December 31,
Revenues
Rental income ........................................................................
Other operating income .........................................................
Total operating revenues.......................................................
Expenses
Property operations and maintenance ....................................
Real estate taxes.....................................................................
General and administrative ....................................................
Depreciation and amortization...............................................
Total operating expenses .....................................................
$ 186,892
8,119
195,011
$ 192,474
7,719
200,193
$ 183,802
6,211
190,013
51,955
19,591
18,650
33,384
123,580
54,858
18,706
17,279
33,876
124,719
51,466
17,095
15,234
33,360
117,155
Income from operations.........................................................
71,431
75,474
72,858
Other income (expenses)
Interest expense ......................................................................
Interest income .......................................................................
Casualty (loss) gain ................................................................
Gain on sale of land ................................................................
Equity in income of joint ventures..........................................
Income from continuing operations........................................
(Loss) income from discontinued operations (including loss
on disposal of $1,636 in 2009 and gain on disposal of $716
in 2008)................................................................................
Net income.............................................................................
Preferred stock dividends .....................................................
Net income attributable to noncontrolling interest ...............
Net income attributable to common shareholders ..................
Earnings per common share attributable to common
shareholders - basic
Continuing operations.............................................................
Discontinued operations .........................................................
Earning per share - basic.......................................................
Earnings per common share attributable to common
shareholders - diluted
Continuing operations.............................................................
Discontinued operations .........................................................
Earning per share - diluted....................................................
(50,050)
85
(390)
1,127
235
(38,097)
322
-
-
104
(33,861)
954
114
-
119
22,438
37,803
40,184
(784)
21,654
-
(1,738)
$ 19,916
1,880
39,683
-
(2,284)
$ 37,399
1,661
41,845
(1,256)
(2,631)
$ 37,958
$ 0.87
(0.03)
$ 0.84
$ 0.87
(0.03)
$ 0.84
$ 1.63
0.09
$ 1.72
$ 1.63
0.09
$ 1.72
$ 1.73
0.08
$ 1.81
$ 1.73
0.08
$ 1.81
Dividends declared per common share ...............................
$ 1.54
$ 2.54
$ 2.50
See notes to consolidated financial statements.
34
SOVRAN SELF STORAGE, INC.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY AND COMPREHENSIVE INCOME
8.375% Series
C Preferred
Stock
Shares
8.375% Series C
Preferred
Stock
Common
Stock
Shares
Common
Stock
1,200,000
26,613
20,443,529
216
(dollars in thousands, except share data)
Balance January 1, 2007.......................................................
Net proceeds from issuance of stock through Dividend
Reinvestment and Stock Purchase Plan ..........................
Exercise of stock options......................................................
Issuance of non-vested stock................................................
Earned portion of non-vested stock......................................
Stock option expense............................................................
Deferred compensation outside directors.............................
Conversion of Series C Preferred Stock to common stock
-
-
-
-
-
-
-
-
-
-
-
-
and exercise of related stock warrants.............................
(1,200,000)
(26,613)
Conversion of operating partnership units to common
stock..................................................................................
Carrying value less than redemption value on redeemed
partnership units ..............................................................
Adjustment to redemption value of noncontrolling
redeemable Operating Partnership Units ..........................
Net income............................................................................
Change in fair value of derivatives ......................................
Total comprehensive income ...............................................
Dividends..............................................................................
Balance December 31, 2007.................................................
Net proceeds from issuance of stock through Dividend
Reinvestment and Stock Purchase Plan ..........................
Exercise of stock options......................................................
Issuance of non-vested stock................................................
Earned portion of non-vested stock......................................
Stock option expense............................................................
Deferred compensation outside directors.............................
Carrying value less than redemption value on redeemed
partnership units ..............................................................
Adjustment to redemption value of noncontrolling
redeemable Operating Partnership Units ..........................
Net income............................................................................
Change in fair value of derivatives ......................................
Total comprehensive income ...............................................
Dividends..............................................................................
Balance December 31, 2008.................................................
Net proceeds from the issuance of common stock...............
Net proceeds from issuance of stock through Dividend
Reinvestment and Stock Purchase Plan ..........................
Exercise of stock options......................................................
Issuance of non-vested stock................................................
Earned portion of non-vested stock......................................
Stock option expense............................................................
Deferred compensation outside directors.............................
Adjustment to redemption value of noncontrolling
redeemable Operating Partnership Units ..........................
Net income............................................................................
Change in fair value of derivatives ......................................
Total comprehensive income ...............................................
Dividends..............................................................................
Balance December 31, 2009.................................................
See notes to consolidated financial statements
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
$ -
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
35
252,816
13,100
43,989
-
-
-
920,244
2,908
-
-
-
-
-
-
21,676,586
285,308
2,600
45,713
-
-
6,141
-
-
-
-
-
-
22,016,348
4,025,000
1,430,521
3,770
59,590
-
-
11,798
-
-
-
-
-
27,547,027
3
-
-
-
-
-
9
-
-
-
-
-
-
-
228
3
-
1
-
-
-
-
-
-
-
-
-
232
40
14
-
1
-
-
-
-
-
-
-
-
$ 287
SOVRAN SELF STORAGE, INC.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY AND COMPREHENSIVE INCOME
Additional
Paid-in
Capital
Dividends in
Excess of
Net Income
Accumulated
Other
Comprehensive
Income (loss)
Treasury
Stock
Total
Equity
612,738
(98,020)
2,128
(27,175)
516,500
12,756
425
-
1,224
183
161
26,604
167
(117)
-
-
-
-
-
654,141
10,654
72
-
1,444
279
112
(69)
-
-
-
-
-
666,633
113,931
32,548
62
-
1,379
321
114
-
-
-
-
-
$ 814,988
-
-
-
-
-
-
-
-
-
7,119
39,214
-
-
(54,042)
(105,729)
-
-
-
-
-
-
-
1,439
37,399
-
-
(55,690)
(122,581)
-
-
-
-
-
-
-
(156)
19,916
-
-
(37,042)
$ (139,863)
12,759
425
-
1,224
183
161
-
167
(117)
7,119
39,214
(3,496)
35,718
(54,042)
520,097
10,657
72
1
1,444
279
112
(69)
1,439
37,399
(23,794)
13,605
(55,690)
491,947
113,971
32,562
62
1
1,379
321
114
(156)
19,916
13,897
33,813
(37,042)
$636,972
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(3,496)
-
-
(1,368)
-
-
-
-
-
(27,175)
-
-
-
-
-
-
-
-
-
(23,794)
-
-
(25,162)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(27,175)
-
-
-
-
-
-
-
-
-
13,897
-
-
$ (11,265)
-
-
-
-
-
$ (27,175)
36
SOVRAN SELF STORAGE, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(dollars in thousands)
Operating Activities
Net income .....................................................................................................................
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization ........................................................................................
Loss (gain) on sale of storage facilities...........................................................................
Gain on sale of land.........................................................................................................
Casualty loss (gain) .........................................................................................................
Equity in income of joint ventures..................................................................................
Distributions from unconsolidated joint venture ............................................................
Non-vested stock earned .................................................................................................
Stock option expense.......................................................................................................
Changes in assets and liabilities:
Accounts receivable .......................................................................................................
Prepaid expenses ............................................................................................................
Accounts payable and other liabilities ...........................................................................
Deferred revenue ............................................................................................................
Net cash provided by operating activities.......................................................................
Investing Activities
Acquisition of storage facilities .....................................................................................
Improvements, equipment additions, and construction in progress ..............................
Net proceeds from the sale of storage facility ...............................................................
Net proceeds from the sale of land ................................................................................
Casualty insurance proceeds received ...........................................................................
Investment in unconsolidated joint venture ...................................................................
Additional investment in consolidated joint ventures net of cash acquired ..................
Reimbursement of advances (advances) to joint ventures.............................................
Reimbursement of (payment of) property deposits .......................................................
Receipts from related parties..........................................................................................
Net cash used in investing activities ...............................................................................
Financing Activities
Net proceeds from sale of common stock......................................................................
Proceeds from line of credit ...........................................................................................
Repayment of line of credit and term note ....................................................................
Proceeds from term notes...............................................................................................
Financing costs...............................................................................................................
Dividends paid - common stock.....................................................................................
Dividends paid - preferred stock....................................................................................
Distributions to noncontrolling interest holders ............................................................
Redemption of operating partnership units....................................................................
Mortgage principal and capital lease payments.............................................................
Net cash (used in) provided by financing activities........................................................
Net increase (decrease) in cash .......................................................................................
Cash at beginning of period ............................................................................................
Cash at end of period ......................................................................................................
Year Ended December 31,
2007
2008
2009
$ 21,654
$ 39,683
$ 41,845
35,656
1,636
(1,127)
390
(235)
686
1,379
321
509
413
(1,677)
(462)
59,143
-
(22,261)
16,309
1,140
518
(331)
-
163
-
14
(4,448)
146,710
30,000
(144,000)
-
-
(51,133)
-
(2,006)
-
(28,042)
(48,471)
6,224
4,486
$ 10,710
35,659
(716)
-
-
(104)
345
1,444
279
(171)
118
619
(24)
77,132
(18,547)
(45,709)
7,002
-
-
(20,287)
(6,106)
(336)
1,259
13
(82,711)
10,842
14,000
(206,000)
250,000
(3,085)
(55,256)
-
(2,633)
(114)
(1,699)
6,055
476
4,010
$ 4,486
34,999
-
-
(114)
(119)
98
1,224
183
(599)
822
7,082
(246)
85,175
(138,059)
(52,441)
-
-
1,692
-
-
-
(1,469)
10
(190,267)
13,345
112,000
(12,000)
6,000
(316)
(51,805)
(1,256)
(2,912)
(174)
(1,510)
61,372
(43,720)
47,730
$ 4,010
Supplemental cash flow information
Cash paid for interest, net of interest capitalized............................................................
$ 49,154
$ 37,970
$ 32,313
Fair value of net liabilities assumed on the acquisition of storage facilities..................
-
107
1,580
Dividends declared but unpaid at December 31, 2009, 2008 and 2007 were $0, $14,090, and $13,656, respectively.
See notes to consolidated financial statements.
37
SOVRAN SELF STORAGE, INC. - DECEMBER 31, 2009
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. ORGANIZATION
Sovran Self Storage, Inc. (the "Company," "We," "Our," or "Sovran"), a self-administered and self-
38
(Dollars in thousands)
2009
2008
Beginning balance noncontrolling interests – consolidated joint venture....................
Carrying value of Locke Sovran I, LLC purchased in 2008 for $6.1 million ............
Net income attributable to noncontrolling interests – consolidated joint venture......
Distributions .............................................................................................................
Ending balance noncontrolling interests – consolidated joint venture.........................
$13,082
-
1,360
(1,360)
$13,082
$16,783
(3,701)
1,563
(1,563)
$13,082
Included in the consolidated balance sheets are noncontrolling redeemable operating partnership units.
Prior to the adoption of these additional guidelines, we referred to these noncontrolling interests as "Minority
interest - Operating Partnership." These interests are presented in the "mezzanine" section of the consolidated
balance sheet because they don't meet the functional definition of a liability or equity under current authorative
accounting literature. These represent the outside ownership interests of the limited partners in the Operating
Partnership. At December 31, 2009 and 2008, there was 419,952 noncontrolling redeemable operating partnership
Units outstanding. The Operating Partnership is obligated to redeem each of these limited partnership Units in the
Operating Partnership at the request of the holder thereof for cash equal to the fair market value of a share of the
Company's common stock, at the time of such redemption, provided that the Company at its option may elect to
acquire any such Unit presented for redemption for one common share or cash. Effective January 1, 2009, the
Company accounts for these noncontrolling redeemable Operating Partnership Units under the provisions of FASB
ASC Topic 480-10-S99. The application of the FASB ASC Topic 480-10-S99 accounting model requires the
noncontrolling interest to follow normal noncontrolling interest accounting and then be marked to redemption value
at the end of each reporting period if higher (but never adjusted below that normal noncontrolling interest
accounting amount). The offset to the adjustment to the carrying amount of the noncontrolling redeemable
Operating Partnership Units is reflected in accumulated deficit. Accordingly, in the accompanying consolidated
balance sheet, noncontrolling redeemable Operating Partnership Units are reflected at redemption value at
December 31, 2009 and December 31, 2008, equal to the number of Units outstanding multiplied by the fair market
value of the Company's common stock at that date. Redemption value exceeded the value determined under the
Company's historical basis of accounting at those dates.
(Dollars in thousands)
Beginning balance noncontrolling redeemable Operating Partnership Units ..............
Redemption of Operating Partnership Units..............................................................
Redemption value in excess of carrying value ..........................................................
Net income attributable to noncontrolling interests – consolidated joint venture......
Distributions .............................................................................................................
Adjustment to redemption value ...............................................................................
Ending balance noncontrolling redeemable Operating Partnership Units ...................
2009
2008
$15,118
-
-
378
(647)
156
$15,005
$16,951
(115)
70
721
(1,070)
(1,439)
$15,118
Retrospective Impact of New Accounting Pronouncement Adopted January 1, 2009 (in thousands):
Statement of Operations:
For the Year Ended December 31, 2008:
As Previously Reported
adjusted for discontinued
operations
Adjustments
As Adjusted
Income from continuing operations ................................................................
Net income .......................................................................................................
Net income attributable to noncontrolling interest ..........................................
Net income attributable to common shareholders ...........................................
$ 35,519
37,399
-
-
$ 2,284
2,284
2,284
37,399
$ 37,803
39,683
2,284
37,399
39
For the Year Ended December 31, 2007:
As Previously Reported
adjusted for discontinued
operations
Adjustments
As Adjusted
Income from continuing operations ................................................................
Net income .......................................................................................................
Net income attributable to noncontrolling interest ..........................................
Net income attributable to common shareholders ...........................................
$ 37,553
39,214
-
-
$ 2,631
2,631
2,631
37,958
$ 40,184
41,845
2,631
37,958
Balance Sheet:
December 31, 2008:
As Adjusted
Adjustments
As Previously Reported
Minority interest – operating partnership .......................................................
Noncontrolling redeemable operating partnership units..................................
Minority interest – consolidated joint venture.................................................
Accumulated deficit ........................................................................................
Total shareholders’ equity................................................................................
Noncontrolling interest – consolidated joint venture.......................................
Total equity.......................................................................................................
Statement of Cash Flows:
$ 9,265
-
13,082
(116,728)
497,800
-
497,800
$ (9,265)
15,118
(13,082)
(5,853)
(5,853)
13,082
7,229
$ -
15,118
-
(122,581)
491,947
13,082
505,029
For the Year Ended December 31, 2008:
As Previously Reported
Adjustments
As Adjusted
Net income .......................................................................................................
Minority interest...............................................................................................
37,399
2,284
2,284
(2,284)
39,683
-
For the Year Ended December 31, 2007:
As Adjusted
As Previously Reported
Adjustments
Net income .......................................................................................................
Minority interest...............................................................................................
39,214
2,631
2,631
(2,631)
41,845
-
Cash and Cash Equivalents: The Company considers all highly liquid investments purchased with
maturities of three months or less to be cash equivalents. The cash balance includes $2.3 million and $3.8 million,
respectively, held in escrow for encumbered properties at December 31, 2009 and 2008.
Revenue and Expense Recognition: Rental income is recognized when earned pursuant to month-to-month
leases for storage space. Promotional discounts are recognized as a reduction to rental income over the promotional
period, which is generally during the first month of occupancy. Rental income received prior to the start of the
rental period is included in deferred revenue. Equity in earnings of real estate joint ventures that we have significant
influence over is recognized based on our ownership interest in the earnings of these entities.
Cost of operations, general and administrative expense, interest expense and advertising costs are expensed
as incurred. For the years ended December 31, 2009, 2008, and 2007, advertising costs were $1.9 million, $1.4
million, and $1.4 million, respectively. The Company accrues property taxes based on estimates and historical
trends. If these estimates are incorrect, the timing and amount of expense recognition would be affected.
Other Operating Income: Consists primarily of sales of storage-related merchandise (locks and packing
supplies), insurance commissions, incidental truck rentals, and management fees from unconsolidated joint ventures.
Investment in Storage Facilities: Storage facilities are recorded at cost. The purchase price of acquired
facilities is allocated to land, building, equipment, and in-place customer leases based on the fair value of each
component. Depreciation is computed using the straight-line method over estimated useful lives of forty years for
buildings and improvements, and five to twenty years for furniture, fixtures and equipment. Expenditures for
significant renovations or improvements that extend the useful life of assets are capitalized. Interest and other costs
incurred during the construction period of major expansions are capitalized. Capitalized interest during the years
ended December 31, 2009, 2008, and 2007 was $0.2, $0.4 million and $0.4 million, respectively. Repair and
40
maintenance costs are expensed as incurred.
Whenever events or changes in circumstances indicate that the basis of the Company's property may not be
recoverable, the Company's policy is to assess any impairment of value. Impairment is evaluated based upon
comparing the sum of the expected undiscounted future cash flows to the carrying value of the property, on a
property by property basis. If the sum of the undiscounted cash flow is less than the carrying amount, an
impairment loss is recognized for the amount by which the carrying amount of the asset exceeds the fair value of the
asset. At December 31, 2009 and 2008, no assets had been determined to be impaired under this policy and,
accordingly, this policy had no impact on the Company's financial position or results of operations.
Other Assets: Included in other assets are net loan acquisition costs, a note receivable, property deposits,
and the value placed on in-place customer leases at the time of acquisition. The loan acquisition costs were $5.9
million and $6.8 million at December 31, 2009, and 2008, respectively. Accumulated amortization on the loan
acquisition costs was approximately $3.4 million and $2.5 million at December 31, 2009, and 2008, respectively.
Loan acquisition costs are amortized over the terms of the related debt. The note receivable of $2.8 million
represents a note from certain investors of Locke Sovran II, LLC. The note bears interest at LIBOR plus 2.4% and
matures upon the dissolution of Locke Sovran II, LLC. There were no property deposits at December 31, 2009 and
$0.1 million at December 31, 2008.
The Company allocates a portion of the purchase price of acquisitions to in-place customer leases. The
value of in-place customer leases is based on the Company's experience with customer turnover. The Company
amortizes in-place customer leases on a straight-line basis over 12 months (the estimated future benefit period). At
December 31, 2009, the gross carrying amount of in-place customer leases was $5.4 million and the accumulated
amortization was $5.4 million
Amortization expense, including amortization of in-place customer leases, was $2.1 million, $2.5 million
and $4.8 million for the periods ended December 31, 2009, 2008 and 2007, respectively.
Accounts Payable and Accrued Liabilities: Accounts payable and accrued liabilities consists primarily of
trade payables, accrued interest, and property tax accruals. The Company accrues property tax expense based on
estimates and historical trends. Actual expense could differ from these estimates.
Income Taxes: The Company qualifies as a REIT under the Internal Revenue Code of 1986, as amended,
and will generally not be subject to corporate income taxes to the extent it distributes at least 90% of its taxable
income to its shareholders and complies with certain other requirements. Accordingly, no provision has been made
for federal income taxes in the accompanying financial statements. On an aggregate basis, the Company's reported
amounts of net assets exceeds the tax basis by approximately $73 million and $74 million at December 31, 2009 and
2008, respectively.
Comprehensive Income: Comprehensive income consists of net income and the change in value of
derivatives used for hedging purposes and is reported in the consolidated statements of shareholders' equity.
Comprehensive income was $33.8 million, $13.6 million and $35.7 million for the years ended December 31, 2009,
2008, and 2007, respectively.
Derivative Financial Instruments: The Company accounts for derivatives in accordance with ASC Topic
815 “Derivatives and Hedging”, which requires companies to carry all derivatives on the balance sheet at fair value.
The Company determines the fair value of derivatives by reference to quoted market prices. The accounting for
changes in the fair value of a derivative instrument depends on whether it has been designated and qualifies as part
of a hedging relationship and, if so, the reason for holding it. The Company's use of derivative instruments is
limited to cash flow hedges of certain interest rate risks.
Recent Accounting Pronouncements: In June 2009, the FASB issued revised accounting guidance under
ASC Topic 810, "Consolidation" by issuing SFAS No. 167, "Amendments to FASB Interpretation No. 46(R)"
("SFAS 167"). The revised guidance amends previous guidance (as previously required under FASB Interpretation
No. 46(R), "Variable Interest Entities") for determining whether an entity is a variable interest entity ("VIE") and
requires an enterprise to perform an analysis to determine whether the enterprise's variable interest or interests give
41
it a controlling financial interest in a VIE. Under the revised guidance, an enterprise has a controlling financial
interest when it has a) the power to direct the activities of a VIE that most significantly impact the entity's economic
performance and b) the obligation to absorb losses of the entity or the right to receive benefits from the entity that
could potentially be significant to the VIE. The revised guidance also requires an enterprise to assess whether it has
an implicit financial responsibility to ensure that a VIE operates as designed when determining whether it has power
to direct the activities of the VIE that most significantly impact the entity's economic performance. The revised
guidance also requires ongoing assessments of whether an enterprise is the primary beneficiary of a VIE, requires
enhanced disclosures and eliminates the scope exclusion for qualifying special-purpose entities. The revised
guidance is effective for the first annual reporting period that begins after November 15, 2009, with early adoption
prohibited. The Company is currently evaluating the impact that the adoption of the revised guidance will have on
its consolidated financial statements.
In May 2009, the FASB issued accounting guidance now codified as FASB ASC Topic 855, "Subsequent
Events". FASB ASC Topic 855 establishes general standards for accounting for and disclosure of events that occur
after the balance sheet date but before financial statements are available to be issued ("subsequent events"). More
specifically, FASB ASC Topic 855 sets forth the period after the balance sheet date during which management of a
reporting entity should evaluate events or transactions that may occur for potential recognition in the financial
statements, identifies the circumstances under which an entity should recognize events or transactions occurring
after the balance sheet date in its financial statements and the disclosures that should be made about events or
transactions that occur after the balance sheet date. FASB ASC Topic 855 provides largely the same guidance on
subsequent events which previously existed only in auditing literature. We adopted FASB ASC Topic 855 on
April 1, 2009. We have evaluated subsequent events through February 26, 2010, the date this quarterly report on
Form 10-K was filed with the U.S. Securities and Exchange Commission. See Note 17 for further information
regarding our evaluation of subsequent events.
Stock-Based Compensation: Effective January 1, 2006, the Company adopted ASC Topic 718,
"Compensation - Stock Compensation" (formerly, FASB Statement 123R) and uses the modified-prospective
method. Under the modified-prospective method, the Company recognizes compensation cost in the financial
statements issued subsequent to January 1, 2006 for all share based payments granted, modified, or settled after the
date of adoption as well as for any awards that were granted prior to the adoption date for which the requisite service
period has not been completed as of the adoption date.
The Company recorded compensation expense (included in general and administrative expense) of
$321,000, $279,000 and $183,000 related to stock options and $1.4 million, $1.4 million and $1.2 million related to
amortization of non-vested stock grants for the years ended December 31, 2009, 2008 and 2007, respectively. The
Company uses the Black-Scholes Merton option pricing model to estimate the fair value of stock options granted
subsequent to the adoption of ASC Topic 718. The application of this pricing model involves assumptions that are
judgmental and sensitive in the determination of compensation expense. The weighted average for key assumptions
used in determining the fair value of options granted during 2009 follows:
Expected life (years).....................................
Risk free interest rate....................................
Expected volatility........................................
Expected dividend yield ...............................
Fair value ......................................................
Weighted Average
4.50
2.04%
38.65%
9.43%
$2.73
Range
4.50
1.65 – 2.63%
36.40% - 41.10%
5.40% - 12.60%
$1.59 - $7.35
The weighted-average fair value of options granted during the years ended December 31, 2008 and 2007,
were $4.79 and $6.86, respectively.
To determine expected volatility, the Company uses historical volatility based on daily closing prices of its
Common Stock over periods that correlate with the expected terms of the options granted. The risk-free rate is based
on the United States Treasury yield curve at the time of grant for the expected life of the options granted. Expected
dividends are based on the Company's history and expectation of dividend payouts. The expected life of stock
options is based on the midpoint between the vesting date and the end of the contractual term.
42
Use of Estimates: The preparation of financial statements in conformity with U.S. generally accepted
accounting principles requires management to make estimates and assumptions that affect the amounts reported in
the financial statements and accompanying notes. Actual results could differ from those estimates.
3. EARNINGS PER SHARE
The Company reports earnings per share data in accordance ASC Topic 260, "Earnings Per Share."
Effective January 1, 2009, FASB ASC Topic 260 was updated for the issuance of FASB Staff Position ("FSP")
EITF 03-6-1, "Determining Whether Instruments Granted in Share-Based Payment Transactions Are Participating
Securities", or FSP EITF 03-6-1, with transition guidance included in FASB ASC Topic 260-10-65-2. Under FSP
EITF 03-6-1, unvested share-based payment awards that contain nonforfeitable rights to dividends or dividend
equivalents, whether paid or unpaid, are participating securities and shall be included in the computation of
earnings-per-share pursuant to the two-class method. The codification update requires retrospective restatement of
all prior period earnings per share data to conform with its provisions. The Company has calculated its 2009 basic
and diluted earnings per share using the two-class method. The Company has also calculated its basic and diluted
earnings per share amounts for 2008 and 2007 under the two-class method and it resulted in no change in basic and
diluted earnings per share as previously reported. The following table sets forth the computation of basic and
diluted earnings per common share utilizing the two-class method.
(Amounts in thousands,
except per share data)
Numerator:
Net income from continuing operations
Year Ended December 31,
2009
2008
2007
attributable to common shareholders ......................
$ 20,700
$ 35,519
$ 36,297
Denominator:
Denominator for basic earnings per share -
weighted average shares..........................................
Effect of Dilutive Securities:
Stock options and warrants and non-vested stock ......
Denominator for diluted earnings per share -
adjusted weighted average shares and assumed
conversion ...............................................................
Basic Earnings per Common Share from
continuing operations attributable to common
shareholders ............................................................
Basic Earnings per Common Share attributable to
common shareholders .............................................
Diluted Earnings per Common Share from
continuing operations attributable to common
shareholders ............................................................
Diluted Earnings per Common Share attributable
to common shareholders .........................................
23,787
10
21,762
21
20,955
49
23,797
21,783
21,004
$ 0.87
$ 0.84
$ 0.87
$ 0.84
$ 1.63
$ 1.72
$ 1.63
$ 1.72
$ 1.73
$ 1.81
$ 1.73
$ 1.81
Not included in the effect of dilutive securities above are 333,072 stock options and 125,871 unvested
restricted shares for the year ended December 31, 2009; 262,247 stock options and 124,161 unvested restricted
shares for the year ended December 31, 2008; and 67,500 stock options and 105,266 unvested restricted shares for
the year ended December 31, 2007, because their effect would be antidilutive.
43
4. INVESTMENT IN STORAGE FACILITIES
The following summarizes activity in storage facilities during the years ended December 31, 2009 and
December 31, 2008.
(Dollars in thousands)
Cost:
Beginning balance ................................................................
Acquisition of storage facilities ............................................
Additional investment in consolidated joint ventures...........
Improvements and equipment additions ...............................
(Decrease) increase in construction in progress....................
Dispositions ..........................................................................
Ending balance .......................................................................
2009
2008
$1,366,615
-
-
26,256
(4,121)
(1,167)
$1,387,583
$1,300,847
18,454
2,473
44,273
761
(193)
$1,366,615
Accumulated Depreciation:
Beginning balance ................................................................
Additions during the year .....................................................
Dispositions ..........................................................................
Ending balance .......................................................................
$ 212,301
33,096
(219)
$ 245,178
$ 179,880
32,556
(135)
$ 212,301
The Company allocates purchase price to the tangible and intangible assets and liabilities acquired based on
their estimated fair values. The value of land and buildings are determined at replacement cost. Intangible assets,
which represent the value of existing customer leases, are recorded at their estimated fair values. The Company did
not acquire any storage facilities in 2009. During 2008, the Company acquired three storage facilities for $18.9
million. Substantially all of the purchase price for these facilities was allocated to land ($3.7 million), building
($14.7 million), equipment ($0.1 million) and in-place customer leases ($0.4 million) and the operating results of the
acquired facilities have been included in the Company's operations since the respective acquisition dates.
5. DISCONTINUED OPERATIONS
During 2009, the Company sold five non-strategic storage facilities in Massachusetts, North Carolina, and
Pennsylvania for net cash proceeds of $16.3 million resulting in a loss of $1.6 million. In April 2008, the Company
sold one non-strategic storage facility located in Michigan for net cash proceeds of $7.0 million resulting in a gain of
$0.7 million. The operations of these facilities and the loss or gain on sale are reported as discontinued operations.
The amounts in the 2008 and 2007 financial statements related to the operations and the net assets of this property
have been reclassified and are presented as discontinued operations and net assets from discontinued operations,
respectively. Cash flows of discontinued operations have not been segregated from the cash flows of continuing
operations on the accompanying consolidated statement of cash flows for the years ended December 31, 2009, 2008
and 2007. The following is a summary of the amounts reported as discontinued operations:
(dollars in thousands)
Year Ended December 31,
2007
2008
2009
Total revenue
Property operations and maintenance expense ................
Real estate tax expense ....................................................
Depreciation and amortization expense...........................
Net realized (loss) gain on sale of property .....................
Total (loss) income from discontinued operations.............
$ 2,187
(643)
(258)
(434)
(1,636)
$ (784)
$ 3,043
(956)
(332)
(591)
716
$ 1,880
$ 3,757
(1,048)
(372)
(676)
-
$ 1,661
44
6. PRO FORMA FINANCIAL INFORMATION (UNAUDITED)
The following unaudited pro forma Condensed Statement of Operations is presented as if the 31 storage
facilities purchased during 2007 and the related indebtedness incurred and assumed on these transactions had all
occurred at January 1, 2007. Such unaudited pro forma information is based upon the historical statements of
operations of the Company. It should be read in conjunction with the financial statements of the Company. In
management's opinion, all adjustments necessary to reflect the effects of these transactions have been made. This
unaudited pro forma information does not purport to represent what the actual results of operations of the Company
would have been assuming such transactions had been completed as set forth above nor does it purport to represent
the results of operations for future periods.
(dollars in thousands, except share data)
Year Ended
December 31, 2007
Pro forma total operating revenues............................................
Pro forma net income ................................................................
Pro forma earnings per common share – diluted .......................
$199,569
$ 41,749
$ 1.92
7. UNSECURED LINE OF CREDIT AND TERM NOTES
On June 25, 2008, the Company entered into agreements relating to new unsecured credit arrangements,
and received funds under those arrangements. As part of the agreements, the Company entered into a $250 million
unsecured term note maturing in June 2012 bearing interest at LIBOR plus 1.625% (based on the Company's
December 31, 2009 credit rating). In October 2009, the Company repaid $100 million of this term note. The new
agreements also provide for a $125 million (expandable to $175 million) revolving line of credit maturing June 2011
bearing interest at a variable rate equal to LIBOR plus 1.375% (based on the Company's credit rating at December
31, 2009), and requires a 0.25% facility fee. The interest rate at December 31, 2009 on the Company's available line
of credit was approximately 1.61% (1.8% at December 31, 2008). At December 31, 2009, there was $125 million
available on the unsecured line of credit.
The Company also maintains an $80 million term note maturing September 2013 bearing interest at a fixed
rate of 6.26%, a $20 million term note maturing September 2013 bearing interest at a variable rate equal to LIBOR
plus 1.50%, and a $150 million unsecured term note maturing in April 2016 bearing interest at 6.38% (based on the
Company's credit rating at December 31, 2009).
The line of credit and term notes require the Company to meet certain financial covenants, measured on a
quarterly basis, including prescribed leverage, fixed charge coverage, minimum net worth, limitations on additional
indebtedness and limitations on dividend payouts. At December 31, 2009, the Company was in compliance with its
debt covenants. At March 31, 2009, the Company had violated the leverage ratio covenant contained in the line of
credit and term note agreements. In May 2009, the Company obtained a waiver of the violation as of March 31,
2009. The fees paid to obtain the waiver were approximately $0.9 million and are included in interest expense for
the year ended December 31, 2009.
As a result of the debt covenant violation and operating trends, Fitch Ratings downgraded the Company's
rating on its revolving credit facility and term notes to non-investment grade in May 2009. In October 2009, Fitch
Ratings adjusted the Company's rating on its revolving credit facility and term notes back to investment grade.
We believe that if operating results remain consistent with historical levels and levels of other debt and
liabilities remain consistent with amounts outstanding at December 31, 2009 the entire $125 million line of credit
could be drawn without violating our debt covenants.
45
8. MORTGAGES PAYABLE AND OTHER DEBT DISCLOSURES
Mortgages payable at December 31, 2009 and December 31, 2008 consist of the following:
(dollars in thousands)
7.80% mortgage note due December 2011, secured by 11 self-storage
facilities (Locke Sovran I) with an aggregate net book value of $42.7
million, principal and interest paid monthly ....................................................
7.19% mortgage note due March 2012, secured by 27 self-storage facilities
(Locke Sovran II) with an aggregate net book value of $80.3 million,
principal and interest paid monthly..................................................................
7.25% mortgage note due December 2011, secured by 1 self-storage facility
with an aggregate net book value of $5.7 million, principal and interest
paid monthly. Estimated market rate at time of acquisition 5.40%.................
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 ....................................................................................................
6.35% mortgage note due March 2014, secured by 1 self-storage facility
with an aggregate net book value of $3.7 million, principal and interest
paid monthly ....................................................................................................
5.55% mortgage notes secured by 8 self storage facilities paid December 1,
2009 .................................................................................................................
7.50% mortgage notes due August 2011, secured by 3 self-storage facilities
with an aggregate net book value of $14.0 million, principal and interest
paid monthly. Estimated market rate at time of acquisition 6.42%.................
Total mortgages payable......................................................................................
December 31,
2009
December 31,
2008
$ 28,447
$ 29,033
41,475
42,603
3,369
3,510
977
1,000
1,072
-
1,098
25,930
5,879
$ 81,219
6,087
$ 109,261
The Company assumed the 7.25%, 6.76%, 6.35%, and 7.50% mortgage notes in connection with the
acquisitions of storage facilities in 2005 and 2006. The 7.25% and 7.50% mortgages were recorded at their
estimated fair value based upon the estimated market rates at the time of the acquisitions ranging from 5.40% to
6.42%. The carrying value of these two mortgages approximates the actual principal balance of the mortgages
payable. An immaterial premium exists at December 31, 2009, which will be amortized over the remaining term of
the mortgages based on the effective interest method.
The table below summarizes the Company's debt obligations and interest rate derivatives at December 31,
2009. The estimated fair value of financial instruments is subjective in nature and is dependent on a number of
important assumptions, including discount rates and relevant comparable market information associated with each
financial instrument. The fair value of the fixed rate term note and mortgage note were estimated by discounting the
future cash flows using the current rates at which similar loans would be made to borrowers with similar credit
ratings and for the same remaining maturities. The use of different market assumptions and estimation
methodologies may have a material effect on the reported estimated fair value amounts. Accordingly, the estimates
presented below are not necessarily indicative of the amounts the Company would realize in a current market
exchange.
46
(dollars in thousands)
2010
2011
2012
2013
2014
Thereafter
Total
Fair
Value
Expected Maturity Date Including Discount
Line of credit - variable rate LIBOR + 1.375
(1.61% at December 31, 2009) .....................
-
-
-
-
-
-
-
-
Notes Payable:
Term note - variable rate LIBOR+1.625%
(1.86% at December 31, 2009) .....................
Term note - variable rate LIBOR+1.50%
(2.23% at December 31, 2009) .....................
Term note - fixed rate 6.26%.............................
Term note - fixed rate 6.38%.............................
-
-
-
-
-
-
-
-
$150,000
-
-
-
-
-
$ 20,000
$ 80,000
-
-
-
-
-
-
-
-
-
-
-
-
-
$150,000
$150,000
-
-
$ 20,000
$ 20,000
$ 80,000
$ 76,958
$ 150,000
$150,000
$136,630
-
-
-
-
-
-
-
$ 28,447
$ 29,454
$ 41,475
$ 43,133
$ 3,369
$ 3,385
$ 977
$ 1,011
$ 1,072
$ 1,059
$ 5,879
$ 6,003
-
$ 11,524
Mortgage note - fixed rate 7.80% ......................
$ 630
$ 27,817
Mortgage note - fixed rate 7.19% ......................
$ 1,211
$ 1,301
$ 38,963
Mortgage note - fixed rate 7.25% ......................
$ 149
$ 3,220
-
Mortgage note - fixed rate 6.76% ......................
$ 25
$ 27
$ 29
$ 896
Mortgage note - fixed rate 6.35% ......................
$ 28
$ 30
$ 31
$ 34
$ 949
Mortgage notes - fixed rate 7.50% ....................
$ 222
$ 5,657
Interest rate derivatives – liability .....................
-
-
9. DERIVATIVE FINANCIAL INSTRUMENTS
-
-
-
-
-
-
Interest rate swaps are used to adjust the proportion of total debt that is subject to variable interest rates.
The interest rate swaps require the Company to pay an amount equal to a specific fixed rate of interest times a
notional principal amount and to receive in return an amount equal to a variable rate of interest times the same
notional amount. The notional amounts are not exchanged. No other cash payments are made unless the contract is
terminated prior to its maturity, in which case the contract would likely be settled for an amount equal to its fair
value. The Company enters interest rate swaps with a number of major financial institutions to minimize
counterparty credit risk.
The interest rate swaps qualify and are designated as hedges of the amount of future cash flows related to
interest payments on variable rate debt. Therefore, the interest rate swaps are recorded in the consolidated balance
sheet at fair value and the related gains or losses are deferred in shareholders' equity as Accumulated Other
Comprehensive Income ("AOCI"). These deferred gains and losses are amortized into interest expense during the
period or periods in which the related interest payments affect earnings. However, to the extent that the interest rate
swaps are not perfectly effective in offsetting the change in value of the interest payments being hedged, the
ineffective portion of these contracts is recognized in earnings immediately. Ineffectiveness was immaterial in
2009, 2008, and 2007.
The Company has three interest rate swap agreements in effect at December 31, 2009 as detailed below to
effectively convert a total of $170 million of variable-rate debt to fixed-rate debt.
Notional Amount
Effective Date
Expiration Date
Fixed
Rate Paid
Floating Rate
Received
$20 Million ...........................
$50 Million ...........................
$100 Million .........................
9/4/05
7/1/08
7/1/08
9/4/13
6/25/12
6/22/12
4.4350%
4.2825%
4.2965%
6 month LIBOR
1 month LIBOR
1 month LIBOR
The interest rate swap agreements are the only derivative instruments, as defined by FASB ASC Topic 815,
47
held by the Company. During 2009, 2008, and 2007, the net reclassification from AOCI to interest expense was
$9.7 million, $2.6 million and ($1.1) million, respectively, based on payments (receipts) made or received under the
swap agreements. Based on current interest rates, the Company estimates that payments under the interest rate
swaps will be approximately $7.0 million in 2010. Payments made under the interest rate swap agreements will be
reclassified to interest expense as settlements occur. The fair value of the swap agreements, including accrued
interest, was a liability of $11.5 million and $25.5 million at December 31, 2009, and 2008 respectively.
(dollars in thousands)
Adjustments to interest expense:
Realized loss reclassified from accumulated other comprehensive
loss to interest expense
Adjustments to other comprehensive income (loss):
Realized loss reclassified to interest expense for 2009 and 2008,
respectively
Unrealized gain (loss) from changes in the fair value of the effective
portion of the interest rate swaps for 2009 and 2008, respectively
Gain (loss) included in other comprehensive income (loss)
Jan. 1, 2009
to
Dec. 31, 2009
Jan. 1, 2008
to
Dec. 31, 2008
$ (9,687)
$ (2,601)
9,687
2,601
4,210
$ 13,897
(26,395)
$ (23,794)
In October 2009, the Company prepaid $100 million in variable rate term notes. In October 2009, the
Company also terminated two interest rate swap agreements that were designated as hedges of forecasted interest
payments on variable rate debt. Realized losses recognized in interest expense in 2009 include $8.4 million in costs
to terminate the interest rate swaps. The cost approximated the fair market values of the swaps at the date of
termination.
10. FAIR VALUE MEASUREMENTS
In September 2006, the FASB issued additional accounting guidance under ASC Topic 820, "Fair Value
Measurements" through the issuance of SFAS No. 157, "Fair Value Measurements," ("SFAS 157"). The additional
guidance defines fair value, establishes a framework for measuring fair value and expands the related disclosure
requirements. This additional guidance applies under other codification standards that require or permit fair value
measurements. The additional guidance indicates, among other things, that a fair value measurement assumes that
the transaction to sell an asset or transfer a liability occurs in the principal market for the asset or liability or, in the
absence of a principal market, the most advantageous market for the asset or liability. FASB ASC Topic 820 defines
fair value based upon an exit price model.
In 2008 and 2009, the FASB issued additional guidance under ASC Topic 820 through the issuance of
FASB Staff Positions (FSP) 157-1, 157-2, and 157-3. FSP 157-1 provides additional guidance under ASC Topic 820
to exclude FASB ASC Topic 840, "Leases" and its related interpretive accounting guidance that addresses leasing
transactions, while FSP 157-2 delays the effective date of the application of the fair value guidelines added to FASB
ASC Topic 820 through the issuance of SFAS 157 to fiscal years beginning after November 15, 2008 for all
nonfinancial assets and nonfinancial liabilities that are recognized or disclosed at fair value in the financial
statements on a nonrecurring basis. FSP 157-3 addresses considerations in determining the fair value of a financial
asset when the market for that asset is not active.
We adopted, as of January 1, 2008, the additional guidance in FASB ASC Topic 820 through the issuance
of SFAS 157, with the exception of the application of the statement to non-recurring nonfinancial assets and
nonfinancial liabilities. We applied the provisions of the additional guidance issued in SFAS 157 in determining the
fair value of our nonfinancial assets and nonfinancial liabilities on a nonrecurring basis effective January 1, 2009.
Assets that are measured on a nonrecurring basis include those measured at fair value in a business combination
accounted for under the provisions of the updated codification standard, as well as investments in storage facilities
in circumstances when we determine that those assets are impaired under the provisions of FASB ASC Topic 360-
10-35, "Property, Plant and Equipment – Subsequent Measurement". No non-recurring fair value measurements
were made during the year ended December 31, 2009.
48
FASB ASC Topic 820, through the additional guidance provided by SFAS 157, establishes a valuation
hierarchy for disclosure of the inputs to valuation used to measure fair value. This hierarchy prioritizes the inputs
into three broad levels as follows. Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets
or liabilities. Level 2 inputs are quoted prices for similar assets and liabilities in active markets or inputs that are
observable for the asset or liability, either directly or indirectly through market corroboration, for substantially the
full term of the financial instrument. Level 3 inputs are unobservable inputs based on our own assumptions used to
measure assets and liabilities at fair value. A financial asset or liability's classification within the hierarchy is
determined based on the lowest level input that is significant to the fair value measurement.
The following table provides the assets and liabilities carried at fair value measured on a recurring basis as
of December 31, 2009 (in thousands):
Interest rate swaps……..
Asset
(Liability)
(11,524)
Level 1
-
Level 2
(11,524)
Level 3
-
Interest rate swaps are over the counter securities with no quoted readily available Level 1 inputs, and
therefore are measured at fair value using inputs that are directly observable in active markets and are classified
within Level 2 of the valuation hierarchy, using the income approach.
11. STOCK OPTIONS AND NON-VESTED STOCK
The Company established the 2005 Award and Option Plan (the "Plan") which replaced the expired 1995
Award and Option Plan for the purpose of attracting and retaining the Company's executive officers and other key
employees. 1,500,000 shares were authorized for issuance under the Plan. The options vest ratably over four and
eight years, and must be exercised within ten years from the date of grant. The exercise price for qualified incentive
stock options must be at least equal to the fair market value of the common shares at the date of grant. As of
December 31, 2009, options for 362,463 shares were outstanding under the Plans and options for 998,330 shares of
common stock were available for future issuance.
The Company also established the 2009 Outside Directors' Stock Option and Award Plan (the Non-
employee Plan) which replaced the 1995 Outside Directors’ Stock Option Plan for the purpose of attracting and
retaining the services of experienced and knowledgeable outside directors. The Non-employee Plan provides for the
initial granting of options to purchase 3,500 shares of common stock and for the annual granting of options to
purchase 2,000 shares of common stock to each eligible director. Such options vest over a one-year period for initial
awards and immediately upon subsequent grants. In addition, each outside director receives non-vested shares
annually equal to 80% of the annual fees paid to them. During the restriction period, the non-vested shares may not
be sold, transferred, or otherwise encumbered. The holder of the non-vested shares has all rights of a holder of
common shares, including the right to vote and receive dividends. During 2009, 3,456 non-vested shares were
issued to outside directors. Such non-vested shares vest over a one-year period. The total shares reserved under the
Non-employee Plan is 150,000. The exercise price for options granted under the Non-employee Plan is equal to the
fair market value at the date of grant. As of December 31, 2009, options for 35,005 common shares and non-vested
shares of 12,161 were outstanding under the Non-employee Plans and options for 137,044 shares of common stock
were available for future issuance.
49
A summary of the Company's stock option activity and related information for the years ended December
31 follows:
2009
2008
2007
Weighted
average
exercise
price
Options
Weighted
average
exercise
price
Options
Weighted
average
exercise
price
Options
Outstanding at beginning
of year: ................................
360,688
$ 43.06
168,125
$ 42.54
113,225
$ 35.77
Granted ...................................
Exercised ................................
Forfeited .................................
51,500
(4,225)
(10,495)
23.99
21.46
44.53
201,163
(2,600)
(6,000)
43.12
27.78
36.86
74,000
(13,100)
(6,000)
52.49
32.44
59.62
Outstanding at end of year......
397,468
$ 40.78
360,688
$ 43.06
168,125
$ 42.54
Exercisable at end of year.......
159,701
$ 40.71
118,025
$ 38.84
82,625
$ 34.45
A summary of the Company's stock options outstanding at December 31, 2009 follows:
Outstanding
Exercisable
Exercise Price Range
$20.375 – 29.99 ......................................
$30.00 – 39.99 ........................................
$40.00 – 57.79 ........................................
Total........................................................
Options
72,750
37,050
287,668
397,468
Weighted
average
exercise
price
$ 22.35
$ 35.05
$ 46.18
$ 40.78
Options
33,250
22,050
104,401
159,701
Weighted
average
exercise
price
$ 21.88
$ 34.87
$ 47.94
$ 40.71
Intrinsic value of outstanding stock options at December 31, 2009 ........................................
Intrinsic value of exercisable stock options at December 31, 2009.........................................
$ 1,034,302
$ 505,412
The intrinsic value of stock options exercised during the years ended December 31, 2009, 2008, and 2007,
were $50,188, $37,691, and $346,306 respectively.
The aggregate intrinsic value is calculated as the difference between the exercise price of the underlying
awards and the quoted price of the Company's common stock at December 31, 2009, or the price on the date of
exercise for those exercised during the year. As of December 31, 2009, there was approximately $1.0 million of
total unrecognized compensation cost related to non-vested share-based compensation arrangements granted under
our stock award plans. That cost is expected to be recognized over a weighted-average period of approximately 4.6
years. The weighted average remaining contractual life of all options is 7.4 years, and for exercisable options is 5.8
years.
Non-vested Stock
The Company has also issued 348,732 shares of non-vested stock to employees which vest over two to nine
year periods. During the restriction period, the non-vested shares may not be sold, transferred, or otherwise
encumbered. The holder of the non-vested shares has all rights of a holder of common shares, including the right to
vote and receive dividends. For issuances of non-vested stock during the year ended December 31, 2009, the fair
market value of the non-vested stock on the date of grant ranged from $21.82 to $35.15. During 2009, 59,590 shares
of non-vested stock were issued to employees and directors with an aggregate fair value of $1.8 million. The
Company charges additional paid-in capital for the market value of shares as they are issued. The unearned portion
is then amortized and charged to expense over the vesting period. The Company uses the average of the high and
50
low price of its common stock on the date the award is granted as the fair value for non-vested stock awards.
A summary of the status of unvested shares of stock issued to employees and directors as of and during the
years ended December 31 follows:
2009
2008
2007
Non-
vested
Shares
Weighted
average
grant date
fair value
Non-
vested
Shares
Weighted
average
grant date
fair value
Non-
vested
Shares
Weighted
average
grant date
fair value
Unvested at beginning
of year: ................................
130,807
$ 44.79
115,896
$ 45.54
96,453
$ 40.21
Granted ...................................
Vested.....................................
Forfeited .................................
59,590
(35,349)
(455)
29.70
41.25
43.95
45,713
(30,802)
-
41.50
42.71
-
43,989
(24,546)
-
53.79
39.39
-
Unvested at end of year ..........
154,593
$ 39.79
130,807
$ 44.79
115,896
$ 45.54
Compensation expense of $1.4 million, $1.4 million and $1.2 million was recognized for the vested portion
of non-vested stock grants in 2009, 2008 and 2007, respectively. The fair value of non-vested stock that vested
during 2009, 2008 and 2007 was $1.5 million, $1.3 million and $1.0 million, respectively. The total unrecognized
compensation cost related to non-vested stock was $5.2 million at December 31, 2009, and the remaining weighted-
average period over which this expense will be recognized was 5.6 years.
12. RETIREMENT PLAN
Employees of the Company qualifying under certain age and service requirements are eligible to be a
participant in a 401(k) Plan. The Company contributes to the Plan at the rate of 10% of the first 4% of gross wages
that the employee contributes. Total expense to the Company was approximately $114,000, $284,000, and $256,000
for the years ended December 31, 2009, 2008 and 2007, respectively.
13. INVESTMENT IN JOINT VENTURES
The Company has a 20% ownership interest in Sovran HHF Storage Holdings LLC (“Sovran HHF”), a
joint venture that was formed in May 2008 to acquire self-storage properties that will be managed by the Company.
The carrying value of the Company’s investment at December 31, 2009 was $19.9 million. Twenty five properties
were acquired by Sovran HHF as of December 31, 2008 for approximately $171.5 million. In 2008, the Company
contributed $18.6 million to the joint venture as its share of capital required to fund the acquisitions. As of
December 31, 2009, the carrying value of the Company's investment in Sovran HHF exceeds its share of the
underlying equity in net assets of Sovran HHF by approximately $1.7 million as a result of the capitalization of
certain acquisition related costs. This difference is not amortized, it is included in the carrying value of the
investment, which is assessed for impairment on a periodic basis.
As manager of Sovran HHF, the Company earns a management and call center fee of 7% of gross revenues
which totaled $1.2 million and $0.5 million for 2009 and 2008, respectively. The Company also received an
acquisition fee of 0.5% or $0.7 million of purchase price for securing purchases for the joint venture in 2008. The
Company’s share of Sovran HHF’s income for 2009 and 2008 was $0.2 million and $0.1 million, respectively. At
December 31, 2009, Sovran HHF owed the Company $0.2 million for payments made by the Company on behalf of
the joint venture.
The Company also has a 49% ownership interest in Iskalo Office Holdings, LLC, which owns the building
that houses the Company's headquarters and other tenants. The Company's investment includes a capital
contribution of $49. The carrying value of the Company's investment is a liability of $0.5 million at December 31,
2009 and 2008, and is included in accounts payable and accrued liabilities in the accompanying consolidated
51
balance sheets. For the years ended December 31, 2009, 2008 and 2007, the Company's share of Iskalo Office
Holdings, LLC's income (loss) was $7,000, ($6,000), and $80,000, respectively. The Company paid rent to Iskalo
Office Holdings, LLC of $608,000, $600,000 and $561,000 in 2009, 2008, and 2007, respectively. Future minimum
lease payments under the lease are $0.6 million per year through 2010.
A summary of the unconsolidated joint ventures' financial statements as of and for the year ended
December 31, 2009 is as follows:
(dollars in thousands)
Balance Sheet Data:
Investment in storage facilities, net
Investment in office building
Other assets
Total Assets
Due to the Company
Mortgages payable
Other liabilities
Total Liabilities
Unaffiliated partners' equity (deficiency)
Company equity (deficiency)
Total Liabilities and Partners' Equity (deficiency)
Income Statement Data:
Total revenues
Total expenses
Net income
Sovran HHF
Storage
Holdings LLC
Iskalo Office
Holdings, LLC
$ 168,237
-
3,575
$ 171,812
=======
$ 173
78,512
2,087
80,772
72,832
18,208
$ 171,812
=======
$ -
5,322
688
$ 6,010
=======
$ -
7,037
224
7,261
(714)
(537)
$ 6,010
======
$ 17,702
16,761
$ 941
=======
$ 1,129
1,115
$ 14
======
The Company does not guarantee the debt of Sovran HHF or Iskalo Office Holdings, LLC.
14. SHAREHOLDERS’ EQUITY
On October 5, 2009, the Company completed the public offering of 4,025,000 shares of its common stock
at $29.75 per share. Net proceeds to the Company after deducting underwriting discounts and commissions and
offering expenses were approximately $114.0 million.
During 2009, the Company issued 1,430,521 shares via its Dividend Reinvestment and Stock Purchase
Plan. The Company received $32.6 million from the sale of such shares. During 2008 and 2007, the Company
issued 285,308 and 252,816 shares, respectively, via this plan and received net proceeds of approximately $10.7
million and $12.8 million, respectively. Our Dividend Reinvestment and Stock Purchase Plan was suspended in
November 2009.
On July 3, 2002, the Company entered into an agreement providing for the issuance of 2,800,000 shares of
8.375% Series C Convertible Cumulative Preferred Stock ("Series C Preferred") in a privately negotiated
transaction. The Company immediately issued 1,600,000 shares of the Series C Preferred and issued the remaining
1,200,000 shares on November 27, 2002. The offering price was $25.00 per share resulting in net proceeds for the
Series C Preferred and related common stock warrants of $67.9 million after expenses. In 2004, the Company
issued 306,748 shares of its common stock in connection with the conversion of 400,000 shares of Series C
Preferred Stock into common stock. During 2005, the Company issued 920,244 shares of its common stock in
connection with a written notice from one of the holders of the Series C Preferred Stock requesting the conversion of
1,200,000 shares of Series C Preferred Stock into common stock. On July 7, 2007, we issued 920,244 shares of our
common stock to the holder of our Series C Preferred Stock upon the holder's election to convert the remaining
1,200,000 shares of Series C Preferred Stock into common stock.
52
15. SUPPLEMENTARY QUARTERLY FINANCIAL DATA (UNAUDITED)
The following is a summary of quarterly results of operations for the years ended December 31, 2009 and
2008 (dollars in thousands, except per share data).
Operating revenue........................................
Income (loss) from continuing
operations (a) ...........................................
(Loss) income from discontinued
operations (a) ...........................................
Net Income(Loss) ........................................
Net income (loss) attributable to common
shareholders...............................................
Net Income (Loss) Per Share Attributable
to Common Shareholders
March 31
June 30
Sept. 30
Dec. 31 (b)
2009 Quarter Ended
$ 48,846
$ 48,097
$ 49,551
$ 48,517
$ 7,873
$ 6,436
$ 8,722
$ (593)
$ 247
$ 8,120
$ 306
$ 6,742
$ (752)
$ 7,970
$ (585)
$ ( 1,178)
$ 7,635
$ 6,286
$ 7,496
$ (1,501)
Basic ..........................................................
Diluted .......................................................
$ 0.35
$ 0.35
$ 0.28
$ 0.28
$ 0.32
$ 0.32
$ (0.06)
$ (0.06)
Operating revenue (a) ..................................
Income from continuing operations (a) .......
Income from discontinued operations (a) ....
Net Income ..................................................
Net income attributable to common
shareholders...............................................
Net Income Per Share Attributable to
Common Shareholders
March 31
June 30
Sept. 30
Dec. 31
2008 Quarter Ended
$ 48,925
$ 9,271
$ 318
$ 9,589
$ 49,421
$ 10,166
$ 1,000
$ 11,166
$ 51,769
$ 9,743
$ 308
$ 10,051
$ 50,078
$ 8,623
$ 254
$ 8,877
$ 8,953
$ 10,541
$ 9,528
$ 8,377
Basic ..........................................................
Diluted .......................................................
$ 0.41
$ 0.41
$ 0.49
$ 0.48
$ 0.44
$ 0.44
$ 0.38
$ 0.38
Data as presented in this table differ from the amounts as presented in the Company’s quarterly reports due
(a)
to the impact of discontinued operations accounting with respect to the five properties sold in 2009 and the one
property sold in 2008 as described in Note 5.
(b)
expense related to the termination of two interest rate swap agreements.
As discussed in Note 9, in the fourth quarter of 2009 the Company recorded $8.4 million in interest
16. COMMITMENTS AND CONTINGENCIES
The Company's current practice is to conduct environmental investigations in connection with property
acquisitions. At this time, the Company is not aware of any environmental contamination of any of its facilities that
individually or in the aggregate would be material to the Company's overall business, financial condition, or results
of operations.
At December 31, 2009, we have a contract in place with a potential buyer for the possible sale of two
properties for approximately $2.4 million. The sale of these properties is subject to significant contingencies as of
December 31, 2009, including the potential buyer’s satisfactory completion of an inspection of the properties and
the buyer securing funds from its lender to finance the transaction. While there can be no assurances that we will
successfully complete the sale of these properties, based upon the status of our dealings with the potential buyer, the
sale of these properties is expected to close in March 2010. Should these sales occur, the Company would recognize
a loss of approximately $0.1 million on the disposal of these properties in the first quarter of 2010.
53
17. SUBSEQUENT EVENTS
On January 4, 2010, the Company declared a quarterly dividend of $0.45 per common share. The dividend
was paid on January 26, 2010 to shareholders of record on January 14, 2010. The total dividend paid amounted to
$12.4 million.
In January and February 2010, the Company entered into contracts for the sale of ten non-strategic
properties in North Carolina, Georgia, Michigan, and Virginia for approximately $25.0 million. The sales of these
properties are subject to significant contingencies and there is no assurance that the properties will be sold. Should
the sales occur, the Company would recognize an aggregate gain of approximately $7.7 million.
54
Item 9.
Changes in and Disagreements With Accountants on Accounting and Financial Disclosure
None.
Item 9A.
Controls and Procedures
Conclusion Regarding the Effectiveness of Disclosure Controls and Procedures
Our management conducted an evaluation of the effectiveness of the design and operation of our disclosure
controls and procedures, as such term is defined under Rule 13a-15(e) promulgated under the Securities Exchange
Act of 1934, as amended (Exchange Act), under the supervision of and with the participation of our management,
including the Chief Executive Officer and Chief Financial Officer. Based on that evaluation, our management,
including the Chief Executive Officer and Chief Financial Officer, concluded that our disclosure controls and
procedures were effective at December 31, 2009. There have not been changes in the Company's internal controls
or in other factors that could significantly affect these controls during the quarter ended December 31, 2009.
Management’s Report on Internal Control Over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial
reporting, and for performing an assessment of the effectiveness of internal control over financial reporting as of
December 31, 2009. Internal control over financial reporting is a process designed to provide reasonable assurance
regarding the reliability of financial reporting and the preparation of financial statements for external purposes in
accordance with generally accepted accounting principles. Our system of internal control over financial reporting
includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail,
accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable
assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance
with generally accepted accounting principles, and that receipts and expenditures of the company are being made
only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable
assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the Company's
assets that could have a material effect on the financial statements.
Our management performed an assessment of the effectiveness of our internal control over financial
reporting as of December 31, 2009 based upon criteria in Internal Control – Integrated Framework issued by the
Committee of Sponsoring Organizations of the Treadway Commission (''COSO''). Based on our assessment,
management determined that our internal control over financial reporting was effective as of December 31, 2009
based on the criteria in Internal Control-Integrated Framework issued by COSO.
The effectiveness of the Company’s internal control over financial reporting as of December 31, 2009 has
been audited by Ernst & Young LLP, an independent registered public accounting firm, as stated in their report
which is included in Item 9A herein.
/S/ Robert J. Attea
Chief Executive Officer
/S/ David L. Rogers
Chief Financial Officer
55
Report of Independent Registered Public Accounting Firm
The Board of Directors and Shareholders of Sovran Self Storage, Inc.
We have audited Sovran Self Storage, Inc.’s internal control over financial reporting as of December 31,
2009, based on criteria established in Internal Control—Integrated Framework issued by the Committee of
Sponsoring Organizations of the Treadway Commission (the COSO criteria). Sovran Self Storage, Inc.’s
management is responsible for maintaining effective internal control over financial reporting, and for its assessment
of the effectiveness of internal control over financial reporting included in the accompanying Management’s Report
on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on the company’s internal
control over financial reporting based on our audit.
We conducted our audit in accordance with the standards of the Public Company Accounting Oversight
Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance
about whether effective internal control over financial reporting was maintained in all material respects. Our audit
included obtaining an understanding of internal control over financial reporting, assessing the risk that a material
weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the
assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe
that our audit provides a reasonable basis for our opinion.
A company’s internal control over financial reporting is a process designed to provide reasonable assurance
regarding the reliability of financial reporting and the preparation of financial statements for external purposes in
accordance with generally accepted accounting principles. A company’s internal control over financial reporting
includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail,
accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable
assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance
with generally accepted accounting principles, and that receipts and expenditures of the company are being made
only in accordance with authorizations of management and directors of the company; and (3) provide reasonable
assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the company’s
assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect
misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that
controls may become inadequate because of changes in conditions, or that the degree of compliance with the
policies or procedures may deteriorate.
In our opinion, Sovran Self Storage, Inc. maintained, in all material respects, effective internal control over
financial reporting as of December 31, 2009, based on the COSO criteria.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight
Board (United States), the consolidated balance sheets of Sovran Self Storage, Inc. as of December 31, 2009 and
2008, and the related consolidated statements of operations, shareholders’ equity and comprehensive income, and
cash flows for each of the three years in the period ended December 31, 2009 of Sovran Self Storage, Inc. and our
report dated February 26, 2010 expressed an unqualified opinion thereon.
/s/ Ernst & Young LLP
Buffalo, New York
February 26, 2010
56
Item 10.
Directors, Executive Officers and Corporate Governance
Part III
The information contained in the Proxy Statement for the Annual Meeting of Shareholders of the Company
to be held on May 26, 2010, with respect to directors, executive officers, audit committee, and audit committee
financial experts of the Company and Section 16(a) beneficial ownership reporting compliance, is incorporated
herein by reference in response to this item.
The Company has adopted a code of ethics that applies to all of its directors, officers, and employees. The
Company has made the Code of Ethics available on its website at http://www.sovranss.com.
Item 11.
Executive Compensation
The information required is incorporated by reference to "Executive Compensation" and "Director
Compensation" in the Company's Proxy Statement for the Annual Meeting of Shareholders of the Company to be
held on May 26, 2010.
Item 12.
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder
Matters
The information required herein is incorporated by reference to "Stock Ownership By Directors and
Executive Officers" and "Security Ownership of Certain Beneficial Owners" in the Proxy Statement for the Annual
Meeting of Shareholders of the Company to be held on May 26, 2010.
Item 13.
Certain Relationships and Related Transactions, and Director Independence
The information required herein is incorporated by reference to "Certain Transactions” and “Election of
Directors—Director Independence” in the Company's Proxy Statement for the Annual Meeting of Shareholders to
be held on May 26, 2010.
Item 14.
Principal Accountant Fees and Services
The information required herein is incorporated by reference to "Appointment of Independent Auditor" in
the Company's Proxy Statement for the Annual Meeting of Shareholders to be held on May 26, 2010.
Item 15.
Exhibits, Financial Statement Schedules
(a)
Documents filed as part of this Annual Report on Form 10-K:
Part IV
1.
The following consolidated financial statements of Sovran Self Storage, Inc. are included in Item 8.
(i)
(ii)
(iii)
Consolidated Balance Sheets as of December 31, 2009 and 2008.
Consolidated Statements of Operations for Years Ended December 31, 2009, 2008, and 2007.
Consolidated Statements of Shareholders' Equity and Comprehensive Income for Years Ended
December 31, 2009, 2008, and 2007.
Consolidated Statements of Cash Flows for Years Ended December 31, 2009, 2008, and 2007.
Notes to Consolidated Financial Statements.
(iv)
(v)
2.
The following financial statement Schedule as of the period ended December 31, 2009 is included in this
Annual Report on Form 10-K.
Schedule III Real Estate and Accumulated Depreciation.
57
All other Consolidated financial schedules are omitted because they are inapplicable, not required, or the
information is included elsewhere in the consolidated financial statements or the notes thereto.
3.
Exhibits
The exhibits required to be filed as part of this Annual Report on Form 10-K have been included as
follows:
3.1
3.2
3.3
Amended and Restated Articles of Incorporation of the Registrant. (incorporated by reference to Exhibit
3.1 (a) to the Registrant’s Registration Statement on Form S-11 (File No. 33-91422) filed June 19, 1995).
Articles Supplementary to the Amended and Restated Articles of Incorporation of the Registrant
classifying and designating the series A Junior Participating Cumulative Preferred Stock. (incorporated
by reference to Exhibit 3.1 to the Registrant's Form 8-A filed December 3, 1996.)
Articles Supplementary to the Amended and Restated Articles of Incorporation of the Registrant
classifying and designating the 8.375% Series C Convertible Cumulative Preferred Stock. (incorporated
by reference to Exhibit 4.1 to Registrant's Current Report on Form 8-K filed July 12, 2002).
3.4 *
Bylaws, as amended, of the Registrant.
4.1
Form of Common Stock Certificate (incorporated by reference to Exhibit 4.1 to Registrant’s Registration
Statement on Form S-11 (File No. 33-91422) filed June 19, 1995).
10.1+
Sovran Self Storage, Inc. 2005 Award and Option Plan, as amended (incorporated by reference to the
Registrant’s Proxy Statement filed April 11, 2005).
10.2+*
Sovran Self Storage, Inc. 1995 Outside Directors’ Stock Option Plan, as amended.
10.3+
10.4+
10.5+
10.6+
10.7+
10.8+
10.9+
Employment Agreement between the Registrant and Robert J. Attea (incorporated by reference to
Exhibit 10.3 to Registrant’s Form 10-K filed February 27, 2009).
Employment Agreement between the Registrant and Kenneth F. Myszka (incorporated by reference to
Exhibit 10.4 to Registrant’s Form 10-K filed February 27, 2009).
Employment Agreement between the Registrant and David L. Rogers (incorporated by reference to
Exhibit 10.5 to Registrant’s Form 10-K filed February 27, 2009).
Form of restricted stock grant pursuant to Sovran Self Storage, Inc. 2005 Award and Option Plan
(incorporated by reference to Exhibit 10.1 to Registrant’s Quarterly Report on Form 10-Q/A filed
November 24, 2006).
Form of stock option grant pursuant to Sovran Self Storage, Inc. 2005 Award and Option Plan
(incorporated by reference to Exhibit 10.2 to Registrant’s Quarterly Report on Form 10-Q/A filed
November 24, 2006).
Form of restricted stock grant pursuant to Sovran Self Storage, Inc. 1995 Award and Option Plan
(incorporated by reference to Exhibit 10.3 to Registrant’s Quarterly Report on Form 10-Q/A filed
November 24, 2006).
Form of stock option grant pursuant to Sovran Self Storage, Inc. 1995 Award and Option Plan
(incorporated by reference to Exhibit 10.4 to Registrant’s Quarterly Report on Form 10-Q/A filed
November 24, 2006).
58
10.10+
Deferred Compensation Plan for Directors (incorporated by reference to Schedule 14A Proxy Statement
filed April 10, 2008).
10.11
10.12
10.13
Amended Indemnification Agreements with members of the Board of Directors and Executive Officers
(incorporated by reference to Exhibit 10.35 and 10.36 to Registrant’s Current Report on Form 8-K filed
July 20, 2006).
Agreement of Limited Partnership of Sovran Acquisition Limited Partnership (incorporated by reference
to Exhibit 3.1 on Form 10 filed April 22, 1998).
Amendments to the Agreement of Limited Partnership of Sovran Acquisition Limited Partnership dated
July 30, 1999 and July 3, 2002 (incorporated by reference to Exhibit 10.13 to registrant’s Form 10-K
filed February 27, 2009).
10.14*
Promissory Note between Locke Sovran II, LLC and PNC Bank, National Association.
10.15
10.16
10.17
10.18
10.19
Third Amended and Restated Revolving Credit and Term Loan Agreement among Registrant, the
Partnership, Manufacturers and Traders Trust Company and other lenders named therein (incorporated
by reference to Exhibit 10.1 filed in the Company’s Current Report on Form 8-K, filed June 27, 2008).
Cornerstone Acquisition Agreement and Amendments to Certain Loan Agreements (incorporated by
reference to Exhibits 10.30, 10.31, 10.32, 10.33 and 10.34 of Registrant’s Current Report on Form 8-K
filed June 26, 2006).
$150 million, 6.38% Senior Guaranteed Notes, Series C due April 26, 2016, and Amendments to Second
Amendment Restated Revolving Credit and Term Loan Agreement dated December 16, 2004 and
Amendment to Note Purchase Agreement dated September 4, 2003 (incorporated by reference to
Exhibits 10.27, 10.28, and 10.29 of the Registrant’s Current Report on Form 8-K filed May 1, 2006).
Promissory Note between Locke Sovran I, LLC and GMAC Commercial Mortgage Corporation
(incorporated by reference to Exhibit 10.21 as filed in the Company’s Annual Report on Form 10-K,
filed March 1, 2007).
Indemnification Agreement dated September 25, 2009 between Registrant, Sovran Acquisition Limited
Partnership and James R. Boldt, a director of the Company (incorporated by reference to Exhibit 10.1 to
Registrant’s Current Report on Form 8-K filed September 25, 2009).
10.20
Sovran Self Storage, Inc. 2009 Outside Directors Stock Option and Award Plan (incorporated by
reference to Registrant’s Proxy Statement filed April 9, 2009).
12.1*
Statement Re: Computation of Earnings to Fixed Charges.
21.1*
Subsidiaries of the Company.
23.1*
Consent of Independent Registered Public Accounting Firm.
24.1*
Powers of Attorney (included on signature pages).
31.1*
31.2*
Certification of Chief Executive Officer pursuant to Rule 13a-14(a) and Rule 15d-14(a) of the Securities
Exchange Act, as amended.
Certification of Chief Financial Officer pursuant to Rule 13a-14(a) and Rule 15d-14(a) of the Securities
Exchange Act, as amended.
59
32.1*
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.
*
+
Filed herewith.
Management contract or compensatory plan or arrangement.
60
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant
has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
SIGNATURES
February 26, 2010
SOVRAN SELF STORAGE, INC.
By: /s/ David L. Rogers
David L. Rogers,
Chief Financial Officer,
Secretary
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by
the following persons on behalf of the registrant and in the capacities and on the dates indicated.
Signature
Title
Date
/s/ Robert J. Attea
Robert J. Attea
Chairman of the Board of Directors
Chief Executive Officer and Director
(Principal Executive Officer)
/s/ Kenneth F. Myszka
Kenneth F. Myszka
President, Chief Operating
Officer and Director
/s/ David L. Rogers
David L. Rogers
Chief Financial Officer (Principal
Financial and Accounting Officer)
/s/ John Burns
John Burns
/s/ James R. Boldt
James R. Boldt
/s/ Anthony P. Gammie
Anthony P. Gammie
/s/ Charles E. Lannon
Charles E. Lannon
Director
Director
Director
Director
February 26, 2010
February 26, 2010
February 26, 2010
February 26, 2010
February 26, 2010
February 26, 2010
February 26, 2010
61
Sovran Self Storage, Inc.
Schedule III
Combined Real Estate and Accumulated Depreciation
(in thousands)
December 31, 2009
Description
Boston-Metro I
Boston-Metro II
E. Providence
Charleston l
Lakeland I
Charlotte
Tallahassee I
Youngstown
Cleveland-Metro II
Tallahassee II
Pt. St. Lucie
Deltona
Middletown
Buffalo I
Rochester I
Salisbury
Jacksonville I
Columbia I
Rochester II
Savannah l
Greensboro
Raleigh I
New Haven
Atlanta-Metro I
Atlanta-Metro II
Buffalo II
Raleigh II
Columbia II
Columbia III
Columbia IV
Atlanta-Metro III
Orlando I
Sharon
Ft. Lauderdale
Initial Cost to Company
Cost Capitalized
Subsequent to
Acquisition
Gross Amount at Which
Carried at Close of Period
Encum
brance
ST
Land
Building,
Equipment
and
Improvements
Building,
Equipment
and
Improvements
Building,
Equipment
and
Improvements
Land
Total
Accum.
Deprec.
Date of
Construction
Date
Acquired
Life on
which
depreciation
in latest
income
statement
is computed
MA
MA
RI
SC
FL
NC
FL
OH
OH
FL
FL
FL
NY
NY
NY
MD
FL
SC
NY
GA
NC
NC
CT
GA
GA
NY
NC
SC
SC
SC
GA
FL
PA
FL
$363
$1,679
$545
$363
680
345
416
397
308
770
239
701
204
395
483
224
423
395
164
152
268
230
463
444
649
387
844
302
315
321
361
189
488
430
513
194
1,616
1,268
1,516
1,424
1,102
2,734
1,110
1,659
734
1,501
1,752
808
1,531
1,404
760
728
1,248
847
1,684
1,613
2,329
1,402
2,021
1,103
745
1,150
1,331
719
1,188
1,579
1,930
912
1,503
3,619
383
688
2,080
1,465
1,124
1,889
1,317
822
923
885
2,077
817
1,660
491
463
1,028
447
452
3,832
2,846
855
962
670
369
1,662
655
599
1,079
508
1,941
474
441
839
680
345
416
397
747
770
239
701
198
779
483
224
497
395
164
688
268
234
805
444
649
387
844
303
517
321
374
189
488
602
513
194
1,503
62
2,224
1,999
1,956
3,596
2,889
1,787
4,623
2,427
2,481
1,663
2,002
3,829
1,625
3,117
1,895
1,223
1,220
1,695
1,295
5,174
4,459
3,184
2,364
2,691
1,471
2,205
1,805
1,917
1,798
1,696
3,348
2,404
1,353
4,458
$2,587
$778
2,679
2,301
4,012
3,286
2,534
764
631
878
703
617
5,393
1,599
2,666
3,182
1,861
2,781
705
840
565
817
4,312
1,032
1,849
570
3,614
1,115
2,290
1,387
1,908
1,963
1,529
678
460
454
664
466
5,979
1,213
4,903
831
3,833
1,126
2,751
3,535
1,774
2,722
2,126
2,291
1,987
2,184
3,950
2,917
1,547
732
987
588
601
611
722
563
648
854
934
492
5,961
1,362
1980
1986
1984
1985
1985
1986
1973
1980
1987
1975
1985
1984
1988
1981
1981
1979
1985
1985
1980
1981
1986
1985
1985
1988
1988
1984
1985
1987
1989
1986
1988
1988
1975
1985
6/26/1995 5 to 40 years
6/26/1995 5 to 40 years
6/26/1995 5 to 40 years
6/26/1995 5 to 40 years
6/26/1995 5 to 40 years
6/26/1995 5 to 40 years
6/26/1995 5 to 40 years
6/26/1995 5 to 40 years
6/26/1995 5 to 40 years
6/26/1995 5 to 40 years
6/26/1995 5 to 40 years
6/26/1995 5 to 40 years
6/26/1995 5 to 40 years
6/26/1995 5 to 40 years
6/26/1995 5 to 40 years
6/26/1995 5 to 40 years
6/26/1995 5 to 40 years
6/26/1995 5 to 40 years
6/26/1995 5 to 40 years
6/26/1995 5 to 40 years
6/26/1995 5 to 40 years
6/26/1995 5 to 40 years
6/26/1995 5 to 40 years
6/26/1995 5 to 40 years
6/26/1995 5 to 40 years
6/26/1995 5 to 40 years
6/26/1995 5 to 40 years
6/26/1995 5 to 40 years
6/26/1995 5 to 40 years
6/26/1995 5 to 40 years
6/26/1995 5 to 40 years
6/26/1995 5 to 40 years
6/26/1995 5 to 40 years
6/26/1995 5 to 40 years
Description
West Palm l
Atlanta-Metro IV
Atlanta-Metro V
Atlanta-Metro VI
Atlanta-Metro VII
Atlanta-Metro VIII
Baltimore I
Baltimore II
Augusta I
Macon I
Melbourne I
Newport News
Pensacola I
Augusta II
Hartford-Metro I
Atlanta-Metro IX
Alexandria
Pensacola II
Melbourne II
Hartford-Metro II
Atlanta-Metro X
Norfolk I
Norfolk II
Birmingham I
Birmingham II
Montgomery l
Jacksonville II
Pensacola III
Pensacola IV
Pensacola V
Tampa I
Tampa II
Tampa III
Jackson I
Jackson II
Richmond
Orlando II
Birmingham III
Macon II
ST
FL
GA
GA
GA
GA
GA
MD
MD
GA
GA
FL
VA
FL
GA
CT
GA
VA
FL
FL
CT
GA
VA
VA
AL
AL
AL
FL
FL
FL
FL
FL
FL
FL
MS
MS
VA
FL
AL
GA
Initial Cost to Company
Cost Capitalized
Subsequent to
Acquisition
Gross Amount at Which
Carried at Close of Period
Encum
brance
Land
Building,
Equipment
and
Improvements
Building,
Equipment
and
Improvements
Building,
Equipment
and
Improvements
Land
Total
Accum.
Deprec.
Date of
Construction
Date
Acquired
Life on
which
depreciation
in latest
income
statement
is computed
398
423
483
308
170
413
154
479
357
231
883
316
632
315
715
304
1,375
244
834
234
256
313
278
307
730
863
326
369
244
226
1,088
526
672
343
209
443
1,161
424
431
1,035
1,015
1,166
1,116
786
999
555
1,742
1,296
1,081
2,104
1,471
2,962
1,139
1,695
1,118
3,220
901
2,066
861
1,244
1,462
1,004
1,415
1,725
2,041
1,515
1,358
1,128
1,046
2,597
1,958
2,439
1,580
964
1,602
2,755
1,506
1,567
292
375
939
521
562
645
1,369
2,810
832
469
1,577
780
1,105
769
1,061
2,521
2,166
420
1,136
1,881
1,803
938
375
1,559
619
626
423
2,741
714
543
988
798
583
2,213
597
826
976
691
734
398
424
483
308
174
413
306
479
357
231
883
316
651
315
715
619
1,376
244
1,591
612
256
313
278
384
730
863
326
369
719
226
1,088
526
672
796
209
443
1,162
424
431
63
1,327
1,389
2,105
1,637
1,344
1,644
1,772
4,552
2,128
1,550
3,681
2,251
4,048
1,908
2,756
3,324
5,385
1,321
2,445
2,364
3,047
2,400
1,379
2,897
2,344
2,667
1,938
4,099
1,367
1,589
3,585
2,756
3,022
3,340
1,561
2,428
3,730
2,197
2,301
1,725
1,813
2,588
1,945
1,518
2,057
2,078
5,031
2,485
1,781
560
562
619
676
511
672
464
994
732
579
4,564
1,254
2,567
824
4,699
1,559
2,223
3,471
3,943
657
883
829
6,761
1,612
1,565
4,036
2,976
3,303
2,713
1,657
3,281
3,074
586
998
638
847
827
540
786
898
3,530
1,018
2,264
746
4,468
1,027
2,086
1,815
550
614
4,673
1,360
3,282
1,032
3,694
1,115
4,136
1,770
2,871
817
635
851
4,892
1,378
2,621
2,732
903
785
1985
1989
1988
1986
1981
1975
1984
1988
1988
1989
1986
1988
1983
1987
1988
1988
1984
1986
1986
1992
1988
1984
1989
1990
1990
1982
1987
1986
1990
1990
1989
1985
1988
1990
1990
1987
1986
1970
6/26/1995 5 to 40 years
6/26/1995 5 to 40 years
6/26/1995 5 to 40 years
6/26/1995 5 to 40 years
6/26/1995 5 to 40 years
6/26/1995 5 to 40 years
6/26/1995 5 to 40 years
6/26/1995 5 to 40 years
6/26/1995 5 to 40 years
6/26/1995 5 to 40 years
6/26/1995 5 to 40 years
6/26/1995 5 to 40 years
6/26/1995 5 to 40 years
6/26/1995 5 to 40 years
6/26/1995 5 to 40 years
6/26/1995 5 to 40 years
6/26/1995 5 to 40 years
6/26/1995 5 to 40 years
6/26/1995 5 to 40 years
6/26/1995 5 to 40 years
6/26/1995 5 to 40 years
6/26/1995 5 to 40 years
6/26/1995 5 to 40 years
6/26/1995 5 to 40 years
6/26/1995 5 to 40 years
6/26/1995 5 to 40 years
6/26/1995 5 to 40 years
6/26/1995 5 to 40 years
6/26/1995 5 to 40 years
6/26/1995 5 to 40 years
6/26/1995 5 to 40 years
6/26/1995 5 to 40 years
6/26/1995 5 to 40 years
6/26/1995 5 to 40 years
6/26/1995 5 to 40 years
8/25/1995 5 to 40 years
9/29/1995 5 to 40 years
1/16/1996 5 to 40 years
1989/94
12/1/1995 5 to 40 years
Initial Cost to Company
Cost Capitalized
Subsequent to
Acquisition
Gross Amount at Which
Carried at Close of Period
Description
Encum
brance
ST
Land
Building,
Equipment
and
Improvements
Building,
Equipment
and
Improvements
Building,
Equipment
and
Improvements
Land
Total
Accum.
Deprec.
Date of
Construction
Date
Acquired
Life on
which
depreciation
in latest
income
statement
is computed
Harrisburg I
Harrisburg II
Syracuse I
Ft. Myers
Ft. Myers II
Newport News II
Montgomery II
Charleston II
Tampa IV
Arlington I
Arlington II
Ft. Worth
San Antonio I
San Antonio II
Syracuse II
Montgomery III
West Palm II
Ft. Myers III
Lakeland II
Springfield
Ft. Myers IV
Cincinnati
Dayton
PA
PA
(1)
NY
FL
FL
VA
AL
SC
FL
TX
TX
TX
TX
TX
NY
AL
FL
FL
FL
MA
FL
OH
(2)
OH
(2)
Baltimore III
MD
Jacksonville III
Jacksonville IV
Jacksonville V
Charlotte II
Charlotte III
Orlando III
Rochester III
Youngstown ll
Cleveland lll
Cleveland lV
Cleveland V
Cleveland Vl
Cleveland Vll
Cleveland Vlll
Cleveland lX
FL
FL
FL
NC
NC
FL
NY
OH
OH
OH
OH
(1)
OH
OH
OH
OH
360
627
470
205
412
442
353
237
766
442
408
328
436
289
481
279
345
229
359
251
344
557
667
777
568
436
535
487
315
314
704
600
751
725
637
495
761
418
606
1,641
2,224
1,712
912
1,703
1,592
1,299
858
1,800
1,767
1,662
1,324
1,759
1,161
1,559
1,014
1,262
884
1,287
917
1,254
1,988
2,379
2,770
2,028
1,635
2,033
1,754
1,131
1,113
2,496
2,142
2,676
2,586
2,918
1,781
2,714
1,921
2,164
599
958
1,313
310
458
1,180
653
623
649
319
1,070
331
1,121
543
2,391
998
354
298
1,065
2,267
292
775
433
434
931
520
321
425
338
953
2,335
2,073
1,798
1,354
1,629
899
1,337
1,655
1,363
2,240
3,117
3,023
1,221
2,160
2,772
1,952
1,486
2,449
2,086
2,732
1,655
2,880
1,704
3,760
1,858
1,616
1,182
2,352
3,138
1,580
2,632
2,796
3,204
2,959
2,155
2,351
2,179
1,469
2,066
4,828
4,122
4,474
3,940
4,483
2,680
4,051
3,576
3,527
360
692
472
206
413
442
353
232
766
442
408
328
436
289
671
433
345
229
359
297
310
688
683
777
568
436
538
487
315
314
707
693
751
725
701
495
761
418
606
64
819
1983
12/29/1995 5 to 40 years
1,018
1985
12/29/1995 5 to 40 years
2,600
3,809
3,495
1,427
2,573
3,214
2,305
1,718
3,215
2,528
3,140
1,983
3,316
1,993
923
573
947
731
633
529
844
730
881
598
937
582
4,431
1,015
2,291
1,961
1,411
2,711
3,435
1,890
3,320
3,479
575
577
413
814
885
567
299
340
3,981
1,087
3,527
1,052
2,591
2,889
2,666
1,784
2,380
789
908
674
485
702
1987
12/27/1995 5 to 40 years
1988
12/28/1995 5 to 40 years
1991/94
12/28/1995 5 to 40 years
1988/93
1/5/1996 5 to 40 years
1984
1985
1985
1987
1986
1986
1986
1986
1983
1988
1986
1986
1988
1986
1987
1988
1988
1990
1987
1985
1/23/1996 5 to 40 years
3/1/1996 5 to 40 years
3/28/1996 5 to 40 years
3/29/1996 5 to 40 years
3/29/1996 5 to 40 years
3/29/1996 5 to 40 years
3/29/1996 5 to 40 years
3/29/1996 5 to 40 years
6/5/1996 5 to 40 years
5/21/1996 5 to 40 years
5/29/1996 5 to 40 years
5/29/1996 5 to 40 years
6/26/1996 5 to 40 years
6/28/1996 5 to 40 years
6/28/1996 5 to 40 years
7/23/1996 5 to 40 years
7/23/1996 5 to 40 years
7/26/1996 5 to 40 years
8/23/1996 5 to 40 years
8/26/1996 5 to 40 years
1987/92
8/30/1996 5 to 40 years
1995
1995
9/16/1996 5 to 40 years
9/16/1996 5 to 40 years
1975
10/30/1996 5 to 40 years
5,535
1,029
1990
12/20/1996 5 to 40 years
4,815
939
5,225
1,300
4,665
1,206
5,184
1,563
3,175
865
4,812
1,273
3,994
1,110
4,133
917
1988
1986
1978
1979
1979
1977
1970
1982
1/10/1997 5 to 40 years
1/10/1997 5 to 40 years
1/10/1997 5 to 40 years
1/10/1997 5 to 40 years
1/10/1997 5 to 40 years
1/10/1997 5 to 40 years
1/10/1997 5 to 40 years
1/10/1997 5 to 40 years
Initial Cost to Company
Cost Capitalized
Subsequent to
Acquisition
Gross Amount at Which
Carried at Close of Period
Description
Encum
brance
ST
Land
Building,
Equipment
and
Improvements
Building,
Equipment
and
Improvements
Building,
Equipment
and
Improvements
Land
Grand Rapids l
MI
(2)
Grand Rapids ll
MI
Kalamazoo
Lansing
Holland
MI
(2)
MI
(2)
MI
San Antonio lll
TX
(1)
Universal
San Antonio lV
Houston-Eastex
Houston-Nederland
Houston-College
TX
TX
TX
TX
TX
Lynchburg-Lakeside
VA
Lynchburg-Timberlake VA
Lynchburg-Amherst
Christiansburg
Chesapeake
Danville
Orlando-W 25th St
Delray l-Mini
Savannah ll
Delray ll-Safeway
Cleveland X-Avon
Dallas-Skillman
Dallas-Centennial
VA
VA
VA
VA
FL
FL
GA
FL
OH
TX
TX
Dallas-Samuell
TX
(1)
Dallas-Hargrove
Houston-Antoine
Atlanta-Alpharetta
TX
TX
GA
Atlanta-Marietta
GA
(1)
Atlanta-Doraville
GreensboroHilltop
GreensboroStgCch
GA
NC
NC
Baton Rouge-Airline
LA
(1)
Baton Rouge-Airline2
LA
Harrisburg-Peiffers
Chesapeake-Military
Chesapeake-Volvo
PA
VA
VA
Virginia Beach-Shell
VA
Virginia Beach-Central VA
455
219
516
327
451
474
346
432
634
566
293
335
328
155
245
260
326
289
491
296
921
301
960
965
570
370
515
1,033
769
735
268
89
396
282
635
542
620
540
864
1,631
790
1,845
1,332
1,830
1,686
1,236
1,560
2,565
2,279
1,357
1,342
1,315
710
1,120
1,043
1,488
1,160
1,756
1,196
3,282
1,214
3,847
3,864
2,285
1,486
2,074
3,753
2,788
3,429
1,097
376
1,831
1,303
2,550
2,210
2,532
2,211
3,994
981
879
1,729
1,627
1,899
442
467
1,695
1,172
356
568
1,274
976
337
583
1,188
246
744
672
347
488
2,106
1,500
1,276
795
530
561
458
465
318
391
1,539
966
312
532
343
908
276
752
2,443
1,669
3,396
2,744
3,729
2,098
1,703
3,255
3,737
2,635
1,925
2,616
2,291
1,050
1,703
2,231
1,734
1,577
2,428
1,543
3,770
3,317
5,347
5,162
3,039
2,016
2,635
4,211
3,197
3,747
1,488
1,915
2,772
1,615
3,080
2,553
3,440
2,487
4,746
624
219
694
542
451
504
346
432
634
566
293
335
328
152
245
260
326
616
491
296
921
304
960
943
611
370
515
1,033
825
735
268
89
421
282
637
542
620
540
864
65
Life on
which
depreciation
in latest
income
statement
is computed
Accum.
Deprec.
Date of
Construction
Date
Acquired
Total
3,067
1,888
4,090
3,286
292
535
367
293
4,180
1,143
2,602
2,049
3,687
644
522
927
1976
1983
1978
1987
1978
1981
1985
1995
1/17/1997 5 to 40 years
1/17/1997 5 to 40 years
1/17/1997 5 to 40 years
1/17/1997 5 to 40 years
1/17/1997 5 to 40 years
1/30/1997 5 to 40 years
1/30/1997 5 to 40 years
1/30/1997 5 to 40 years
4,371
1,139
1993/95
3/26/1997 5 to 40 years
3,201
2,218
2,951
2,619
1,202
1,948
2,491
2,060
2,193
2,919
1,839
837
572
743
725
372
478
627
561
507
833
526
4,691
1,266
3,621
742
6,307
1,651
6,105
1,635
3,650
2,386
3,150
990
712
872
5,244
1,428
4,022
1,031
4,482
1,230
1,756
2,004
3,193
1,897
3,717
3,095
458
463
796
551
940
789
4,060
1,015
3,027
797
1995
1995
1982
1985
1987
3/26/1997 5 to 40 years
3/26/1997 5 to 40 years
3/31/1997 5 to 40 years
3/31/1997 5 to 40 years
3/31/1997 5 to 40 years
1985/90
3/31/1997 5 to 40 years
1988/95
3/31/1997 5 to 40 years
1988
1984
1969
1988
1980
1989
1975
1977
1975
1975
1984
1994
1996
1995
1995
1997
1982
3/31/1997 5 to 40 years
3/31/1997 5 to 40 years
4/11/1997 5 to 40 years
5/8/1997 5 to 40 years
5/21/1997 5 to 40 years
6/4/1997 5 to 40 years
6/30/1997 5 to 40 years
6/30/1997 5 to 40 years
6/30/1997 5 to 40 years
6/30/1997 5 to 40 years
6/30/1997 5 to 40 years
7/24/1997 5 to 40 years
7/24/1997 5 to 40 years
8/21/1997 5 to 40 years
9/25/1997 5 to 40 years
9/25/1997 5 to 40 years
10/9/1997 5 to 40 years
1985
11/21/1997 5 to 40 years
1984
1996
1995
1991
12/3/1997 5 to 40 years
2/5/1998 5 to 40 years
2/5/1998 5 to 40 years
2/5/1998 5 to 40 years
5,610
1,464
1993/95
2/5/1998 5 to 40 years
Initial Cost to Company
Cost Capitalized
Subsequent to
Acquisition
Gross Amount at Which
Carried at Close of Period
Description
Encum
brance
ST
Norfolk-Naval Base
VA
Tampa-E.Hillsborough
FL
Northbridge
MA
(2)
Harriman
NY
Greensboro-High Point NC
Lynchburg-Timberlake VA
Titusville
Salem
FL
(2)
MA
Chattanooga-Lee Hwy
TN
Chattanooga-Hwy 58
TN
Ft. Oglethorpe
Birmingham-Walt
East Greenwich
GA
AL
RI
Durham-Hillsborough
NC
Durham-Cornwallis
Salem-Policy
Warren-Elm
NC
NH
OH
(1)
Warren-Youngstown
OH
Indian Harbor Beach
FL
Jackson 3 - I55
Katy-N.Fry
MS
TX
Hollywood-Sheridan
FL
Pompano Beach-Atlantic FL
Pompano Beach-Sample FL
Boca Raton-18th St
Vero Beach
Humble
FL
FL
TX
Houston-Old Katy
TX
(1)
Webster
Carrollton
Hollywood-N.21st
San Marcos
Austin-McNeil
Austin-FM
Jacksonville-Center
Jacksonville-Gum
Branch
TX
TX
FL
TX
TX
TX
NC
NC
Jacksonville-N.Marine
NC
Euless
N. Richland Hills
TX
TX
Land
1,243
709
441
843
397
488
492
733
384
296
349
544
702
775
940
742
522
512
662
744
419
1,208
944
903
1,503
489
447
659
635
548
840
324
492
484
327
508
216
550
670
Building,
Equipment
and
Improvements
Building,
Equipment
and
Improvements
5,019
3,235
1,788
3,394
1,834
1,746
1,990
2,941
1,371
1,198
1,250
1,942
2,821
3,103
3,763
2,977
1,864
1,829
2,654
3,021
1,524
4,854
3,803
3,643
6,059
1,813
1,790
2,680
2,302
1,988
3,373
1,493
1,995
1,951
1,329
1,815
782
1,998
2,407
744
750
990
490
554
498
934
1,236
536
2,090
584
831
1,080
710
749
468
1,218
1,860
-602
132
3,284
358
352
341
832
116
2,246
377
131
295
363
2,012
494
462
678
1,271
721
660
1,540
Building,
Equipment
and
Improvements
5,763
3,985
2,525
3,884
2,388
2,244
2,728
4,177
1,907
3,170
1,834
2,773
3,901
3,813
4,512
3,445
3,035
3,526
2,052
3,153
4,808
5,212
4,155
3,984
6,891
1,929
3,743
3,018
2,433
2,283
3,736
3,505
2,471
2,416
2,007
3,086
1,503
2,658
3,947
Land
1,243
709
694
843
397
488
688
733
384
414
349
544
702
775
940
742
569
675
662
744
419
1,208
944
903
1,503
489
740
698
635
548
840
324
510
481
327
508
216
550
670
66
Life on
which
depreciation
in latest
income
statement
is computed
Accum.
Deprec.
Date of
Construction
Date
Acquired
1,760
1,331
263
1975
1985
1988
2/5/1998 5 to 40 years
2/4/1998 5 to 40 years
2/9/1998 5 to 40 years
Total
7,006
4,694
3,219
4,727
1,225
1989/95
2/4/1998 5 to 40 years
2,785
2,732
3,416
732
680
292
4,910
1,255
2,291
3,584
2,183
3,317
613
657
574
922
1993
2/10/1998 5 to 40 years
1990/96
2/18/1998 5 to 40 years
1986/90
2/25/1998 5 to 40 years
1979
1987
1985
1989
1984
3/3/1998 5 to 40 years
3/27/1998 5 to 40 years
3/27/1998 5 to 40 years
3/27/1998 5 to 40 years
3/27/1998 5 to 40 years
4,603
1,151
1984/88
3/26/1998 5 to 40 years
4,588
1,143
1988/91
4/9/1998 5 to 40 years
5,452
1,342
1990/96
4/9/1998 5 to 40 years
4,187
3,604
4,201
2,714
3,897
5,227
994
814
779
674
964
704
6,420
1,548
5,099
1,254
4,887
1,175
8,394
2,043
2,418
4,483
3,716
3,068
2,831
635
824
810
727
668
4,576
1,139
3,829
2,981
2,897
2,334
3,594
1,719
3,208
4,617
667
729
714
500
761
468
709
905
1980
1986
1986
1985
1995
1994
1988
1985
1988
1991
1997
1986
1996
1997
1997
1987
1994
1994
1996
1995
1989
1985
1996
1996
4/7/1998 5 to 40 years
4/22/1998 5 to 40 years
4/22/1998 5 to 40 years
6/2/1998 5 to 40 years
5/13/1998 5 to 40 years
5/20/1998 5 to 40 years
7/1/1998 5 to 40 years
7/1/1998 5 to 40 years
7/1/1998 5 to 40 years
7/1/1998 5 to 40 years
6/12/1998 5 to 40 years
6/16/1998 5 to 40 years
6/19/1998 5 to 40 years
6/19/1998 5 to 40 years
6/19/1998 5 to 40 years
8/3/1998 5 to 40 years
6/30/1998 5 to 40 years
6/30/1998 5 to 40 years
6/30/1998 5 to 40 years
8/6/1998 5 to 40 years
8/17/1998 5 to 40 years
9/24/1998 5 to 40 years
9/29/1998 5 to 40 years
10/9/1998 5 to 40 years
Initial Cost to Company
Cost Capitalized
Subsequent to
Acquisition
Gross Amount at Which
Carried at Close of Period
Description
Encum
brance
ST
Land
Building,
Equipment
and
Improvements
Building,
Equipment
and
Improvements
Building,
Equipment
and
Improvements
Land
Total
Accum.
Deprec.
Date of
Construction
Date
Acquired
Life on
which
depreciation
in latest
income
statement
is computed
Batavia
Jackson-N.West
Katy-Franz
W.Warwick
Lafayette-Pinhook 1
Lafayette-Pinhook2
OH
MS
TX
RI
LA
LA
Lafayette-Ambassador
LA
Lafayette-Evangeline
LA
Lafayette-Guilbeau
Gilbert-Elliot Rd
Glendale-59th Ave
Mesa-Baseline
Mesa-E.Broadway
Mesa-W.Broadway
Mesa-Greenfield
Phoenix-Camelback
Phoenix-Bell
Phoenix-35th Ave
Westbrook
Cocoa
Cedar Hill
Monroe
N.Andover
Seabrook
Plantation
LA
AZ
AZ
AZ
AZ
AZ
AZ
AZ
AZ
AZ
ME
FL
TX
NY
MA
TX
FL
Birmingham-Bessemer AL
390
460
507
447
556
708
314
188
963
651
565
330
339
291
354
453
872
849
410
667
335
276
633
633
384
254
Brewster
NY
(2)
1,716
Austin-Lamar
Houston-E.Main
TX
(2)
TX
(2)
Ft.Myers-Abrams
FL
(2)
837
733
787
1,035
1,024
883
552
470
534
MA
(1)
MA
(1)
SC
(1)
SC
(1)
GA
(1)
ME
(1)
MA
1,004
MA
(1)
NY
(1)
670
294
Dracut
Methuen
Columbia 5
Myrtle Beach
Kingsland
Saco
Plymouth
Sandwich
Syracuse
1,570
1,642
2,058
1,776
1,951
2,860
1,095
652
3,896
2,600
2,596
1,309
1,346
1,026
1,405
1,610
3,476
3,401
1,626
2,373
1,521
1,312
2,573
2,617
1,422
1,059
6,920
2,977
3,392
3,249
3,737
3,649
3,139
1,970
1,902
1,914
4,584
3,060
1,203
909
480
1,599
813
977
285
665
1,507
776
1,101
556
2,399
593
874
336
834
871
666
1,759
775
377
1,159
808
343
415
1,194
905
496
572
374
590
567
1,212
881
2,914
279
2,282
408
402
390
460
507
447
556
708
314
188
963
772
565
733
339
291
354
453
872
849
410
667
335
276
633
633
384
254
1,981
966
841
902
1,104
1,091
942
589
666
570
1,004
714
327
67
2,479
2,122
3,657
2,589
2,928
3,145
1,760
2,159
4,672
3,580
3,152
3,305
1,939
1,900
1,741
2,444
4,347
4,067
3,385
3,148
1,898
2,471
3,381
2,960
1,837
2,253
7,560
3,344
3,856
3,508
4,258
4,149
4,292
2,814
4,620
2,157
6,866
3,424
1,572
2,869
2,582
4,164
3,036
3,484
3,853
2,074
2,347
625
707
741
717
973
895
631
628
5,635
1,224
4,352
3,717
4,038
2,278
2,191
2,095
2,897
864
852
482
493
414
516
665
5,219
1,196
4,916
1,094
3,795
3,815
2,233
2,747
4,014
3,593
2,221
2,507
9,541
4,310
4,697
4,410
5,362
5,240
5,234
3,403
5,286
2,727
728
850
535
515
755
768
463
411
797
400
428
424
887
856
816
582
642
452
1988
11/19/1998 5 to 40 years
1984
12/1/1998 5 to 40 years
1993
12/15/1998 5 to 40 years
1986/94
2/2/1999 5 to 40 years
1980
2/17/1999 5 to 40 years
1992/94
2/17/1999 5 to 40 years
1975
1977
1994
1995
1997
1986
1986
1976
1986
1984
1984
1996
1988
1982
1985
1998
1989
1996
1994
2/17/1999 5 to 40 years
2/17/1999 5 to 40 years
2/17/1999 5 to 40 years
5/18/1999 5 to 40 years
5/18/1999 5 to 40 years
5/18/1999 5 to 40 years
5/18/1999 5 to 40 years
5/18/1999 5 to 40 years
5/18/1999 5 to 40 years
5/18/1999 5 to 40 years
5/18/1999 5 to 40 years
5/21/1999 5 to 40 years
8/2/1999 5 to 40 years
9/29/1999 5 to 40 years
11/9/1999 5 to 40 years
2/2/2000 5 to 40 years
2/15/2000 5 to 40 years
3/1/2000 5 to 40 years
5/2/2000 5 to 40 years
1998
11/15/2000 5 to 40 years
1991/97
12/27/2000 5 to 40 years
1996/99
2/22/2001 5 to 40 years
1993/97
3/2/2001 5 to 40 years
1997
1986
1984
1985
1984
1989
1988
3/13/2001 5 to 40 years
12/1/2001 5 to 40 years
12/1/2001 5 to 40 years
12/1/2001 5 to 40 years
12/1/2001 5 to 40 years
12/1/2001 5 to 40 years
12/3/2001 5 to 40 years
7,870
1,043
1996
12/19/2001 5 to 40 years
4,138
1,899
714
358
1984
12/19/2001 5 to 40 years
1987
2/5/2002 5 to 40 years
Initial Cost to Company
Cost Capitalized
Subsequent to
Acquisition
Gross Amount at Which
Carried at Close of Period
Description
Encum
brance
ST
Land
Building,
Equipment
and
Improvements
Building,
Equipment
and
Improvements
Building,
Equipment
and
Improvements
Land
Total
Accum.
Deprec.
Date of
Construction
Date
Acquired
Life on
which
depreciation
in latest
income
statement
is computed
Houston-Westward
TX
(1)
Houston-Boone
Houston-Cook
TX
(1)
TX
(1)
Houston-Harwin
TX
(1)
Houston-Hempstead
TX
(1)
Houston-Kuykendahl
TX
(1)
Houston-Hwy 249
TX
(1)
Mesquite-Hwy 80
TX
(1)
Mesquite-Franklin
TX
(1)
Dallas-Plantation
TX
(1)
San Antonio-Hunt
TX
(1)
Humble-5250 FM
Pasadena
League City-E.Main
Montgomery
Texas City
Houston-Hwy 6
Lumberton
The Hamptons l
The Hamptons 2
The Hamptons 3
The Hamptons 4
Duncanville
Dallas-Harry Hines
Stamford
Houston-Tomball
Houston-Conroe
Houston-Spring
Houston-Bissonnet
Houston-Alvin
Clearwater
TX
TX
TX
TX
TX
TX
TX
NY
NY
NY
NY
TX
TX
CT
TX
TX
TX
TX
TX
FL
Houston-Missouri City
TX
Chattanooga-Hixson
Austin-Round Rock
Cicero
Bay Shore
TN
TX
NY
NY
Springfield-Congress
MA
Stamford-Hope
CT
853
250
285
449
545
517
299
463
734
394
381
919
612
689
817
817
407
817
2,207
1,131
635
1,251
1,039
827
3,434
1,020
1,160
1,816
2,200
2,090
1,216
1,873
2,956
1,595
1,545
3,696
2,468
3,159
3,286
3,286
1,650
3,287
8,866
4,564
2,918
5,744
4,201
3,776
2,713
11,013
773
1,195
1,103
1,061
388
1,720
1,167
1,365
2,047
527
1,131
612
1,612
3,170
4,877
4,550
4,427
1,640
6,986
4,744
5,569
5,857
2,121
4,609
2,501
6,585
4,949
Houston-Jones
TX 3,369
1,214
855
495
326
597
935
1,258
1,053
655
678
283
781
363
232
269
912
268
306
480
583
553
320
496
784
421
408
919
612
689
2,066
1,119
817
407
817
2,207
1,131
635
1,252
1,039
827
129
182
191
627
489
357
357
46
297
304
1,775
109
253
2,663
852
82
3,459
1,182
675
564
59
106
201
82
4,230
1,497
1,465
2,382
3,097
3,312
2,248
2,495
3,584
1,851
2,299
4,059
2,700
3,428
5,050
3,415
1,832
3,478
9,493
5,053
3,275
6,100
4,247
4,073
5,142
1,765
1,771
2,862
3,680
3,865
2,568
2,991
4,368
2,272
2,707
4,978
3,312
4,117
6,169
4,232
2,239
4,295
883
319
323
506
627
601
428
482
694
394
431
763
514
658
736
671
359
670
1976
1983
1986
1981
2/13/2002 5 to 40 years
2/13/2002 5 to 40 years
2/13/2002 5 to 40 years
2/13/2002 5 to 40 years
1974/78
2/13/2002 5 to 40 years
1979/83
2/13/2002 5 to 40 years
1983
1985
1984
1985
1980
2/13/2002 5 to 40 years
2/13/2002 5 to 40 years
2/13/2002 5 to 40 years
2/13/2002 5 to 40 years
2/13/2002 5 to 40 years
1998/02
6/19/2002 5 to 40 years
1999
6/19/2002 5 to 40 years
1994/97
6/19/2002 5 to 40 years
1998
1999
1997
1996
6/19/2002 5 to 40 years
6/19/2002 5 to 40 years
6/19/2002 5 to 40 years
6/19/2002 5 to 40 years
11,700
1,714
1989/95
12/16/2002 5 to 40 years
6,184
3,910
890
566
1998
12/16/2002 5 to 40 years
1997
12/16/2002 5 to 40 years
7,352
1,078
1994/98
12/16/2002 5 to 40 years
5,286
4,900
693
641
1995/99
8/26/2003 5 to 40 years
1998/01
10/1/2003 5 to 40 years
2,713
11,317
14,030
1,732
4,945
4,986
4,803
7,090
2,492
7,068
7,804
6,751
6,528
2,685
4,668
2,607
6,786
5,030
5,718
6,181
5,906
8,151
2,880
648
734
716
822
296
8,788
1,020
9,370
8,116
8,579
3,212
5,799
3,219
8,398
6,245
746
947
902
355
593
337
855
603
773
1,195
1,103
1,061
388
1,720
1,566
1,365
2,051
527
1,131
612
1,612
1,215
68
1998
2000
2001
2001
2003
2003
2001
1998
3/17/2004 5 to 40 years
5/19/2004 5 to 40 years
5/19/2004 5 to 40 years
5/19/2004 5 to 40 years
5/19/2004 5 to 40 years
5/19/2004 5 to 40 years
6/3/2004 5 to 40 years
6/23/2004 5 to 40 years
1998/02
8/4/2004 5 to 40 years
2000
8/5/2004 5 to 40 years
1988/02
3/16/2005 5 to 40 years
2003
3/15/2005 5 to 40 years
1965/75
4/12/2005 5 to 40 years
2002
4/14/2005 5 to 40 years
1997/99
6/6/2005 5 to 40 years
Initial Cost to Company
Cost Capitalized
Subsequent to
Acquisition
Gross Amount at Which
Carried at Close of Period
Building,
Equipment
and
Improvements
Total
Accum.
Deprec.
Date of
Construction
Date
Acquired
Life on
which
depreciation
in latest
income
statement
is computed
Description
Encum
brance
ST
Montgomery-Richard
AL
Oxford
Austin-290E
MA
TX
SanAntonio-Marbach
TX
Austin-South 1st
Pinehurst
Marietta-Austell
Baton Rouge-Florida
Cypress
Texas City
TX
TX
GA
LA
TX
TX
San Marcos-Hwy 35S
TX
Baytown
Webster
Houston-Jones Rd 2
TX
NY
TX
Cameron-Scott
LA
977
Lafayette-Westgate
Broussard
LA
LA
Congress-Lafayette
LA 1,072
Manchester
Nashua
Largo 2
Pinellas Park
Tarpon Springs
New Orleans
St Louis-Meramec
NH
NH
FL
FL
FL
LA
MO
St Louis-Charles Rock MO
St Louis-Shackelford
MO
St Louis-W.Washington MO
St Louis-Howdershell MO
St Louis-Lemay Ferry MO
St Louis-Manchester
MO
Land
1,906
470
537
556
754
484
811
719
721
867
628
596
937
707
411
463
601
542
832
617
1,270
929
696
1,220
1,113
766
828
734
899
890
697
Arlington-Little Rd
TX 1,951
1,256
Dallas-Goldmark
Dallas-Manana
Dallas-Manderville
TX
TX
TX
Ft. Worth-Granbury
TX 1,751
Ft. Worth-Grapevine
San Antonio-Blanco
TX
TX
San Antonio-Broadway TX
605
607
1,073
549
644
963
773
Building,
Equipment
and
Improvements
Building,
Equipment
and
Improvements
7,726
1,902
2,183
2,265
3,065
1,977
3,397
2,927
2,994
3,499
2,532
2,411
3,779
2,933
1,621
1,831
2,406
1,319
3,268
2,422
5,037
3,676
2,739
4,805
4,359
3,040
3,290
2,867
3,596
3,552
2,711
4,946
2,434
2,428
4,276
2,180
2,542
3,836
3,060
135
1,577
167
206
148
1,361
433
927
1,094
106
450
86
116
2,013
136
83
1,250
2,101
90
489
171
109
110
83
190
111
141
555
180
208
96
159
58
115
62
90
52
55
106
Land
1,906
470
537
556
754
484
811
719
721
867
982
596
937
707
411
463
601
542
832
617
1,270
929
696
1,220
1,113
766
828
734
899
890
697
1,256
605
607
1,073
549
644
963
773
69
7,861
3,479
2,350
2,471
3,213
3,338
3,830
3,854
4,088
3,605
2,628
2,497
3,895
4,946
1,757
1,914
3,656
3,420
3,358
2,911
5,208
3,785
2,849
4,888
4,549
3,151
3,431
3,422
3,776
3,760
2,807
5,105
2,492
2,543
4,338
2,270
2,594
3,891
3,166
9,767
3,949
2,887
3,027
3,967
3,822
4,641
4,573
4,809
4,472
3,610
3,093
4,832
5,653
2,168
2,377
4,257
3,962
4,190
3,528
6,478
4,714
3,545
6,108
5,662
3,917
4,259
4,156
4,675
4,650
3,504
6,361
3,097
3,150
5,411
2,819
3,238
4,854
3,939
950
288
291
290
388
303
449
295
414
377
274
266
392
447
205
193
315
224
320
256
487
344
263
450
414
282
315
328
350
338
258
463
228
233
398
210
238
357
293
1997
2002
2003
2003
2003
6/1/2005 5 to 40 years
6/23/2005 5 to 40 years
7/12/2005 5 to 40 years
7/12/2005 5 to 40 years
7/12/2005 5 to 40 years
2002/04
7/12/2005 5 to 40 years
2003
9/15/2005 5 to 40 years
1984/94
11/15/2005 5 to 40 years
2003
2003
2001
2002
1/13/2006 5 to 40 years
1/10/2006 5 to 40 years
1/10/2006 5 to 40 years
1/10/2006 5 to 40 years
2002/06
2/1/2006 5 to 40 years
2000
1997
3/9/2006 5 to 40 years
4/13/2006 5 to 40 years
2001/04
4/13/2006 5 to 40 years
2002
4/13/2006 5 to 40 years
1997/99
4/13/2006 5 to 40 years
2000
1989
1998
2000
1999
2000
1999
1999
1999
4/26/2006 5 to 40 years
6/29/2006 5 to 40 years
6/22/2006 5 to 40 years
6/22/2006 5 to 40 years
6/22/2006 5 to 40 years
6/22/2006 5 to 40 years
6/22/2006 5 to 40 years
6/22/2006 5 to 40 years
6/22/2006 5 to 40 years
1980/01
6/22/2006 5 to 40 years
2000
1999
2000
6/22/2006 5 to 40 years
6/22/2006 5 to 40 years
6/22/2006 5 to 40 years
1998/03
6/22/2006 5 to 40 years
2004
2004
2003
1998
1999
2004
2000
6/22/2006 5 to 40 years
6/22/2006 5 to 40 years
6/22/2006 5 to 40 years
6/22/2006 5 to 40 years
6/22/2006 5 to 40 years
6/22/2006 5 to 40 years
6/22/2006 5 to 40 years
Initial Cost to Company
Cost Capitalized
Subsequent to
Acquisition
Gross Amount at Which
Carried at Close of Period
Building,
Equipment
and
Improvements
Total
Accum.
Deprec.
Date of
Construction
Date
Acquired
Life on
which
depreciation
in latest
income
statement
is computed
Description
Encum
brance
ST
Land
San Antonio-Huebner
TX 2,177
1,175
Chattanooga-Lee Hwy II TN
Lafayette-Evangeline
LA
619
699
Montgomery-E.S.Blvd
AL
1,158
Auburn-Pepperell Pkwy AL
Auburn-Gatewood Dr
AL
Columbus-Williams Rd GA
Columbus-Miller Rd
GA
Columbus-Armour Rd
GA
Columbus-Amber Dr
GA
Concord
Buffalo-Langner Rd
Buffalo-Transit Rd
Buffalo-Lake Ave
Buffalo-Union Rd
Buffalo-Niagara Falls
Blvd
Buffalo-Young St
Buffalo-Sheridan Dr
Lockport-Transit Rd
NH
NY
NY
NY
NY
NY
NY
NY
NY
Rochester-Phillips Rd
NY
Greenville
MS
Port Arthur-9595 Hwy69 TX
Beaumont-Dowlen Rd
Huntsville-Memorial
Pkwy
TX
AL
Huntsville-Madison 1
AL
Gulfport-Ocean Springs MS
Huntsville-Hwy 72
Mobile-Airport Blvd
Gulfport-Hwy 49
AL
AL
MS
Huntsville-Madison 2
AL
Foley-Hwy 59
AL
Pensacola 6-Nine Mile
FL
Auburn-College St
Gulfport-Biloxi
AL
MS
Pensacola 7-Hwy 98
FL
Montgomery-Arrowhead AL
Montgomery-McLemore AL
San Antonio-Foster
Beaumont-S.Major
TX
TX
590
694
736
975
0
439
813
532
437
638
348
323
315
961
375
1,003
1,100
929
1,537
1,607
1,016
1,423
1,206
1,216
1,345
1,164
1,346
1,029
686
1,811
732
1,075
885
676
742
Building,
Equipment
and
Improvements
Building,
Equipment
and
Improvements
4,624
2,471
2,784
4,639
2,361
2,758
2,905
3,854
3,680
1,745
3,213
2,119
1,794
2,531
1,344
1,331
2,185
3,827
1,498
4,002
4,386
3,647
6,018
6,338
4,013
5,624
4,775
4,819
5,325
4,624
5,474
4,180
2,732
7,152
3,015
4,333
3,586
2,685
3,024
118
62
1,885
304
152
111
118
129
98
63
1,919
442
76
242
108
64
118
101
253
63
116
123
224
171
151
45
69
132
42
52
95
92
85
47
34
35
19
135
113
Land
1,175
619
699
1,158
590
694
736
975
0
439
813
532
437
638
348
323
316
961
375
1,003
1,100
930
1,537
1,607
1,017
1,423
1,206
1,216
1,345
1,164
1,347
1,029
686
1,811
732
1,076
885
676
742
70
4,742
2,533
4,669
4,943
2,513
2,869
3,023
3,983
3,778
1,808
5,132
2,561
1,870
2,773
1,452
1,395
2,302
3,928
1,751
4,065
4,502
3,769
6,242
6,509
4,163
5,669
4,844
4,951
5,367
4,676
5,568
4,272
2,817
7,199
3,049
4,367
3,605
2,820
3,137
5,917
3,152
5,368
6,101
3,103
3,563
3,759
4,958
3,778
2,247
5,945
3,093
2,307
3,411
1,800
1,718
2,618
4,889
2,126
5,068
5,602
4,699
7,779
8,116
5,180
7,092
6,050
6,167
6,712
5,840
6,915
5,301
3,503
9,010
3,781
5,443
4,490
3,496
3,879
424
228
310
433
214
237
1998
2002
6/22/2006 5 to 40 years
8/7/2006 5 to 40 years
1995/99
8/1/2006 5 to 40 years
1996/97
9/28/2006 5 to 40 years
1998
9/28/2006 5 to 40 years
2002/03
9/28/2006 5 to 40 years
263
2002/04/06
9/28/2006 5 to 40 years
333
324
155
337
171
142
219
108
104
147
280
142
289
360
279
460
436
285
373
324
339
354
314
380
307
197
472
217
294
244
194
181
1995
9/28/2006 5 to 40 years
2004/05
9/28/2006 5 to 40 years
1998
9/28/2006 5 to 40 years
2000
10/31/2006 5 to 40 years
1993/07
3/30/2007 5 to 40 years
1998
1997
1998
3/30/2007 5 to 40 years
3/30/2007 5 to 40 years
3/30/2007 5 to 40 years
1998
3/30/2007 5 to 40 years
1999/00
3/30/2007 5 to 40 years
1999
3/30/2007 5 to 40 years
1990/95
3/30/2007 5 to 40 years
1999
1994
3/30/2007 5 to 40 years
1/11/2007 5 to 40 years
2002/04
3/8/2007 5 to 40 years
2003/06
3/8/2007 5 to 40 years
1989/06
6/1/2007 5 to 40 years
1993/07
6/1/2007 5 to 40 years
1998/05
6/1/2007 5 to 40 years
1998/06
6/1/2007 5 to 40 years
2000/07
6/1/2007 5 to 40 years
2002/04
6/1/2007 5 to 40 years
2002/06
6/1/2007 5 to 40 years
2003/06
6/1/2007 5 to 40 years
2003/06
6/1/2007 5 to 40 years
2003
6/1/2007 5 to 40 years
2004/06
6/1/2007 5 to 40 years
2006
2006
2006
6/1/2007 5 to 40 years
6/1/2007 5 to 40 years
6/1/2007 5 to 40 years
2003/06
5/21/2007 5 to 40 years
2002/05
11/14/2007 5 to 40 years
Initial Cost to Company
Cost Capitalized
Subsequent to
Acquisition
Gross Amount at Which
Carried at Close of Period
Life on
which
depreciation
in latest
income
statement
is computed
Description
Encum
brance
ST
Land
Building,
Equipment
and
Improvements
Building,
Equipment
and
Improvements
Building,
Equipment
and
Improvements
Total
Accum.
Deprec.
Date of
Construction
Date
Acquired
Hattiesburg-Clasic
Biloxi-Ginger
MS
MS
Foley-7905 St Hwy 59
AL
Ridgeland
Jackson-5111
MS
MS
Cincinnati-Robertson
OH
Richmond-Bridge Rd
VA
Construction in progress
Corporate Office
NY
444
384
437
1,479
1,337
852
1,047
0
0
1,799
1,548
1,757
5,965
5,377
3,409
5,981
0
68
Land
444
384
437
1,479
1,337
852
1,047
0
73
46
34
85
61
75
0
9,846
11,167
1,616
1,872
1,594
1,791
6,050
5,438
3,484
5,981
9,846
9,619
2,316
1,978
2,228
7,529
6,775
4,336
7,028
9,846
99
84
93
297
267
90
0
0
11,235
7,819
1998
12/19/2007 5 to 40 years
2000
12/19/2007 5 to 40 years
2000
12/19/2007 5 to 40 years
1997/00
1/17/2008 5 to 40 years
2003
1/17/2008 5 to 40 years
2003/04
12/31/2008 5 to 40 years
2009
2009
2000
10/1/2009 5 to 40 years
5/1/2000 5 to 40 years
$ 225,290
$ 875,528
$ 286,765
$237,684 $1,149,899
$1,387,583 $245,178
(1) These properties are encumbered through one mortgage loan with an outstanding balance of $41.5 million at December 31, 2009.
(2) These properties are encumbered through one mortgage loan with an outstanding balance of $28.4 million at December 31, 2009.
71
December 31, 2009
December 31, 2008
December 31, 2007
Cost:
Balance at beginning of period .............
Additions during period:
Acquisitions through foreclosure ......
Other acquisitions..............................
Improvements, etc. ............................
$ -
-
22,135
$1,366,615
$1,300,847
$1,115,255
$ -
18,454
47,507
$ -
136,653
51,363
22,135
65,961
188,016
Deductions during period:
Cost of real estate sold ......................
Balance at close of period .....................
(1,167)
(1,167)
$1,387,583
(193)
(193)
$1,366,615
(2,424) (2,424)
$1,300,847
Accumulated Depreciation:
Balance at beginning of period..............
Additions during period:
Depreciation expense ........................ $ 33,096
$ 212,301
$ 179,880
$ 151,138
$ 32,556
$ 29,523
33,096
32,556
29,523
Deductions during period:
Accumulated depreciation of
real estate sold ....................................
Balance at close of period .....................
(219)
(219)
$ 245,178
(135)
(135)
$ 212,301
(781)
(781)
$ 179,880
72
Statement Re: Computation of Earnings to
Combined Fixed Charges and Preferred Stock Dividends
Exhibit 12.1
Amounts in thousands
Earnings:
Income from continuing operations
before noncontrolling interest in
consolidated subsidiaries and
income from equity investees
Fixed charges
Preferred dividend requirements of
consolidated subsidiaries
Earnings (1)
Fixed charges:
Interest expense
Amortization of financing fees
Preferred stock dividends
Fixed charges (2)
Ratio of earnings to combined fixed
charges and preferred stock dividends
(1)/(2)
2009
Year ended December 31,
2008
2007
2006
2005
$22,203
50,050
$37,699
38,097
$40,065
35,117
-
72,253
-
75,796
(1,256)
73,926
48,847
1,203
-
$50,050
36,905
1,192
-
$38,097
32,898
963
1,256
$35,117
$37,134
32,006
(2,512)
66,628
28,501
993
2,512
$32,006
$34,177
24,352
(4,123)
54,406
19,439
790
4,123
$24,352
1.44
1.99
2.11
2.08
2.23
1
Corporate Headquarters
6467 Main Street
Williamsville, New York 14221
(716) 633-1850
Officers & Directors
Robert J. Attea
Director
Chairman of the Board and
Chief Executive Officer
Kenneth F. Myszka
Director
President and
Chief Operating Officer
David Rogers
Chief Financial Officer
John E. Burns, CPA
Director
President
Altus Capital Inc.
Anthony P. Gammie
Director
Chairman of the Board
Bowater Incorporated
(retired)
Charles E. Lannon
Director
President
Strategic Advisory, Inc.
James R. Boldt
Director
Chairman, President and
Chief Executive Officer
Computer Task Group Inc.
Registrar and Transfer Agent
American Stock Transfer & Trust Co.
59 Maiden Lane
New York, New York 10038
(718) 921-8200
Annual Meeting
May 26, 2010
Sovran Self Storage, Inc. Home Office
6467 Main Street
Williamsville, New York 14221
9:00 a.m. (e.d.t.)
Investor Relations
Diane M. Piegza
(716) 633-1850
www.unclebobs.com/company
Independent Auditors
Ernst & Young LLP
1500 Key Tower
Buffalo, New York 14202
Corporate Counsel
Phillips Lytle LLP
3400 HSBC Center
Buffalo, New York 14203
Exchange: New York Stock Exchange
Listing Symbol: SSS
Average Daily Volume in 2009: 259,146
The Chief Executive Officer has previously filed
with the New York Stock Exchange (NYSE) the
annual CEO certification for 2009 as required
by section 303A.12(a) of the NYSE listed
company manual.
As of December 31, 2009, there were
approximately 1,335 shareholders of record of
the common stock.
Cover Photo: Jessica Biurra
Uncle Bob’s Self Storage Locations
at December 31, 2009
Sovran Self Storage, Inc. (356)
Sovran HHF JV (25)
Sovran Self Storage, Inc.
6467 Main Street
Williamsville, NY 14221
www.unclebobs.com