Sovran Self Storage, Inc.
2011
Annual
Report
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Sovran Self Storage
381
Sovran HHF JV
UB Management
Total
45
9
435
6467 Main Street
Williamsville, NY 14221
Dear Fellow Shareholder
Our focus as we began 2011 was to “return to growth”. We weathered the economic crisis of 2008/2009
by keeping our balance sheet strong, our customer base intact and our operations lean. We spent 2010
enhancing our operating systems and marketing programs, and made additional investments in our
technology and our people. Meanwhile, our efforts at sourcing and acquiring quality acquisitions began
to bear fruit.
As a result, 2011 proved to be the most dynamic in our 25-plus years in the storage business. During the
past year we:
Achieved same store revenue increases of 4.2% and same store net operating income increases
of 6.2%; among the best in the industry
Invested $155 million to acquire 29 quality stores in good, growing markets
Formed another joint venture with our partners at Heitman, LLC and acquired 20 stores in New
Jersey - primarily in the metro New York and Philadelphia markets
Ramped up our Uncle Bob’s Management program to solicit new third party management
contracts – at the end of 2011, we were operating 54 stores via this program
Executed a $500 million financing package which significantly extended the term of our loans,
provided for a better interest rate, and expanded our line of credit to $175 million
Implemented an “At the Market” equity offering program and issued $46 million of common stock
in an effective and efficient manner
We invested heavily in technology again this year – our internet marketing group, revenue management
team and employee training staff all utilize state of the art operating platforms to deliver higher market
share, stronger rental rates and better operating margins. Increasingly, such systems and technology are
the main drivers differentiating us from the owners of 90% of the properties in the industry who do not
have the resources to make such investments. Self storage is rapidly becoming a business in which scale
is all important – and at 435 stores and growing, we have significant scale.
Early in 2012, we made some changes to the executive structure of our team. Throughout our history of
almost three decades as both a private and a publicly owned company, the three of us have managed
Sovran as a partnership and we will continue as a team to provide core management as we grow the
Company. This year, however, we appointed Dave as CEO, reflecting his role as the more public face of
the Company. Further, we appointed Andrew Gregoire as our CFO, Paul Powell as Executive Vice
President of Real Estate Investment, and Edward Killeen as Executive Vice President of Real Estate
Management. Andy, Paul and Ed have each been with us for about 15 years and brought a wealth of
experience to us when they arrived. They are proven and valuable members of our team, and their
promotions are designed to provide an orderly transition and a plan for eventual succession in the
leadership of our Company.
We are more excited than ever to be in the self storage business, especially in our role as one of the
dominant players and leading innovators. We anticipate significant consolidation in the industry and we
are well poised with a strong balance sheet, excellent operating systems and highly qualified people to
capitalize on the opportunity to grow the size and value of our Company. Your ongoing support is
appreciated.
Robert J. Attea
Executive Chairman
Kenneth F. Myszka
President and COO
David L. Rogers
CEO
Officers & Directors
Robert J. Attea
Director
Executive Chairman
of the Board
James R. Boldt
Director
Chairman, President, and
Chief Executive Officer
Computer Task Group Inc.
Charles E. Lannon
Director
President
Strategic Advisory, Inc.
Kenneth F. Myszka
Director
President and
Chief Operating Officer
Anthony P. Gammie
Director
Chairman of the Board
Bowater
Incorporated (retired)
David L. Rogers
Chief Executive Officer
Andrew J. Gregoire
Chief Financial Officer
and Corporate Secretary
Edward F. Killeen
Executive Vice President
Real Estate Management
Paul T. Powell
Executive Vice President
Real Estate Investment
Registrar and Transfer Agent
American Stock Transfer & Trust Co.
6201 15th Avenue
Brooklyn, New York 11219
(800) 937-5449
Annual Meeting
May 23, 2012
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 2011:
135,789
The Chief Executive Officer has previously filed
with the New York Stock Exchange (NYSE) the
annual CEO certification for 2011 as required
by section 303A.12(a) of the NYSE listed
company manual.
As of December 31, 2011, there were
approximately 1,155 shareholders of record
of the common stock.
Store 378 - Atlanta, GA
Store 740 - Newark, NJ
Store 373 - Raleigh, NC
Sovran Self Storage, Inc. | 6467 Main Street | Williamsville, NY 14221 | 716.633.1850
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, 2011
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 [ X ] No [ ]
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 [ X ] 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. [ X ]
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, 2011, 27,699,279 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 $1,107,442,226 (based on the closing price of the Common Stock on the New York Stock
Exchange on June 30, 2011).
As of February 15, 2012, 28,967,583 shares of Common Stock, $.01 par value per share, were outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the registrant’s Proxy Statement for the 2012 Annual Meeting of Shareholders are incorporated herein by reference in Part III of this
Annual Report on Form 10-K to the extent stated herein. Such proxy statement will be filed with the Securities and Exchange Commission within
120 days of the registrant’s fiscal year ended December 31, 2011.
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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. Mine Safety Disclosures
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
Item 9B. Other Information
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-10.1
EX-10.6
EX-10.7
EX-12.1
EX-21.1
EX-23.1
EX-31.1
EX-31.2
EX-32.1
EX-101
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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; 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 operating expenses, 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 its 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 December 31, 2011, we held ownership
interests in and/or managed 435 Properties consisting of approximately 28.9 million net rentable square feet, situated
in 25 states. Among our 435 self-storage properties are 25 properties that we manage for an unconsolidated joint
venture of which we are a 20% owner, 20 properties that we manage for an unconsolidated joint venture of which
we are a 15% owner, one property that we manage for a consolidated joint venture of which we have a 20%
common ownership interest and a preferred interest, and nine properties that we manage and have no ownership
interest. We believe we are the fifth 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 98.8% economic interest in the Partnership and unaffiliated third parties own collectively a 1.2%
limited partnership interest at December 31, 2011. 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
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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 owned and/or managed by the Company, are usually
fenced and well lighted with automated access systems, and surveillance cameras, and have a full-time manager.
Our customers rent space on a month-to-month basis and typically have access to their storage space up to 15 hours
a day and in certain circumstances are provided with 24-hour access. Individual storage spaces are secured by the
customer's lock, and the customer has sole control of access to the space.
According to the 2012 Self-Storage Almanac, of the approximately 50,000 facilities in the United States,
approximately 11% are managed by the ten largest operators. The remainder of the industry is characterized by
numerous small, local operators. The scarcity of capital available to small operators for acquisitions and expansions,
internet marketing, and calls centers, 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 to grow either through
acquisitions or third party management platforms.
Property Management
We have over 25 years experience managing self storage facilities and the combined experience of our key
personnel has made us one of the leaders in the industry. All of our stores operate under the user-friendly name of
Uncle Bob’s Self Storage®, and we employ the following strategies with respect to our property management:
Our People:
We recognize the importance of quality people to the success of an organization. Our store personnel are
held to high standards for customer service, store appearance, financial performance, and overall operations. They
are supported with state of the art training tools including an online learning management system, a company
intranet, and an extensive network of certified training personnel. Every store team also has frequent, and
sometimes daily, interaction with an Area Manager, a Regional Vice President, an Accounting Representative, and
other support personnel.
Training & Development:
Our employees benefit from a wide array of training and development opportunities. New store employees
undergo a comprehensive, proprietary training program designed to drive sales and operational results while
ensuring the delivery of quality customer service. Each new hire is assigned a Certified Training Manager as a
mentor during their initial training period. To supplement their initial training, employees enjoy continuing
edification, coaching, and performance feedback throughout their tenure.
All learning and development activities are facilitated through our online Learning and Performance
Management System internally named eBOB. eBOB delivers and tracks hundreds of on-demand computer based
training and compliance courses; it also administers tests, surveys, and the employee appraisal process. Sovran’s
training and development program encompasses the tools and support we deem essential to the success of our
employees and business.
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Marketing and Advertising:
We believe the avenues for attracting and capturing new customers have changed dramatically over the
years. As such, we have implemented the following strategies to market our properties and increase profitability:
• We employ a Customer Care Center (call center) that services over 30,000 rental inquiries per month.
Our highly skilled Sale Representatives answer incoming sales calls for all of our stores, 361 days a year.
The team undertakes continuous training in effective storage sales techniques, which we believe results in
higher conversions of inquiries to rentals.
• The once predominant advertising vehicle - yellow pages - has lost favor to a wide range of other
opportunities. Our aggressive internet marketing and websites provide customers with real-time pricing,
online reservations, online payments, and support for mobile devices. Our advertising and marketing
strategies employ a mix of web media to ensure the Uncle Bob’s name is found wherever customers
search for storage.
• We believe we were the first self storage operator to develop a Mobile App that allows potential
customers to search for and reserve a storage space electronically or connect directly to a Customer Care
Rep with a touch of the screen. Further, the App allows existing customers to manage their account and
pay their rent via smart phone.
• Since the need for storage is largely based on timing, the ultimate goal is to create as much positive brand
recognition as possible. When the time comes for a customer to select a storage company, we want the
Uncle Bob’s brand to be on the top of their mind. That said, we employ a variety of different strategies to
create brand awareness including our Uncle Bob’s rental trucks, branded merchandise such as moving
and packing supplies, and extensive regional marketing in the communities in which we operate. We
strive to gain the most exposure as possible for the longest period of time.
• Dri-guard humidity-controlled spaces are a premium storage feature intended to protect metal,
electronics, furniture, fabrics and paper from moisture. We became the first self-storage operator to
utilize this humidity protection technology and we believe it helps to differentiate us from other
operators.
• We also have a fleet of rental trucks that serve as an added incentive to choose our storage facilities. The
truck rental charge is waived for new move-in customers and we believe it provides a valuable service
and added incentive to choose us. Further, the prominent display of our logo turns each truck into a
moving billboard.
Ancillary Income:
We know that our 200,000 customers require more than just a storage space. With that in mind, we offer a
wide range of other products and services that fulfill their needs while providing us ancillary income. Whereas our
Uncle Bob’s trucks are available with no rental charge for new move-in customers, they are available for rent to
non-customers and existing customers. We also rent moving dollies and blankets, and we carry a wide assortment
of moving and packing supplies including boxes, tape, locks, and other essential items. For those customers who do
not carry storage insurance, we make available renters insurance through a third party carrier, on which we earn a
commission. We also earn incidental income from billboards and cell towers.
Information Systems:
Each of our primary business functions are linked through our customized computer applications. This
system provides for a consistent, timely and accurate flow of information.
•
•
It performs the functions necessary for our store personnel to efficiently and effectively run their property.
This includes customer account management, automatic imposition of late fees, move-in and move-out
analysis, generation of essential legal notices, and marketing reports to aid in regional marketing efforts.
It is linked with each of our primary sales channels (customer care center, web, store) allowing for real time
access to space type and inventory, pricing, promotions, and other pertinent store information. This robust
flow of information facilitates our commitment to capturing prospective customers from all channels.
5
•
•
It provides our revenue management team with raw data on historical pricing, move-in and move-out
activity, specials and occupancies, etc. This data is then utilized in the various algorithms that form the
foundation of our revenue management program.
It generates financial reports for each property that provide our accounting and audit departments with the
necessary oversight of transactions; this allows us to maintain proper control of receipts.
Revenue Management:
Our proprietary revenue management system is constantly evolving through the efforts of our revenue
management group and our partnership with Veritec Solutions. We have the ability to change pricing
instantaneously for any one unit type, at any single location, based on occupancy, competition, and forecasted
changes in demand. By analyzing current customer rent tenures, we are able to implement rental rate increases at
optimal times to increase revenues. Advanced pricing analytics enable us to reduce the amount of concessions,
attracting a more stable customer base and discouraging short term price shoppers. We believe this will lead to
revenue growth.
Property Maintenance:
We take great pride in the appearance and structural integrity of our Properties. All of our Properties go
through a thorough annual inspection performed by qualified Project Managers. Those inspections provide the basis
for short and long term planned projects which are all performed under a standardized set of specifications. Routine
maintenance such as landscaping, pest control, etc. is contracted through local providers who have a clear
understanding of our standards. 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. Further, we continually look to green alternatives and implement energy saving alternatives as
new technology becomes available. Most recently we have begun installation of solar panels which are both
environmentally friendly and have the potential to substantially reduce energy consumption (thereby reducing costs)
in the buildings in which they are installed.
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. We have elected to treat certain of our subsidiaries as taxable
6
REIT subsidiaries. In general, our taxable REIT subsidiaries may perform additional services for customers and
generally may engage in certain real estate or non-real estate related business. Our taxable REIT subsidiaries are
subject to corporate federal and state income taxes. 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 in a manner in which we can increase market share while
not adversely affecting any of our existing locations in that market. However, 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 and U-Haul, 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.
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.
Although we sold no stores in 2011, during 2010 we sold ten non-strategic storage facilities located in
Georgia, Michigan, North Carolina and Virginia for net cash proceeds of $23.7 million resulting in a gain of $6.9
million. 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.
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
7
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 dividend rate of $1.80 per share.
Financing 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. In addition to our Board of Directors’ debt limits, our most restrictive debt
covenants limit our leverage. However, we believe cash flow from operations, access to the capital markets and
access to our credit facility, as described below, are adequate to execute our current business plan and remain in
compliance with our debt covenants.
We have a $175 million (expandable to $250 million) revolving line of credit bearing interest at a variable
rate equal to LIBOR plus a margin based on the Company’s credit rating (at December 31, 2011 the margin was
2.0%). At December 31, 2011, there was $129 million available on the unsecured line of credit. The revolving line
of credit has a maturity date of August 2016, but can be extended for 2 one year periods at the Company’s option
with the payment of an extension fee equal to 0.125% of the total line of credit commitment.
The Company also has a continuous equity offering program (“Equity Program”) pursuant to which we
may sell from time to time up to $125 million in aggregate offering price of shares of our common stock. During
2011 we issued 1.2 million shares under the Equity Program for net proceeds of approximately $46 million. Future
sales under the Equity Program will depend on a variety of factors and conditions, including, but not limited to,
market conditions, the trading price of the Company’s common stock, and determinations of the appropriate sources
of funding for the Company. The Company expects to continue to offer, sell, and issue shares of common stock
under the Equity Program from time to time based on various factors and conditions, although the Company is under
no obligation to sell any shares under the Equity Program.
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 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 1,164 employees, including 435 property managers, 28 area managers, and
538 associate managers and part-time employees. At our headquarters, in addition to our three senior executive
officers, we employ 160 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.
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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 Committee, 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 Committee, 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.
9
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.
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.
Reduction in or Loss of Credit Rating. Certain of our debt instruments require us to maintain an investment
grade rating from at least one and in some cases two debt ratings agencies. Should we fail to attain an investment
grade rating from the agencies, the interest rate on our line of credit and $225 million of our bank term notes would
increase by 0.25%, and the rate on our $150 million term note due 2016 and our $100 million term note due 2021
would increase by 1.750%.
10
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;
11
• Changes in real estate tax rates and other operating expenses;
• 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%.
12
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
• 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, Cohen & Steers, Inc. and Invesco Advisers, 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 specific 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.
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.
13
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, 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 2011, our board of directors authorized and we declared quarterly common stock dividends of $0.45 per
share in January, April, July and October, the equivalent of an annual rate of $1.80 per share. In addition, our board
of directors authorized and we declared a quarterly common stock dividend to $0.45 per share in January 2012. We
can provide no assurance that our board will not reduce or eliminate entirely dividend distributions on our common
stock in the future.
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 decisions 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.
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, 2011, 171 of our 435 self-storage facilities are located in the states of Texas and
Florida. For the year ended December 31, 2011, these facilities accounted for approximately 40% 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 federal law is 15% through 2012, 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. The earnings of a REIT that are distributed to its
14
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. However, the lower rate of taxation to
dividends paid through 2012 by regular “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 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 for domestic
noncorporate taxpayers. The maximum rate for domestic noncorporate taxpayers will increase in 2013 unless
current tax laws are changed.
Item 1B.
Unresolved Staff Comments
None.
15
Item 2.
Properties
At December 31, 2011, we held ownership interests in and/or managed a total of 435 Properties situated in
twenty-five states. Among our 435 self-storage properties are 25 properties that we manage for an unconsolidated
joint venture of which we are a 20% owner, 20 properties that we manage for an unconsolidated joint venture of
which we are a 15% owner, one property that we manage for a consolidated joint venture of which we have a 20%
common ownership interest and a preferred interest, and nine properties that we manage and have no ownership
interest.
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 and well lighted with automated
access systems and surveillance cameras. 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 23,000 to
181,000 net rentable square feet, with an average of approximately 66,000 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. Generally, customers
have access to their storage space up to 15 hours a day, and some 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, 2011:
Alabama ..........................................................
Arizona ...........................................................
Colorado .........................................................
Connecticut .....................................................
Florida .............................................................
Georgia ...........................................................
Kentucky .........................................................
Louisiana.........................................................
Maine ..............................................................
Maryland .........................................................
Massachusetts .................................................
Michigan .........................................................
Mississippi ......................................................
Missouri ..........................................................
New Hampshire ..............................................
New Jersey ......................................................
New York........................................................
North Carolina ................................................
Ohio ................................................................
Pennsylvania ...................................................
Rhode Island ...................................................
South Carolina ................................................
Tennessee ........................................................
Texas ...............................................................
Virginia ...........................................................
Total ..............................................................
Number of
Stores at
December 31,
2011
25
9
4
5
59
24
2
14
2
4
12
4
14
8
4
22
28
18
23
7
4
8
4
112
19
435
Square
Feet
1,756,111
513,594
276,716
300,610
3,949,785
1,561,702
144,914
866,579
113,276
172,019
664,329
229,193
1,081,398
505,398
261,155
1,759,249
1,609,287
1,036,816
1,553,554
438,836
168,371
435,709
291,244
8,062,330
1,188,670
28,940,845
Number of
Spaces
13,137
4,555
2,354
2,865
36,399
12,847
1,322
7,555
1,007
2,037
6,069
2,159
8,247
4,468
2,333
18,097
14,675
9,602
12,857
3,601
1,567
3,757
2,433
67,010
11,076
252,029
Percentage
of Store
Revenue
4.9%
2.0%
1.3%
1.9%
14.1%
5.1%
0.6%
3.3%
0.5%
0.9%
3.1%
0.9%
3.3%
1.9%
1.0%
4.6%
8.3%
3.1%
5.1%
1.1%
0.8%
1.6%
1.0%
25.6%
4.0%
100.0%
At December 31, 2011, the Properties had an average occupancy of 80.7% and an annualized rent per
occupied square foot of $10.89.
16
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. Mine Safety Disclosures
Not Applicable
17
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 2010
1st ..............................................................................
2nd .............................................................................
3rd ..............................................................................
4th ..............................................................................
Quarter 2011
1st ..............................................................................
2nd .............................................................................
3rd ..............................................................................
4th ..............................................................................
High
$36.83
40.79
40.01
41.47
High
$40.00
43.55
42.99
44.98
Low
$31.12
32.29
32.35
35.00
Low
$36.19
38.05
33.37
35.34
As of February 15, 2012, there were approximately 1,144 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 2011 represent 78% ordinary income,
3% capital gain, and 19% return of capital.
History of Dividends Declared on Common Stock
January 2010 ..............................................................
April 2010 ..................................................................
July 2010 ...................................................................
October 2010 .............................................................
$0.450 per share
$0.450 per share
$0.450 per share
$0.450 per share
January 2011 ..............................................................
April 2011 ..................................................................
July 2011 ...................................................................
October 2011 .............................................................
$0.450 per share
$0.450 per share
$0.450 per share
$0.450 per share
18
EQUITY COMPENSATION PLAN INFORMATION
The following table sets forth certain information as of December 31, 2011, with respect to equity
compensation plans under which shares of the Company’s Common Stock may be issued.
Plan Category
Equity compensation plans approved by
shareholders:
2005 Award and Option Plan ..............................
1995 Award and Option Plan ..............................
2009 Outside Directors' Stock Option and
Award Plan ......................................................
1995 Outside Directors' Stock Option Plan ........
Deferred Compensation Plan for Directors (1) ...
Equity compensation plans not approved by
shareholders: ....................................................
Number of
securities to be
issued upon
exercise of
outstanding
options, warrants
and rights (#)
Weighted average
exercise price of
outstanding
options, warrants
and rights ($)
Number of
securities
remaining available
for future issuance
(#)
304,913
12,350
21,500
25,505
45,025
N/A
$43.37
$37.09
$33.30
$46.23
N/A
N/A
811,436
0
115,684
0
12,036
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.
19
CORPORATE PERFORMANCE GRAPH
The following chart and line-graph presentation compares (i) the Company’s shareholder return on an
indexed basis since December 31, 2006 with (ii) the S&P Stock Index and (iii) the National Association of Real
Estate Investment Trusts Equity Index.
120
100
80
60
40
Dec. 31, 2006
Dec. 31, 2007
Dec. 31, 2008
Dec. 31, 2009
Dec. 31, 2010
Dec. 31, 2011
S&P 500
NAREIT
SSS
CUMULATIVE TOTAL SHAREHOLDER RETURN
SOVRAN SELF STORAGE, INC.
DECEMBER 31, 2006 - DECEMBER 31, 2011
S&P
NAREIT
SSS
Dec. 31,
2006
Dec. 31,
2007
Dec. 31,
2008
Dec. 31,
2009
Dec. 31,
2010
Dec. 31,
2011
100.00
100.00
100.00
105.50
84.31
73.44
66.46
52.50
70.18
84.05
67.20
75.67
96.71
85.98
81.98
98.76
93.10
99.52
The foregoing item assumes $100.00 invested on December 31, 2006, with dividends reinvested.
20
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 ........
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) ...............................................
Balance Sheet Data
Investment in storage facilities at cost ....
Total assets .............................................
Total debt ................................................
Total liabilities ........................................
Other Data
Net cash provided by operating
activities ...............................................
Net cash used in investing activities .......
Net cash provided by (used in)
financing activities ...............................
At or For Year Ended December 31,
2011
2010
2009
2008
2007
$ 211,156
31,529
$ 192,072
34,979
$ 191,040
20,581
$ 196,286
35,994
$ 186,251
38,416
-
31,529
7,562
42,541
1,073
21,654
3,689
39,683
3,429
41,845
30,592
40,642
19,916
37,399
37,958
1.10
1.20
0.79
1.55
1.65
1.11
1.48
0.84
1.72
1.81
1.10
1.80
1.48
1.80
0.84
1.54
1.72
2.54
1.81
2.50
$1,596,103
1,344,735
625,423
674,730
$1,419,956
1,185,541
488,954
528,398
$1,364,454
1,185,098
481,219
520,039
$1,343,669
1,212,439
623,261
692,292
$1,278,528
1,164,390
566,517
610,559
$80,310
(190,292)
$73,671
(32,605)
$59,123
(4,448)
$77,132
(82,711)
$85,175
(190,267)
111,537
(46,010)
(48,471)
6,055
61,372
(1) In 2010 we sold ten stores, 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. In 2010 and
2011 we declared regular quarterly dividends of $0.45 in January, April, July and October.
21
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 operating expenses, principal, interest and dividends;
and tax law changes that may change the taxability of future income.
Business and Overview
We believe we are the fifth 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, established in 2000, answers sales inquires and makes
reservations for all of our Properties on a centralized basis. Further, our call center and
customer contact software was developed in-house and is 100% supported by our in-house
experts. This brings us flexibility well beyond that of any operator using off the shelf
software;
The Uncle Bob’s truck move-in program, under which, at present, 276 of our stores offer a
free Uncle Bob’s truck to assist our customers moving into their spaces, and acts as a moving
billboard further supporting our branding efforts;
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;
Aggressive and efficient Web and Mobile marketing which rank our websites highly and
make Uncle Bob’s stand out among the competitors;
Regional marketing which creates effective brand awareness in the cities where we do
business.
-
-
-
-
-
Our customized computer applications link each of our primary sales channels (customer care center,
22
web, and store) allowing for real time access to space type and inventory, pricing, promotions, and
other pertinent store information. This also provides us with raw data on historical and current
pricing, move-in and move-out activity, specials and occupancies, etc. This data is then used within
the advanced pricing analytics programs employed by our revenue management team.
-
Our store managers are better qualified and receive a high level of training. New store employees
are assigned a Certified Training Manager as a mentor during their initial training period. In
addition, all employees have access to our online Learning and Performance Management System
internally named eBOB for initial training as well as continuing education. Finally, we have a
company intranet that acts as a communications portal for company policy and procedures, online
ordering, incentive rankings, etc.
B. Acquiring additional stores:
-
-
Our objective is to acquire new stores in markets in which we currently operate. This is a proven
strategy we have employed over the years as it facilitates our branding efforts, grows market share,
and allows us to achieve improved economies of scale through shared advertising, payroll, and other
services.
We also look to enter new markets that are in the top 50 MSA by acquiring established multi-
property portfolios. With this strategy we are then able to seek out additional acquisition or third
party management opportunities to continue to grow market share, branding and enhance economies
of scale.
C.
Expanding our management business:
-
We see our management business as a source of future acquisitions. In 2011 we entered into another
joint venture in which we retained a 15% ownership interest and manage the 20 self storage facilities
owned by this joint venture. In addition, we entered into management contracts for nine self-storage
facilities for which we have no ownership. We may enter into additional management agreements
and develop additional joint ventures in the future. 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 2008, we spent approximately $26 million to add 403,000 square feet and to convert 95,000
square feet to premium storage; 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; in 2010, we
added 162,000 square feet to existing Properties, and converted 6,500 square feet to premium storage
for a total cost of approximately $9 million; and in 2011, we added 118,000 square feet to existing
Properties, and converted 2,000 square feet to premium storage for a total cost of approximately $7
million. During 2011 we also installed solar panels at eight locations for a total cost of
approximately $2.3 million after federal and local incentives. This initiative is expected to reduce
energy consumption and reduce operating cost at those locations.
Supply and Demand / Operating Trends
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 recent economic conditions and the
credit market environment have resulted in a decrease in new supply on a national basis in the last four years. With
the recent loosening of the debt and equity markets, we have seen capitalization rates on quality acquisitions
(expected annual return on investment) decrease from approximately 7.25% to 6.75%.
23
We believe our industry has weathered the recent recession very well. Although our industry experienced
softness in 2008 through 2011, our same store sales showed positive increases save for 2009, when we showed a
3.1% decrease in same store revenue. That was the first time in recent history that we recorded lower same store
sales. We feel our recent performance further supports the notion that the self-storage industry holds up well
through recessions.
We believe our same-store move-ins in 2011 were lower than 2010 for several reasons. The first being
reduced upfront special promotions in 2011 as compared to 2010. The aggressive upfront concessions offered in
2010 resulted in short term customers taking advantage of the special, which resulted in a higher turnover rate in
2010. Second, the housing slowdown has impacted our industry by 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.)
Year-to-date same store move ins ...........................................
Year-to-date same store move outs ........................................
Difference ...............................................................................
2011
143,354
139,236
4,118
2010
151,995
Change
(8,641)
150,608 (11,372)
2,731
1,387
We expect conditions in most of our markets to continue the recovery that we saw in 2011 and are
forecasting 2% to 4% revenue growth on a same store basis in 2012.
We were able to maintain relatively flat expenses at the store operating level from 2009 through 2011.
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 expect some store expense growth in 2012, we do believe the 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 expectation 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.
24
During 2011 we recorded an impairment charge at one of our stores as of a result of a structural deficiency that we
have decided to address by demolishing the buildings in 2012. See further discussion in the analysis of the 2011
results compared to 2010 that follows. No assets had been determined to be impaired under this policy in 2010.
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 2012.
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 or have the power to direct the
activities most significant to the economic performance of 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.
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 May 2011 the FASB issued ASU No. 2011-04, Fair Value Measurements (Topic 820): Amendments to
Achieve Common Fair Value Measurement and Disclosure Requirements in US GAAP and International Financial
Reporting Standards (“IFRS”) (“ASU 2011-04”). ASU 2011-04 represents the converged guidance of the FASB
and the IASB (the “Boards”) on fair value measurements. The collective efforts of the Boards and their staffs,
reflected in ASU 2011-04, have resulted in common requirements for measuring fair value and for disclosing
information about fair value measurements, including a consistent meaning of the term “fair value.” The Boards
have concluded the common requirements will result in greater comparability of fair value measurements presented
and disclosed in financial statements prepared in accordance with GAAP and IFRS. The amendments in this ASU
are required to be applied prospectively, and are effective for interim and annual periods beginning after December
15, 2011. The Company does not expect that the adoption of ASU 2011-04 will have a significant impact on the
Company’s consolidated financial statements.
In July 2011, the FASB issued ASU No. 2011-05, “Comprehensive Income (Topic 220) – Presentation of
Comprehensive Income.” The amendment eliminates the option to present other comprehensive income and its
components in the statement of stockholders’ equity. The amendment requires all nonowner changes in
stockholders’ equity be presented in either a single continuous statement of comprehensive income or in two
separate but consecutive statements. The amendment, which must be applied retrospectively, is effective for interim
and annual periods beginning after December 15, 2011, with early adoption permitted. The Company adopted the
provisions of ASU No. 2011-05 in 2011 and has included a separate consolidated statement of comprehensive
income in its financial statements.
25
YEAR ENDED DECEMBER 31, 2011 COMPARED TO YEAR ENDED DECEMBER 31, 2010
We recorded rental revenues of $198.2 million for the year ended December 31, 2011, an increase of $15.3 million
or 8.4% when compared to 2010 rental revenues of $182.9 million. Of the increase in rental revenue, $6.4 million
resulted from a 3.5% increase in rental revenues at the 344 core properties considered in same store sales (those
properties included in the consolidated results of operations since January 1, 2010). The increase in same store
rental revenues was a result of a 3% increase in average rental income per square foot as a result of our reduced use
of move-in incentives. Average occupancy in 2011 was essentially flat to 2010. The remaining increase in rental
revenue of $8.9 million resulted from the continued lease-up of our Richmond, Virginia property constructed in
2009 and the revenues from the acquisition of 36 properties completed since January 1, 2010. Other operating
income, which includes merchandise sales, insurance commissions, truck rentals, management fees and acquisition
fees, increased by $3.7 million for the year ended December 31, 2011 compared to 2010 primarily as a result of
increased commissions earned on customer insurance and from fees for managing the properties in the new joint
venture which began operations in July 2011. We also earned a $0.7 million acquisition fee from the new joint
venture in 2011.
Property operations and maintenance expenses increased $3.1 million or 5.9% in 2011 compared to 2010.
$0.3 million of the increase resulted from increases in personnel and maintenance at the 344 core properties
considered in same store pool. The remaining increase in operating expenses of $2.8 million resulted from the 36
properties acquired since January 1, 2010. Real estate tax expense increased $1.3 million as a result of 1.7%
increase in property taxes on the 344 same store pool and the inclusion of taxes on the properties acquired in 2010
and 2011.
Net operating income increased $14.7 million or 12.1% as a result of a 6.2% increase in our same store net
operating income and the acquisitions completed since January 1, 2010.
Net operating income or "NOI" is a non-GAAP (generally accepted accounting principles) financial
measure that we define as total continuing revenues less continuing property operating expenses. NOI also can be
calculated by adding back to net income: interest expense, amounts attributable to noncontrolling interests,
impairment and casualty losses, depreciation and amortization expense, acquisition related costs, general and
administrative expense, and deducting from net income: income from discontinued operations, interest income, gain
on sale of real estate, and equity in income of joint ventures. We believe that NOI is a meaningful measure of
operating performance, because we utilize NOI in making decisions with respect to capital allocations, in
determining current property values, and comparing period-to-period and market-to-market property operating
results. NOI should be considered in addition to, but not as a substitute for, other measures of financial performance
reported in accordance with GAAP, such as total revenues, operating income and net income. There are material
limitations to using a measure such as NOI, including the difficulty associated with comparing results among more
than one company and the inability to analyze certain significant items, including depreciation and interest expense,
that directly affect our net income. We compensate for these limitations by considering the economic effect of the
excluded expense items independently as well as in connection with our analysis of net income. The following table
reconciles NOI generated by our self-storage facilities to our net income presented in the December 31, 2011, 2010
and 2009 consolidated financial statements.
26
(dollars in thousands)
Net operating income
Year ended December 31,
2011 2010
2009
Same store ......................................................................
Other stores and management fee income ......................
Total net operating income ....................................................
$ 127,049
8,790
135,839
$ 119,613
1,549
121,162
$ 119,558
1,401
120,959
General and administrative ....................................................
Acquisition related costs ........................................................
Depreciation and amortization ...............................................
Impairment of real estate .......................................................
Interest expense .....................................................................
Interest income ......................................................................
Casualty loss ..........................................................................
Gain on sale of land ...............................................................
Equity in (losses) income of joint ventures ...........................
Income from discontinued operations....................................
Net income .............................................................................
(25,986)
(3,278)
(36,578)
(1,047)
(38,549)
83
(126)
1,511
(340)
-
$ 31,529
(21,071)
(786)
(32,939)
-
(31,711)
84
-
-
240
7,562
$ 42,541
(18,649)
-
(32,736)
-
(50,050)
85
(390)
1,127
235
1,073
$ 21,654
Our 2011 same store results consist of only those properties that were included in our consolidated results
since January 1, 2010, excluding the one property we developed in 2009. The following table sets forth operating
data for our 344 same store properties. These results provide information relating to property operating changes
without the effects of acquisition.
Same Store Summary
(dollars in thousands)
Year ended December 31,
2011 2010
Percentage
Change
Same store rental income .......................................................
Same store other operating income ........................................
Total same store operating income.....................................
$ 189,014
9,144
198,158
$ 182,635
7,519
190,154
3.5%
21.6%
4.2%
Same store property operations and maintenance ..................
Same store real estate taxes ...................................................
51,778
19,331
Total same store operating expenses .................................. 71,109
Same store net operating income ...........................................
$ 127,049
51,532
19,009
70,541
$ 119,613
0.5%
1.7%
0.8%
6.2%
General and administrative expenses increased $4.9 million or 23.3% from 2010 to 2011. The key drivers
of the increase were a $2.2 million increase in salaries and performance incentives, $0.8 million increase in internet
advertising, and a $1.1 million increase in costs associated with training and onboarding new owned and/or managed
stores.
Acquisition related costs increased by $2.5 million as a result of the 29 stores acquired in 2011 compared to
seven stores acquired in 2010.
Depreciation and amortization expense increased to $36.6 million in 2011 from $32.9 million in 2010,
primarily as a result of depreciation on the 36 properties acquired in 2010 and 2011.
The impairment charge related to a building that was determined to have a structural deficiency in 2011. A
decision was made to demolish and rebuild this building in 2012, and we have written off the value of the building.
27
Interest expense increased from $31.7 million in 2010 to $38.5 million in 2011 mainly due to the $5.5
million that was paid to terminate two interest rate swap agreements related to the $150 million term note that was
repaid as part of our debt refinancing in August 2011.
The casualty loss recorded in 2011 relates to insurance proceeds received that were less than the carrying
value of two buildings damaged by fire.
During 2011, we sold three parcels of land to various municipalities for their use as part of road widening
projects for net cash proceeds of $2.0 million resulting in a gain on sale of $1.5 million.
Net income attributable to noncontrolling interest decreased from $1.9 million in 2010 to $0.9 million in
2011 as a result of our May 2011 additional investment in Locke Sovran II, LLC in which we purchased the
remaining noncontrolling interest in that entity, and as a result of our lower net income.
YEAR ENDED DECEMBER 31, 2010 COMPARED TO YEAR ENDED DECEMBER 31, 2009
We recorded rental revenues of $182.9 million for the year ended December 31, 2010, a decrease of $0.2
million or 0.1% when compared to 2009 rental revenues of $183.1 million. Of the decrease in rental revenue, $0.4
million resulted from a 0.2% decrease in rental revenues at the 344 core properties considered in same store sales
(those properties included in the consolidated results of operations since January 1, 2009). The decrease in same
store rental revenues was a result of a small decrease in average rental income per square foot as a result of our
continued use of move-in incentives to attract customers. Average occupancy in 2010 was essentially flat to 2009.
The decrease in same store rental income was offset by a $0.2 million increase in rental revenues resulting from the
continued lease-up of our Richmond Virginia property constructed in 2009 and the few days of revenues from the
acquisition of seven properties completed in late December 2010. Other income, which includes merchandise sales,
insurance commissions, truck rentals, management fees and acquisition fees, increased in 2010 primarily as a result
of $1.0 million increase in commissions earned from our customer insurance program.
Property operations and maintenance expenses increased $1.1 million or 2.2%, in 2010 compared to 2009.
The increase resulted mostly from higher health insurance costs and repairs and maintenance expense, as other
property expenses were kept at or below 2009 levels. Real estate tax expense decreased $0.3 million as a result of
assessment reductions and municipalities holding property tax rates steady. We expect same-store operating costs to
increase moderately in 2011 with increases primarily attributable to employee costs, utilities, and property taxes.
Net operating income increased $0.2 million or 0.2% as a result of the seven stores acquired in late 2010 as
same store net operating income was flat.
Our 2010 same store results consist of only those properties that were included in our consolidated results
since January 1, 2009, excluding the one property we developed in 2009. The following table sets forth operating
data for our 344 same store properties. These results provide information relating to property operating changes
without the effects of acquisition.
Same Store Summary
(dollars in thousands)
Year ended December 31,
2010 2009
Percentage
Change
Same store rental income .......................................................
Same store other operating income ........................................
Total same store operating income.....................................
$ 182,635
7,519
190,154
$ 183,069
6,395
189,464
-0.2%
17.6%
0.4%
Same store property operations and maintenance ..................
Same store real estate taxes ...................................................
51,532
19,009
Total same store operating expenses .................................. 70,541
Same store net operating income ...........................................
$ 119,613
28
50,561
1.9%
19,345 -1.7%
0.9%
0.0%
69,906
$ 119,558
General and administrative expenses increased $2.4 million or 13.0% from 2009 to 2010. The key drivers
of the increase were a $1.3 million increase in salaries and performance incentives, $0.5 million increase in health
insurance costs, $0.4 million increase in internet advertising, and a $0.2 increase in tax expense related to our
taxable REIT subsidiary.
Acquisition related costs increased by $0.8 million as a result of the seven stores acquired in 2010
compared with no stores acquired in 2009.
Depreciation and amortization expense increased to $32.9 million in 2010 from $32.7 million in 2009,
primarily as a result of a full year of depreciation on the Virginia property constructed in 2009, and the depreciation
on the expansions completed at existing stores.
Interest expense decreased from $50.1 million in 2009 to $31.7 million in 2010 as a result of the following
factors:
• Our credit rating remained investment grade during all of 2010. In May 2009, Fitch Ratings
downgraded our rating on our unsecured floating rate notes which triggered a temporary 1.75%
increase in the interest rate on our then outstanding $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 its 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. No such violations occurred in 2010;
• 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 8 of our
financial statements). The total cost to terminate the swaps was $8.4 million and is included as
additional interest expense in 2009. No such termination occurred in 2010, 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. No
financing fees were written-off in 2010.
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 2010 the Company sold ten non-strategic storage
facilities for net cash proceeds of $23.7 million resulting in a gain of $6.9 million. 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. The
2010 and 2009 operations of these facilities and the loss/gain associated with the disposal are reported in income
from discontinued operations for all periods presented.
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.
29
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 available to common shareholders computed in accordance with generally accepted accounting principles
(“GAAP”), excluding gains or losses on sales of properties, plus impairment of real estate assets, plus depreciation
and amortization and after adjustments to record unconsolidated partnerships and joint ventures on the same basis.
We believe that to further understand our performance, FFO should be compared with our reported net income and
cash flows in accordance with GAAP, as presented in our consolidated financial statements.
In October and November of 2011, NAREIT issued guidance for reporting FFO that reaffirmed NAREIT's
view that impairment write-downs of depreciable real estate should be excluded from the computation of FFO. This
view is based on the fact that impairment write-downs are akin to and effectively reflect the early recognition of
losses on prospective sales of depreciable property or represent adjustments of previously charged depreciation.
Since depreciation of real estate and gains/losses from sales are excluded from FFO, it is NAREIT's view that it is
consistent and appropriate for write-downs of depreciable real estate to also be excluded. Our calculation of FFO
excludes impairment write-downs of investments in storage facilities.
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.
Reconciliation of Net Income to Funds From Operations
(dollars in thousands)
Net income attributable to common
For Year Ended December 31,
2007
2011
2009
2008
2010
shareholders .........................................
$30,592
$40,642
$19,916
$37,399
$37,958
Net income attributable to
noncontrolling interests ........................
937
1,899
1,738
2,284
2,631
Depreciation of real estate and
amortization of intangible assets
exclusive of deferred financing fees.....
Depreciation of real estate included in
36,578
32,939
32,736
33,252
32,779
discontinued operations ........................
-
217
1,083
1,215
1,257
Depreciation and amortization from
unconsolidated joint ventures ...............
Casualty and impairment loss (gain) .......
(Gain) loss 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
1,018
1,173
(1,511)
788
-
(6,944)
820
-
509
333
-
(716)
59
(114)
-
(813)
(885)
(984)
(1,366)
(1,425)
(567)
(1,360)
(1,360)
(1,564)
(1,848)
common shareholders ..........................
$67,407
$67,296
$54,458
$70,837
$71,297
30
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, 2011, the Company was in compliance with all
debt covenants. The most sensitive covenant is the leverage ratio covenant contained in certain of our term note
agreements. This covenant limits our total consolidated liabilities to 55% of our gross asset value. At December 31,
2011, our leverage ratio as defined in the agreements was approximately 44.9%. 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
and other items ("Adjusted EBITDA") as defined in the agreements. In 2009, the Company had violated the
leverage ratio covenant contained in the line of credit and term note agreements and obtained a waiver of the
violation. 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. 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, 2011, the entire
availability under our line of credit could be drawn without violating our debt covenants.
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 the availability on our line of
credit will be sufficient to fund ongoing operations, capital improvements, dividends and debt service requirements
through September 2013, at which time $100 million of term notes mature.
Cash flows from operating activities were $80.3 million, $73.7 million and $59.1 million for the years
ended December 31, 2011, 2010, and 2009, respectively. The increase in operating cash flows from 2010 to 2011
was primarily due to an increase in accounts payable and other liabilities. The increase in operating cash flows from
2009 to 2010 was primarily due to an increase in net income as a result of reduced interest expense.
Cash used in investing activities was $190.3 million, $32.6 million, and $4.4 million for the years ended
December 31, 2011, 2010, and 2009 respectively. The increase in cash used from 2010 to 2011 was due to the
purchase of 29 storage facilities in 2011 for $150.4 million and the $13.6 million investment in the new
unconsolidated joint venture entered in 2011. The increase in cash used from 2009 to 2010 was due to the purchase
of seven storage facilities in 2010 for $34.7 million. No facilities were purchased in 2009. In addition, the proceeds
from the sale of the ten stores in 2010 of $23.7 million exceeded the proceeds from the five stores sold in 2009 of
$16.3 million.
Cash provided by financing activities was $111.5 million in 2011, compared to cash used in financing
activities of $46.0 million in 2010 and $48.5 million in 2009. In 2011, we realized $47.0 million from the sale of
our common stock through our at the market equity offering and $211.0 million in proceeds, net of repayments,
from our new credit agreements to fund our acquisitions, joint venture activity and mortgage payoffs of $77.0
million. In 2010, our financing activities were generally limited to a net $10.0 million draw on our line of credit as
well as our recurring dividends, distributions, and mortgage principal payments. In 2009, we used our operating
cash flow and the proceeds from our common stock offering to make net repayments of $14.0 million on our line of
credit, to repay $100 million of term notes, and to make $28.0 million in mortgage principal payments.
On August 5, 2011, 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 $125 million unsecured term
note maturing in August 2018 bearing interest at LIBOR plus a margin based on the Company’s credit rating (at
December 31, 2011 the margin is 2.0%). The agreements also provide for a $175 million (expandable to $250
million) revolving line of credit bearing interest at a variable rate equal to LIBOR plus a margin based on the
Company’s credit rating (at December 31, 2011 the margin is 2.0%), and requires a 0.20% facility fee. The interest
31
rate at December 31, 2011 on the Company's available line of credit was approximately 2.28% (1.64% at December
31, 2010). The proceeds from this term note and draws on the new line of credit were used to repay the Company’s
previous line of credit and the Company’s $150 million bank term note that was to mature June 2012. At December
31, 2011, there was $129 million available on the unsecured line of credit without considering the additional
availability under the expansion feature. The revolving line of credit has a maturity date of August 2016, but can be
extended for 2 one year periods at the Company’s option with the payment of an extension fee equal to 0.125% of
the total line of credit commitment.
In addition, on August 5, 2011, we secured an additional $100 million term note with a delayed draw
feature that was used to fund the Company’s mortgage maturities in December 2011. The delayed draw term note
matures August 2018 and bears interest at LIBOR plus a margin based on the Company’s credit rating (at December
31, 2011 the margin is 2.0%).
On August 5, 2011, we also entered into a $100 million term note maturing August 2021 bearing interest at
a fixed rate of 5.54%. The interest rate on the term note increases to 7.29% if the notes are not rated by at least one
rating agency, the credit rating on the notes is downgraded or if the Company’s credit rating is downgraded. The
proceeds from this term note were used to fund acquisitions and investments in unconsolidated joint ventures.
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%. The interest rate
on the $150 million unsecured term note increases to 8.13% if the notes are not rated by at least one rating agency,
the credit rating on the notes is downgraded or the Company’s credit rating is downgraded.
The 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, 2011, the Company was in compliance with its
debt covenants.
Our line of credit facility and term notes have an investment grade rating from Standard and Poor's and
Fitch Ratings (BBB-). In May 2009, 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 grade (BB+). 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-).
In addition to the unsecured financing mentioned above, our consolidated financial statements also include
$4.4 million of mortgages payable that are secured by three storage facilities.
On September 14, 2011, the Company entered into a continuous equity offering program (“Equity
Program”) with Wells Fargo Securities, LLC (“Wells Fargo”), pursuant to which the Company may sell from time
to time up to $125 million in aggregate offering price of shares of the Company’s common stock. Actual sales
under the Equity Program will depend on a variety of factors and conditions, including, but not limited to, market
conditions, the trading price of the Company’s common stock, and determinations of the appropriate sources of
funding for the Company. The Company expects to continue to offer, sell, and issue shares of common stock under
the Equity Program from time to time based on various factors and conditions, although the Company is under no
obligation to sell any shares under the Equity Program.
During 2011, the Company issued 1,166,875 shares of common stock under the Equity Program at a
weighted average issue price of $40.59 per share, generating net proceeds of $46.4 million after deducting $0.9
million of sales commissions payable to Wells Fargo. In addition to sales commissions paid to Wells Fargo, the
Company incurred expenses of $0.4 million in connection with the Equity Program during 2011. The Company used
the proceeds from the Equity Program to reduce the outstanding balance under the Company’s revolving line of
credit. As of December 31, 2011, the Company had $77.6 million available for issuance under the Equity Program.
32
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.
Our Dividend Reinvestment and Stock Purchase Plan was suspended in November 2009, and therefore we
did not issue any shares under this plan in 2011. During 2009, we issued approximately 1.4 million shares via our
Dividend Reinvestment and Stock Purchase Plan and the Employee Stock Option Plan. We received $32.6 million
from the sale of such shares. We expect to reinstate our dividend reinvestment plan in 2012.
During 2011 and 2010, 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, 2011, 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, issuance of common and preferred stock, the issuance of unsecured term
notes, sale of properties, and private placement solicitation of joint venture equity. Should the capital markets
deteriorate, we may have to curtail acquisitions, our expansion and enhancement program, and share repurchases as
we approach September 2013, when certain term notes mature.
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 ................
Expansion and
enhancement
contracts .................
Contribution to
joint venture for
acquisitions under
contract ...................
Building leases .........
Total .........................
Total
2012
2013-2014
2015-2016
2017 and thereafter
$46.0 million
$575.0 million
$4.4 million
$144.5 million
-
-
$0.2 million
$27.3 million
-
$100.0 million
$2.1 million
$47.3 million
$46.0 million
$150.0 million
$0.3 million
$35.8 million
-
$325.0 million
$1.8 million
$34.1 million
$10.7 million
$1.0 million
$4.8 million
$0.1 million
$1.3 million
$0.1 million
$1.0 million
$0.1 million
$3.6 million
$0.7 million
$7.5 million
$7.5 million
-
-
-
-
-
-
$4.3 million
$2.9 million
$796.3 million
$4.3 million
$0.7 million
$44.9 million
$1.5 million
$152.3 million
$0.7 million
$233.9 million
-
$365.2 million
Interest payments include actual interest on fixed rate debt and estimated interest for floating-rate debt
based on December 31, 2011 rates. Interest rate swap payments include net settlements of swap liabilities based on
forecasted variable rates.
33
ACQUISITION OF PROPERTIES
In 2011, we acquired 29 self storage facilities comprising 2.0 million square feet in New Jersey (3), Florida
(1), Georgia (1), Missouri (1), Texas (22), and Virginia (1) for a total purchase price of $155.1 million. Based on the
trailing financials of the entities from which the properties were acquired, the weighted average capitalization rate
was 7.6% on these purchases and ranged from 5.3% to 8.4%. During 2010, we used the proceeds from the sale of
the ten Properties and borrowings pursuant to our line of credit to acquire seven Properties in North Carolina
comprising 0.5 million square feet from unaffiliated storage operators. We acquired no properties in 2009.
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 into new markets by acquiring several facilities at
once in those new markets. We are actively pursuing acquisitions in 2012 and at December 31, 2011 we had 10
properties under contract to be purchased by the joint venture we entered in 2011 in which we have a 15%
ownership. The properties were acquired by the joint venture in February 2012 for $29 million and the Company’s
capital contribution was approximately $4.3 million.
In 2011, we added 118,000 square feet to existing Properties, and converted 2,000 square feet to premium
storage for a total cost of approximately $7.2 million. In 2010, we added 162,000 square feet to existing Properties,
and converted 6,500 square feet to premium storage for a total cost of approximately $9 million. In 2009, 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 2012, we do plan to complete approximately $20
million in expansions and enhancements to existing facilities of which $12.5 million was paid prior to December 31,
2011.
In 2011, the Company spent approximately $14.6 million for recurring capitalized expenditures including
roofing, painting, paving, and office renovations. We expect to spend $14.1 million in 2012 on similar capital
expenditures.
DISPOSITION OF PROPERTIES
During 2010 we sold ten non-strategic storage facilities located in Georgia, Michigan, North Carolina and
Virginia for net cash proceeds of $23.7 million resulting in a gain of $6.9 million. 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.
We are seeking to sell additional Properties to third parties or joint venture programs in 2012.
OFF-BALANCE SHEET ARRANGEMENTS
Our off-balance sheet arrangements consist of our investment in two self storage joint ventures in which we
have a 20% and 15% ownership, as well as our investment in the entity that owns the building that houses our
corporate office in which we have a 49% ownership. We account for these real estate entities under the equity
method. The debt held by the unconsolidated real estate entity is secured by the real estate owned by these entities,
and is non-recourse to us. See Note 12 to our consolidated financial statements appearing elsewhere in this annual
report on Form 10-K.
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
34
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 2012 may be
applied toward our 2011 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 2011, our percentage of revenue from such sources was approximately 96%, 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
The primary market risk to which we believe we are exposed is interest rate risk, which may result from
many factors, including government monetary and tax policies, domestic and international economic and political
considerations, and other factors that are beyond our control.
We have entered into interest rate swap agreements in order to mitigate the effects of fluctuations in interest
rates on our variable rate debt. 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 $245 million of our debt through the interest rate swap termination dates. See Note 8 to our consolidated
financial statements appearing elsewhere in this annual report on Form 10-K.
Through September 2013, $245 million of our $291 million of floating rate unsecured debt is on a fixed
rate basis after taking into account our interest rate swap agreements. Based on our outstanding unsecured debt of
$291 million at December 31, 2011, a 100 basis point increase in interest rates would have a $0.5 million effect on
our interest expense. These amounts were determined by considering the impact of the hypothetical interest rates on
our borrowing cost and our interest rate hedge agreements in effect on December 31, 2011. These analyses do not
consider the effects of the reduced level of overall economic activity that could exist in such an environment.
Further, in the event of a change of such magnitude, we would consider taking actions to further mitigate our
exposure to the change. However, due to the uncertainty of the specific actions that would be taken and their
possible effects, the sensitivity analysis assumes no changes in our capital structure.
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 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 and college student activity 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.
35
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, 2011 and 2010, and the related consolidated statements of operations, comprehensive income,
shareholders’ equity, and cash flows for each of the three years in the period ended December 31, 2011. 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, 2011 and 2010, and the consolidated
results of its operations and its cash flows for each of the three years in the period ended December 31, 2011, 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, 2011,
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 28, 2012 expressed an unqualified
opinion thereon.
/s/ Ernst & Young LLP
Buffalo, New York
February 28, 2012
36
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 unconsolidated joint ventures .............................................
Investment in unconsolidated joint ventures..................................................
Prepaid expenses............................................................................................
Other assets ....................................................................................................
Total Assets .................................................................................................
Liabilities
Line of credit .................................................................................................
Term notes .....................................................................................................
Accounts payable and accrued liabilities .......................................................
Deferred revenue ...........................................................................................
Fair value of interest rate swap agreements ...................................................
Mortgages payable .........................................................................................
Total Liabilities............................................................................................
December 31,
2011
2010
$ 272,784
1,323,319
1,596,103
(305,585)
1,290,518
7,321
3,008
589
31,939
3,987
7,373
$ 1,344,735
$ 46,000
575,000
32,254
6,305
10,748
4,423
674,730
$ 240,651
1,179,305
1,419,956
(271,797)
1,148,159
5,766
2,377
253
19,730
4,408
4,848
$ 1,185,541
$ 10,000
400,000
23,991
4,925
10,528
78,954
528,398
Noncontrolling redeemable Operating Partnership Units at
redemption value .......................................................................................
14,466
12,480
Shareholders' Equity
Common stock $.01 par value, 100,000,000 shares authorized, 28,952,356
shares outstanding (27,650,829 at December 31, 2010) ............................
Additional paid-in capital ..............................................................................
Dividends in excess of net income ................................................................
Accumulated other comprehensive loss ........................................................
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.
301
862,467
(169,799)
(10,255)
(27,175)
655,539
-
655,539
$ 1,344,735
288
816,986
(148,264)
(10,254)
(27,175)
631,581
13,082
644,663
$ 1,185,541
37
SOVRAN SELF STORAGE, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(dollars in thousands, except per share data)
2011
2010
2009
Year Ended December 31,
Revenues
Rental income ........................................................................
Other operating income .........................................................
Total operating revenues.......................................................
Expenses
Property operations and maintenance ....................................
Real estate taxes.....................................................................
General and administrative ....................................................
Acquisition costs....................................................................
Impairment loss .....................................................................
Depreciation and amortization ...............................................
Total operating expenses .....................................................
$ 198,221
12,935
211,156
$ 182,865
9,207
192,072
$ 183,074
7,966
191,040
54,913
20,404
25,986
3,278
1,047
36,578
142,206
51,845
19,065
21,071
786
-
32,939
125,706
50,726
19,355
18,649
-
-
32,736
121,466
Income from operations .........................................................
68,950
66,366
69,574
Other income (expenses)
Interest expense ......................................................................
Interest income .......................................................................
Casualty loss ...........................................................................
Gain on sale of land ................................................................
Equity in (losses) income of joint ventures ............................
Income from continuing operations ........................................
Income from discontinued operations (including a
gain on disposal of $6,944 in 2010 and loss on disposal of
$1,636 in 2009) .....................................................................
Net income .............................................................................
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 .........................................................
Earnings per share - basic .....................................................
Earnings per common share attributable to common
shareholders - diluted
Continuing operations .............................................................
Discontinued operations .........................................................
Earnings per share - diluted ..................................................
(38,549)
83
(126)
1,511
(340)
(31,711)
84
-
-
240
(50,050)
85
(390)
1,127
235
31,529
34,979
20,581
-
31,529
(937)
$ 30,592
7,562
42,541
(1,899)
$ 40,642
1,073
21,654
(1,738)
$ 19,916
$ 1.11
-
$ 1.11
$ 1.10
-
$ 1.10
$ 1.20
0.28
$ 1.48
$ 1.20
0.28
$ 1.48
$ 0.79
0.05
$ 0.84
$ 0.79
0.05
$ 0.84
Dividends declared per common share ...............................
$ 1.80
$ 1.80
$ 1.54
See notes to consolidated financial statements.
38
SOVRAN SELF STORAGE, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(dollars in thousands, except per share data)
2011
2010
2009
Year Ended December 31,
Net income ..............................................................................
Other comprehensive income:
Change in fair value of derivatives net of reclassification to
interest expense ...............................................................
Total comprehensive income ..................................................
Comprehensive income attributable to noncontrolling interest
Comprehensive income attributable to common shareholders
$ 31,529
$ 42,541
$ 21,654
(1)
31,528
(937)
$ 30,591
1,011
43,552
(1,912)
$ 41,640
13,897
35,551
(1,997)
$ 33,554
See notes to consolidated financial statements.
39
SOVRAN SELF STORAGE, INC.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
(dollars in thousands, except share data)
Common
Stock
Shares
Common
Stock
Additional
Paid-in
Capital
Dividends
in
Excess of
Net Income
Accumulated
Other
Comprehensive
Income (loss)
Treasury
Stock
Total
Shareholders’
Equity
Balance January 1, 2009.........................................................
22,016,348
$ 232
$ 666,633
$ (122,581)
$ (25,162)
$ (27,175)
$ 491,947
4,025,000
40
113,931
-
14
-
1
-
-
-
32,548
62
-
1,379
321
114
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
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 attributable to common shareholders ...................
Change in fair value of derivatives .........................................
Dividends...............................................................................
Balance December 31, 2009 ...................................................
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 attributable to common shareholders ...................
Change in fair value of derivatives .........................................
Dividends...............................................................................
Balance December 31, 2010 ...................................................
Net proceeds from the issuance of common stock ..................
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
noncontrolling interest .......................................................
Adjustment to redemption value of noncontrolling
redeemable Operating Partnership Units ..............................
Net income attributable to common shareholders ...................
Change in fair value of derivatives .........................................
Dividends...............................................................................
Balance December 31, 2011 ...................................................
See notes to consolidated financial statements
1,430,521
3,770
59,590
-
-
11,798
-
-
-
-
27,547,027
25,650
78,152
-
-
-
-
-
-
-
-
27,650,829
1,166,875
28,050
106,602
-
-
-
-
-
-
-
-
28,952,356
113,971
32,562
62
1
1,379
321
114
(156)
19,916
13,897
(37,042)
636,972
603
617
1,307
354
239
(1,121)
620
40,642
1,011
(49,663)
$631,581
46,034
728
617
1,492
302
239
(3,918)
(2,227)
30,592
(1)
(49,900)
$655,539
-
-
-
-
287
-
-
-
-
814,988
(156)
19,916
-
(37,042)
(139,863)
-
-
13,897
-
(11,265)
-
-
-
-
(27,175)
-
1
-
-
-
-
603
616
1,307
354
239
(1,121)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
$ 288
-
-
-
-
$ 816,986
620
40,642
-
(49,663)
$ (148,264)
-
-
1,011
-
$ (10,254)
-
-
-
-
$ (27,175)
12
-
1
-
-
-
-
46,022
728
616
1,492
302
239
(3,918)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
$ 301
-
-
-
-
$ 862,467
(2,227)
30,592
-
(49,900)
$ (169,799)
-
-
(1)
-
$ (10,255)
-
-
-
-
$ (27,175)
40
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......................................................................................
Amortization of deferred financing fees .......................................................................
(Gain) loss on sale of storage facilities .........................................................................
Gain on sale of land ......................................................................................................
Casualty loss ...............................................................................................................
Impairment loss ...........................................................................................................
Equity in losses (income) of joint ventures ...................................................................
Distributions from unconsolidated joint venture...........................................................
Non-vested stock earned ..............................................................................................
Stock option expense ....................................................................................................
Changes in assets and liabilities (excluding the effects of acquisitions):
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 facilities ...........................................................
Net proceeds from the sale of land ..............................................................................
Casualty insurance proceeds received .........................................................................
Investment in unconsolidated joint venture .................................................................
(Advances) reimbursement of advances to joint ventures ............................................
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 ........................................................................................
Proceeds from term notes ............................................................................................
Repayment of line of credit .........................................................................................
Repayment of term notes .............................................................................................
Financing costs ............................................................................................................
Dividends paid - common stock ..................................................................................
Distributions to noncontrolling interest holders ...........................................................
Redemption of operating partnership units ..................................................................
Additional investment in Locke Sovran II LLC ..........................................................
Mortgage principal payments ......................................................................................
Net cash provided by (used in) financing activities ......................................................
Net increase (decrease) in cash .....................................................................................
Cash at beginning of period ..........................................................................................
Cash at end of period ...................................................................................................
Year Ended December 31,
2009
2011
2010
$ 31,529
$ 42,541
$ 21,654
36,578
1,184
-
(1,511)
126
1,047
340
944
1,492
302
(523)
434
7,988
380
80,310
(150,444)
(28,064)
-
2,019
588
(13,571)
(413)
(407)
-
(190,292)
47,001
198,000
325,000
(162,000)
(150,000)
(4,146)
(49,900)
(1,177)
-
(14,199)
(77,042)
111,537
1,555
5,766
$ 7,321
33,156
1,030
(6,944)
-
-
-
(240)
494
1,307
354
(21)
(72)
2,257
(191)
73,671
(34,717)
(21,516)
23,708
-
-
-
(80)
-
-
(32,605)
842
32,000
-
(22,000)
-
-
(49,663)
(2,030)
(2,894)
-
(2,265)
(46,010)
(4,944)
10,710
$ 5,766
33,818
1,838
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
-
(44,000)
(100,000)
-
(51,133)
(2,006)
-
-
(28,042)
(48,471)
6,224
4,486
$ 10,710
Supplemental cash flow information
Cash paid for interest, net of interest capitalized ..........................................................
$ 35,134
$ 30,698
$ 49,154
See notes to consolidated financial statements.
41
SOVRAN SELF STORAGE, INC. - DECEMBER 31, 2011
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. ORGANIZATION
Sovran Self Storage, Inc. (the "Company," "We," "Our," or "Sovran"), a self-administered and self-
managed real estate investment trust (a "REIT"), was formed on April 19, 1995 to own and operate self-storage
facilities throughout the United States. On June 26, 1995, the Company commenced operations effective with the
completion of its initial public offering. At December 31, 2011, we had an ownership interest in and/or managed
435 self-storage properties in 25 states under the name Uncle Bob's Self Storage ®. Among our 435 self-storage
properties are 25 properties that we manage for an unconsolidated joint venture (Sovran HHF Storage Holdings
LLC) of which we are a 20% owner, 20 properties that we manage for an unconsolidated joint venture (Sovran HHF
Storage Holdings II LLC) of which we are a 15% owner, one property that we manage for a consolidated joint
venture (West Deptford JV LLC) of which we have a 20% common ownership interest and a preferred interest, and
nine properties that we manage and have no ownership interest. Approximately 40% of the Company's revenue is
derived from stores in the states of Texas and Florida.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation: All of the Company's assets are owned by, and all its operations are conducted
through, Sovran Acquisition Limited Partnership (the "Operating Partnership"). Sovran Holdings, Inc., a wholly-
owned subsidiary of the Company (the "Subsidiary"), is the sole general partner of the Operating Partnership; the
Company is a limited partner of the Operating Partnership, and through its ownership of the Subsidiary and its
limited partnership interest controls the operations of the Operating Partnership, holding a 98.8% ownership interest
therein as of December 31, 2011. The remaining ownership interests in the Operating Partnership (the "Units") are
held by certain former owners of assets acquired by the Operating Partnership subsequent to its formation.
We consolidate all wholly owned subsidiaries. Partially owned subsidiaries and joint ventures are
consolidated when we control the entity. Our consolidated financial statements include the accounts of the
Company, the Operating Partnership, Uncle Bob’s Management, LLC (the Company’s taxable REIT subsidiary),
Locke Sovran I, LLC, Locke Sovran II, LLC and West Deptford JV LLC, a controlled joint venture. All
intercompany transactions and balances have been eliminated. Investments in joint ventures that we do not control
but for which we have significant influence over are reported using the equity method.
In December 2007, the FASB issued additional accounting guidance now codified in ASC Topic 810,
"Consolidation" through the issuance of FASB Statement No. 160, "Noncontrolling Interests in Consolidated
Financial Statements" ("SFAS No. 160") which was adopted by the Company on January 1, 2009. The additional
guidance requires that the portion of equity in a subsidiary attributable to the owners of the subsidiary other than the
parent or the parent's affiliates be labeled "noncontrolling interests" and presented in the consolidated balance sheet
as a component of equity. The additional guidance does not significantly change the Company's past accounting
practices with respect to the attribution of net income between controlling and noncontrolling interests, however, the
provisions of the additional guidance require that earnings attributable to noncontrolling interests be reported as part
of consolidated earnings and not as a separate component of income or expense. In addition, the additional guidance
requires the disclosure of the attribution of consolidated earnings to the controlling and noncontrolling interests on
the face of the statement of operations.
In accordance with the guidance provided in ASC Topic 810, “Consolidation” in 2010 we presented
noncontrolling interests in Locke Sovran II, LLC as a separate component of equity, called "Noncontrolling
interests - consolidated joint venture" in the consolidated balance sheets.
In May 2011, the Company made an additional investment of $17.0 million in Locke Sovran II, LLC and
now owns 100% of that entity. The purchase price in excess of the carrying value of the non-controlling interest in
Locke Sovran II, LLC was $3.9 million and was recorded as a reduction of additional paid-in capital. In connection
42
with this transaction, the noncontrolling interest holders settled an outstanding $2.8 million note receivable due to
the Company, and the net cash paid by the Company to the noncontrolling interest holders was $14.2 million. Prior
to May 2011, the Company presented noncontrolling interests in Locke Sovran II, LLC as a separate component of
equity, called "Noncontrolling interests - consolidated joint venture" in the consolidated balance sheets.
The following table sets forth the activity in the noncontrolling interest – consolidated joint venture:
(Dollars in thousands)
2011
2010
Beginning balance noncontrolling interests – consolidated joint venture ....................
Net income attributable to noncontrolling interests – consolidated joint venture ......
Distributions .............................................................................................................
Additional investment in Locke Sovran II, LLC .......................................................
Ending balance noncontrolling interests – consolidated joint venture .........................
$13,082
567
(567)
(13,082)
$ -
$13,082
1,360
(1,360)
-
$13,082
On June 30, 2011, the Company entered into a newly formed joint venture agreement with an owner of a
self-storage facility in New Jersey (West Deptford JV LLC). As part of the agreement the Company contributed
$4.2 million to the joint venture for a $2.8 million mortgage note at 8%, a 20% common interest, and a $1.4 million
preferred interest with an 8% preferred return. Pursuant to the terms of the joint venture operating agreement, upon
a liquidation of the joint venture the Company has the right to receive a return of its investment prior to any
distributions to the common members. The Company also has the right to redeem its preferred interests in the joint
venture upon a written election any time on or after June 30, 2016. The Company has concluded that this joint
venture is a variable interest entity pursuant to the guidance in FASB ASC Topic 810, “Consolidation” on the basis
that the total equity investment in the joint venture is not sufficient to permit the joint venture to finance its activities
without additional subordinated financial support from its investors. The Company has determined that it is the
primary beneficiary of the joint venture as it has the power to direct the activities of the joint venture that most
significantly impact the joint venture’s economic performance. The Company also has the right to receive a
significant amount of the benefits of the joint venture by virtue of its preferred interest and liquidation preferences.
As a result of the above, the assets, liabilities and results of operations of West Deptford JV LLC since June 30,
2011 are included in the Company’s consolidated financial statements. Pursuant to the terms of the West Deptford
JV LLC operating agreement, neither party to the joint venture is obligated to make additional capital contributions
to the joint venture and shall not be held personally liable for any obligations of the joint venture. Should the joint
venture be unable to meet its obligations as they come due or there be any other events or circumstances that have a
significant adverse effect on West Deptford JV LLC, the Company could be exposed to losses on its investment in
the joint venture and the Company could determine that it is necessary to make additional capital contributions to
West Deptford JV LLC. At December 31, 2011, West Deptford JV LLC had total assets of $4.1 million and total
liabilities of $2.9 million. For the year ended December 31, 2011 West Deptford JV LLC generated total operating
revenues of $0.3 million and a net loss of $3,100.
Included in the consolidated balance sheets are noncontrolling redeemable operating partnership units.
These interests are presented in the "mezzanine" section of the consolidated balance sheet because they do not meet
the functional definition of a liability or equity under current accounting literature. These represent the outside
ownership interests of the limited partners in the Operating Partnership. At December 31, 2011 and 2010, there
were 339,025 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. The Company accounts for these noncontrolling redeemable Operating Partnership
Units under the provisions of EITF D-98, "Classification and Measurement of Redeemable Securities" which are
included in 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 dividends in excess of net income. Accordingly, in the accompanying
43
consolidated balance sheet, noncontrolling redeemable Operating Partnership Units are reflected at redemption value
at December 31, 2011 and 2010, 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 ...................
2011
2010
$12,480
-
-
370
(611)
2,227
$14,466
$15,005
(2,894)
1,121
539
(671)
(620)
$12,480
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 $29 thousand and $2.4 million,
respectively, held in escrow for encumbered properties at December 31, 2011 and 2010.
Accounts Receivable: Accounts receivable are composed of trade and other receivables recorded at billed
amounts and do not bear interest. The allowance for doubtful accounts is the Company’s best estimate of the
amount of probable uncollectible amounts in the Company’s existing accounts receivable. The Company determines
the allowance based on a number of factors, including experience, credit worthiness of customers, and current
market and economic conditions. The Company reviews the allowance for doubtful accounts on a regular basis.
Account balances are charged against the allowance after all means of collection have been exhausted and the
potential for recovery is considered remote. The allowance for doubtful accounts is recorded as a reduction of
accounts receivable and amounted to $0.5 million, $0.2 million and $0.3 million at December 31, 2011, 2010 and
2009, respectively.
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, 2011, 2010, and 2009, advertising costs were $3.2 million, $2.3
million, and $1.9 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
incidental truck rentals, and management and acquisition fees from
insurance commissions,
supplies),
unconsolidated joint ventures.
Investment in Storage Facilities: Storage facilities are recorded at cost. The purchase price of acquired
facilities is allocated to land, land improvements, building, equipment, and in-place customer leases based on the
fair value of each component. The fair values of land are determined based upon comparable market sales
information. The fair values of buildings are determined based upon estimates of current replacement costs adjusted
for depreciation on the properties. For the years ended December 31, 2011 and 2010, $3.3 million and $0.8 million
of acquisition related costs were incurred and expensed, respectively. No acquisitions were completed in 2009 and
therefore there were no acquisition related costs expensed during 2009.
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
44
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, 2011, 2010, and 2009 was $0.1 million, $0.1 million and $0.2 million, respectively. Repair and
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, 2011, the Company determined that a building was impaired due to a structural deficiency.
The Company recorded an impairment charge of $1.0 million in 2011 related to the write-off of the building value.
At December 31, 2010, no assets had been determined to be impaired under this policy.
Other Assets: Included in other assets are net loan acquisition costs, property deposits, and the value placed
on in-place customer leases at the time of acquisition. The loan acquisition costs were $5.9 million at December 31,
2011, and 2010. Accumulated amortization on the loan acquisition costs was approximately $1.5 million and $4.4
million at December 31, 2011, and 2010, respectively. Loan acquisition costs are amortized over the terms of the
related debt. At December 31, 2010, the Company had a note receivable of $2.8 million representing a note from
certain investors of Locke Sovran II, LLC. The note was repaid in 2011. Property deposits at December 31, 2011
were $0.4 million. There were no property deposits at December 31, 2010.
The Company allocates a portion of the purchase price of acquisitions to in-place customer leases. The fair
value of in-place customer leases is determined using an income approach. Estimates of future income are derived
from customers in existence at the date of acquisition based primarily on historical income derived from the leases
with those customers and 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,
2011, the gross carrying amount of in-place customer leases was $9.5 million and the accumulated amortization was
$7.0 million.
Amortization expense related to financing fees was $1.2 million, $1.0 million and $1.8 million for the
periods ended December 31, 2011, 2010 and 2009, respectively.
Investment in Unconsolidated Joint Ventures: The Company's investment in unconsolidated joint
ventures, where the Company has significant influence, but not control and joint ventures which are VIEs in which
the Company is not the primary beneficiary, are recorded under the equity method of accounting in the
accompanying consolidated financial statements. Under the equity method, the Company's investment in
unconsolidated joint ventures is stated at cost and adjusted for the Company's share of net earnings or losses and
reduced by distributions. Equity in earnings of unconsolidated joint ventures is generally recognized based on the
Company's ownership interest in the earnings of each of the unconsolidated joint ventures. For the purposes of
presentation in the statement of cash flows, the Company follows the "look through" approach for classification of
distributions from joint ventures. Under this approach, distributions are reported under operating cash flow unless
the facts and circumstances of a specific distribution clearly indicate that it is a return of capital (e.g., a liquidating
dividend or distribution of the proceeds from the joint venture's sale of assets), in which case it is reported as an
investing activity.
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.
45
The Company has elected to treat certain of its subsidiaries as taxable REIT subsidiaries. In general, the
Company's taxable REIT subsidiaries may perform additional services for tenants and generally may engage in
certain real estate or non-real estate related business. A taxable REIT subsidiary is subject to corporate federal and
state income taxes. Deferred tax assets and liabilities are determined based on differences between financial
reporting and tax bases of assets and liabilities.
For the years ended December 31, 2011, 2010 and 2009, the Company recorded federal and state income
tax expense of $1.5 million, $1.1 million and $0.9 million, respectively. At December 31, 2011 and 2010, there
were no material unrecognized tax benefits. Interest and penalties relating to uncertain tax positions will be
recognized in income tax expense when incurred. As of December 31, 2011 and 2010, the Company had no interest
or penalties related to uncertain tax provisions. The Company’s taxable REIT subsidiary has a current taxes payable
of $0.2 million and a deferred tax liability of $0.1 million.
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 using an income approach. 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 May 2011 the FASB issued ASU No. 2011-04, Fair Value
Measurements (Topic 820): Amendments to Achieve Common Fair Value Measurement and Disclosure
Requirements in US GAAP and International Financial Reporting Standards (“IFRS”) (“ASU 2011-04”). ASU
2011-04 represents the converged guidance of the FASB and the IASB (the “Boards”) on fair value
measurements. The collective efforts of the Boards and their staffs, reflected in ASU 2011-04, have resulted in
common requirements for measuring fair value and for disclosing information about fair value measurements,
including a consistent meaning of the term “fair value.” The Boards have concluded the common requirements will
result in greater comparability of fair value measurements presented and disclosed in financial statements prepared
in accordance with GAAP and IFRSs. The amendments in this ASU are required to be applied prospectively, and
are effective for interim and annual periods beginning after December 15, 2011. The Company does not expect that
the adoption of ASU 2011-04 will have a significant impact on the Company’s consolidated financial statements.
In July 2011, the FASB issued ASU No. 2011-05, “Comprehensive Income (Topic 220) – Presentation of
Comprehensive Income.” The amendment eliminates the option to present other comprehensive income and its
components in the statement of stockholders’ equity. The amendment requires all nonowner changes in
stockholders’ equity be presented in either a single continuous statement of comprehensive income or in two
separate but consecutive statements. The amendment, which must be applied retrospectively, is effective for interim
and annual periods beginning after December 15, 2011, with early adoption permitted. The Company adopted the
provisions of ASU No. 2011-05 in 2011 and has included a separate consolidated statement of comprehensive
income in its financial statements.
Stock-Based Compensation: The Company accounts for stock-based compensation under the provisions
of ASC Topic 718, "Compensation - Stock Compensation" (formerly, FASB Statement 123R). The Company
recognizes compensation cost in its financial statements for all share based payments granted, modified, or settled
during the period. For awards with graded vesting, compensation cost is recognized on a straight-line basis over the
related vesting period.
The Company recorded compensation expense (included in general and administrative expense) of
$302,000, $354,000 and $321,000 related to stock options and $1.5 million, $1.3 million and $1.4 million related to
amortization of non-vested stock grants for the years ended December 31, 2011, 2010 and 2009, 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
46
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 2011 follows:
Expected life (years) .....................................
Risk free interest rate ....................................
Expected volatility ........................................
Expected dividend yield ...............................
Fair value ......................................................
Weighted Average
4.50
1.85%
42.22%
4.46%
$10.09
Range
4.50
1.85%
42.22%
4.40% - 4.50%
$9.95 - $10.29
The weighted-average fair value of options granted during the years ended December 31, 2010 and 2009,
were $8.34 and $2.73, 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.
During 2011, the Company issued performance based non-vested stock to certain executives. The fair
value for the performance based non-vested shares granted in 2011 was estimated at the time the shares were
granted using a Monte Carlo pricing model applying the following assumptions:
Expected life (years) .....................................
Risk free interest rate ....................................
Expected volatility ........................................
Fair value ......................................................
2.1
0.28%
30.75%
$28.66
The Monte Carlo pricing model was not used to value the other 2011, 2010 and 2009 non-vested shares
granted as no market conditions were present in these awards. The value of these other non-vested shares was equal
to the stock price on the date of grant.
Reclassification: Certain amounts from the 2010 financial statements have been reclassified as a result of
separating acquisition costs from general and administrative expenses on the consolidated statements of operations.
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 Company has calculated its basic and diluted earnings per
share using the two-class method. The following table sets forth the computation of basic and diluted earnings per
common share utilizing the two-class method.
47
(Amounts in thousands, except per share data)
2011
Year Ended December 31,
2010
2009
Numerator:
Net income from continuing operations attributable to common shareholders ........
$ 30,592
$ 33,080
$ 18,843
Denominator:
Denominator for basic earnings per share - weighted average shares .....................
Effect of Dilutive Securities:
Stock options and warrants and non-vested stock ....................................................
27,674
51
27,472
42
23,787
10
Denominator for diluted earnings per share - adjusted weighted average shares
and assumed conversion....................................................................................
27,725
27,514
23,797
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
$ 1.11
$ 1.11
$ 1.10
$ 1.10
$ 1.20
$ 1.48
$ 1.20
$ 1.48
$ 0.79
$ 0.84
$ 0.79
$ 0.84
Not included in the effect of dilutive securities above are 305,468 stock options and 157,903 unvested
restricted shares for the year ended December 31, 2011; 320,318 stock options and 159,763 unvested restricted
shares for the year ended December 31, 2010; and 333,072 stock options and 125,871 unvested restricted shares for
the year ended December 31, 2009, because their effect would be antidilutive.
4. INVESTMENT IN STORAGE FACILITIES
The following summarizes activity in storage facilities during the years ended December 31, 2011 and
December 31, 2010.
(Dollars in thousands)
Cost:
Beginning balance ................................................................
Acquisition of storage facilities ............................................
Improvements and equipment additions ...............................
Increase (decrease) in construction in progress ....................
Dispositions and impairments ...............................................
Ending balance .......................................................................
2011
2010
$1,419,956
151,572
21,764
6,371
(3,560)
$1,596,103
$1,364,454
34,155
23,311
(1,788)
(176)
$1,419,956
Accumulated Depreciation:
Beginning balance ................................................................
Additions during the year .....................................................
Dispositions and impairments ...............................................
Ending balance .......................................................................
$ 271,797
35,008
(1,220)
$ 305,585
$ 238,971
32,939
(113)
$ 271,797
The assets and liabilities of the acquired storage facilities, which primarily consist of tangible and
intangible assets, are measured at fair value on the date of acquisition in accordance with the principles of FASB
ASC Topic 820, “Fair Value Measurements and Disclosures.” During 2011 and 2010, the Company acquired 29
and 7 self-storage facilities, respectively, and the purchase price of the facilities was assigned as follows:
48
Consideration paid
Acquisition Date Fair Value
Number of
Properties
Date of
Acquisition
Purchase
Price
Cash Paid
Loan
Assumed
Net Other
Liabilities
(Assets)
Assumed
Building,
Equipment,
and
Improvements
Land
In-Place
Customers
Leases
Closing
Costs
Expensed
6/30/2011 $ 4,154
1
7/14/2011 14,571
2
7/28/2011 2,400
1
8/1711 9,500
1
9/22/2011 110,950
22
1
9/29/2011 8,925
1 11/15/2011 4,600
$ 155,100
29
$ 4,131 $ -
14,439 -
2,350 -
9,399 -
106,703
2,511
8,851 -
4,571 -
$ 2,511
$150,444
$ 23
132
50
101
1,736
74
29
$ 2,145
$ 626
1,681
197
1,043
25,660
2,848
197
$ 32,252
$ 3,419 $ 109
12,540 350
2,132 71
8,252 205
82,804 2,486
5,892 185
4,281 122
$ 119,320 $ 3,528
$ 23
467
95
226
2,051
252
164
$ 3,278
1 12/28/2010 5,040
6 12/29/2010 29,680
7
$ 34,720
5,020 -
20
29,697 - (17)
$ 3
$ 34,717 $ -
846
4,523
$ 5,369
4,095 99
24,691 466
$ 28,786 $ 565
157
629
$ 786
State
2011
New Jersey
New Jersey
Missouri
Georgia
T exas
Virginia
Florida
T otal 2011
2010
N. Carolina
N. Carolina
T otal 2010
The Company did not acquire any storage facilities in 2009. The operating results of the acquired faculties
have been included in the Company’s operations since the respective acquisition dates.
The Company measures the fair value of in-place customer lease intangible assets 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). In-place customer leases are included in other assets on the
Company’s balance sheet as follows:
(Dollars in thousands)
In-place customer leases .........................................................
Accumulated amortization ......................................................
Net carrying value at December 31, .......................................
2010
$6,014
(5,449)
$565
2011
$9,542
(7,019)
$2,523
Amortization expense related to in-place customer leases was $1.6 million, $0, and $0.3 million for the
years ended December 31, 2011, 2010, and 2009, respectively. Amortization expense in 2012 is expected to be $2.5
million.
5. DISCONTINUED OPERATIONS
During 2010, the Company sold ten non-strategic storage facilities in Georgia, Michigan, North Carolina
and Virginia for net proceeds of approximately $23.7 million resulting in a gain of $6.9 million. 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. The operations of these facilities and the loss or gain
on sale are reported as discontinued operations. 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, 2010 and 2009. The following is a summary of the amounts reported as discontinued
operations:
(dollars in thousands)
Total revenue
Property operations and maintenance expense ................
Real estate tax expense ....................................................
Depreciation and amortization expense ...........................
Net realized gain (loss) on sale of property .....................
Total income from discontinued operations ......................
Year Ended December 31,
2009
$ 6,158
(1,872)
(494)
(1,083)
(1,636)
$ 1,073
2010
$ 1,404
(487)
(82)
(217)
6,944
$ 7,562
2011
$ -
-
-
-
-
$ -
Income from continuing operations attributable to common shareholders was $30.6 million, $33.2 million
49
and $18.9 million in 2011, 2010 and 2009, respectively. Income from discontinued operations attributable to
common shareholders was $0, $7.5 million and $1.1 million in 2011, 2010 and 2009, respectively.
6. UNSECURED LINE OF CREDIT AND TERM NOTES
On August 5, 2011, 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 $125 million
unsecured term note maturing in August 2018 bearing interest at LIBOR plus a margin based on the Company’s
credit rating (at December 31, 2011 the margin is 2.0%). The agreements also provide for a $175 million
(expandable to $250 million) revolving line of credit bearing interest at a variable rate equal to LIBOR plus a margin
based on the Company’s credit rating (at December 31, 2011 the margin is 2.0%), and requires a 0.20% facility fee.
The interest rate at December 31, 2011 on the Company's available line of credit was approximately 2.28% (1.64%
at December 31, 2010). The proceeds from this term note and draws on the new line of credit were used to repay the
Company’s previous line of credit and the Company’s $150 million bank term note that was to mature June 2012.
At December 31, 2011, there was $129 million available on the unsecured line of credit without considering the
additional availability under the expansion feature. The revolving line of credit has a maturity date of August 2016,
but can be extended for 2 one year periods at the Company’s option with the payment of an extension fee equal to
0.125% of the total line of credit commitment.
In addition, on August 5, 2011, the Company secured an additional $100 million term note with a delayed
draw feature that was used to fund the Company’s mortgage maturities in December 2011. The delayed draw term
note matures August 2018 and bears interest at LIBOR plus a margin based on the Company’s credit rating (at
December 31, 2011 the margin is 2.0%).
On August 5, 2011, the Company also entered into a $100 million term note maturing August 2021 bearing
interest at a fixed rate of 5.54%. The interest rate on the term note increases to 7.29% if the notes are not rated by at
least one rating agency, the credit rating on the notes is downgraded or if the Company’s credit rating is
downgraded. The proceeds from this term note were used to fund acquisitions and investments in unconsolidated
joint ventures.
In connection with the new unsecured revolving line of credit and term notes, the Company incurred a total
of approximately $4.1 million in fees paid to the creditors which have been deferred and will be amortized over the
life of the new credit facility and term notes.
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%. The interest
rate on the $150 million unsecured term note increases to 8.13% if the notes are not rated by at least one rating
agency, the credit rating on the notes is downgraded or the Company’s credit rating is downgraded.
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, 2011, the Company was in compliance with its
debt covenants.
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, 2011 the entire availability on the line of
credit could be drawn without violating our debt covenants.
The Company’s fixed rate term notes contain a provision that allows for the noteholders to call the debt
upon a change of control of the Company at an amount that includes a make whole premium based on rates in effect
on the date of the change of control.
50
7. MORTGAGES PAYABLE AND OTHER DEBT DISCLOSURES
Mortgages payable at December 31, 2011 and December 31, 2010 consist of the following:
(dollars in thousands)
7.80% mortgage note due December 2011, secured by 11 self-storage facilities
(Locke Sovran I), repaid December 2011 ........................................................
7.19% mortgage note due March 2012, secured by 27 self-storage facilities
(Locke Sovran II), repaid December 2011 .......................................................
7.25% mortgage note due December 2011, secured by 1 self-storage facility,
repaid December 2011 .....................................................................................
6.76% mortgage note due September 2013, secured by 1 self-storage facility with
an aggregate net book value of $1.9 million, principal and interest paid
monthly (effective interest rate 6.85%) ............................................................
6.35% mortgage note due March 2014, secured by 1 self-storage facility with an
aggregate net book value of $3.6 million, principal and interest paid monthly
(effective interest rate 6.44%) ..........................................................................
7.50% mortgage notes due August 2011, secured by 3 self-storage facilities,
repaid August 2011. .........................................................................................
5.99% mortgage notes due May 2026, secured by 1 self-storage facility with an
aggregate net book value of $4.3 million, principal and interest paid monthly
(effective interest rate 5.89%) ..........................................................................
Total mortgages payable ......................................................................................
December 31,
2011
December 31,
2010
$ -
$ 27,817
-
-
40,264
3,220
925
952
1,014
1,044
-
5,657
2,484
$ 4,423
-
$ 78,954
The table below summarizes the Company's debt obligations and interest rate derivatives at December 31,
2011. 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 notes and mortgage notes 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.
(dollars in thousands)
2012
2013
2014
2015
2016
Thereafter
Total
Fair
Value
Expected Maturity Date Including Discount
-
-
-
-
$46,000
-
$46,000
$46,000
Line of credit - variable rate LIBOR +
2.0% (2.28% at December 31, 2011) ...........
Notes Payable:
Term note - variable rate LIBOR+1.50%
(1.99% at December 31, 2011) .................
Term note - fixed rate 6.26% ........................
Term note - fixed rate 6.38% ........................
Term note - variable rate LIBOR+2.0%
(2.27% at December 31, 2011) .................
Term note - variable rate LIBOR+2.0%
(2.30% at December 31, 2011) .................
Term note - fixed rate 5.54% ........................
-
-
-
-
-
-
$ 20,000
$ 80,000
-
-
-
-
Mortgage note - fixed rate 6.76% ..................
$ 29
$ 896
Mortgage note - fixed rate 6.35% ..................
$ 31
$ 34
Mortgage notes - fixed rate 5.99% ................
$ 112
$ 119
Interest rate derivatives – liability .................
-
-
$ 949
$ 126
-
51
-
-
-
-
-
-
-
-
-
-
-
-
$ 150,000
-
-
-
$ 20,000
$ 20,000
$ 80,000
$ 84,627
$150,000
$162,451
-
-
-
-
-
-
-
-
-
-
$125,000
$125,000
$125,000
$100,000
$100,000
$100,000
$ 100,000
$100,000
$95,926
- $ 925
$ 964
-
$ 1,014
$ 1,059
$134
$142
$1,851
$ 2,484
$ 2,500
-
-
-
-
$ 10,748
8. 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 Loss ("AOCL"). 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
2011, 2010, and 2009.
The Company has six interest rate swap agreements in effect at December 31, 2011 as detailed below to
effectively convert a total of $245 million of variable-rate debt to fixed-rate debt.
Notional Amount
Effective Date
Expiration Date
$20 Million ...........................
$75 Million ...........................
$50 Million ...........................
$50 Million ...........................
$25 Million ...........................
$25 Million ...........................
9/4/05
9/1/2011
9/1/2011
12/30/11
12/30/11
12/30/11
9/4/13
8/1/18
8/1/18
12/29/17
12/29/17
12/29/17
Fixed
Rate Paid
Floating Rate
Received
4.4350%
2.3700%
2.3700%
1.6125%
1.6125%
1.6125%
6 month LIBOR
1 month LIBOR
1 month LIBOR
1 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
“Derivatives and Hedging”, held by the Company. During 2011, 2010, and 2009, the net reclassification from
AOCL to interest expense was $10.5 million, $6.9 million and $9.7 million, respectively, based on payments made
under the swap agreements. Based on current interest rates, the Company estimates that payments under the interest
rate swaps will be approximately $4.8 million in 2012. 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 $10.7 million and $10.5 million at December 31, 2011, and 2010 respectively.
(dollars in thousands)
Adjustments to interest expense:
Realized loss reclassified from accumulated other
comprehensive loss to interest expense .....................................
Jan. 1, 2011
to
Dec. 31, 2011
Jan. 1, 2010
to
Dec. 31, 2010
Jan. 1, 2009
to
Dec. 31, 2009
$ (10,516)
$ (6,900)
$ (9,687)
Adjustments to other comprehensive income (loss): ................
Realized loss reclassified to interest expense ............................
Unrealized (loss) gain from changes in the fair value of
the effective portion of the interest rate swaps .......................
(Loss) Gain included in other comprehensive income (loss) ....
10,516
6,900
9,687
(10,517)
$ (1)
(5,889)
$ 1,011
4,210
$ 13,897
52
In August 2011, the Company repaid $150 million in variable rate term notes. In August 2011, 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 2011 include $5.5 million in costs
to terminate the interest rate swaps. 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 dates of termination. No interest rate swap termination occurred in 2010.
9. FAIR VALUE MEASUREMENTS
The Company applies the provisions of ASC Topic 820 “Fair Value Measurements and Disclosures” in
determining the fair value of its financial and nonfinancial assets and liabilities. ASC Topic 820 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, 2011 (in thousands):
Interest rate swaps .........................................
Asset
(Liability)
(10,748)
Level 1
-
Level 2
(10,748)
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.
During 2011 assets and liabilities measured at fair value on a non-recurring basis included the assets
acquired and liabilities assumed in connection with the acquisition of 29 storage facilities discussed in Note 4. To
determine the fair value of land the Company used prices per acre derived from observed transactions involving
comparable land in similar locations, which is considered a level 2 input. To determine the fair value of buildings,
equipment and improvements, the Company used current replacement cost based on information derived from
construction industry data by geographic region as adjusted for the age and condition of these assets, which are
considered level 2 and 3 inputs. The fair value of in-place customer leases is based on the rent lost due to the amount
of time required to replace existing customers which is based on the Company's historical experience with turnover
in its facilities, which is a level 3 input. Debt assumed is recorded at fair value based on current interest rates
compared to contractual rates which is a level 2 input. Other assets acquired and liabilities assumed in the
acquisitions consist primarily of prepaid real estate taxes and deferred revenues from advance monthly rentals paid
by customers. The fair values of these assets and liabilities are based on their carrying values as they typically turn
over within one year from the acquisition date and these are level 3 inputs.
Also during 2011, the Company measured a storage facility at fair value as a result of the determination
that the structure of a building was deficient and would need to be demolished. The fair value of the facility was
determined by assessing the future discounted cash flows of the facility, which is considered a level 3 input. An
impairment charge of $1.0 million was recorded in 2011 as a result of the write-down of the facility to fair value.
53
10. STOCK BASED COMPENSATION
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. Options granted under the Plan 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, 2011, options for 317,263 shares were outstanding under the Plans and options for
811,436 shares of common stock were available for future issuance. The Company may also grant other stock-based
awards under the Plan, including restricted stock and performance-based vesting restricted stock awards.
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 2011, 3,116 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, 2011, options for 47,005 common shares and non-vested
shares of 17,521 were outstanding under the Non-employee Plans and options for 115,684 shares of common stock
were available for future issuance.
A summary of the Company's stock option activity and related information for the years ended December
31 follows:
2011
2010
2009
Weighted
average
exercise
price
Weighted
average
exercise
price
Options
Options
Weighted
average
exercise
price
Options
Outstanding at beginning
of year: ................................
387,318
$ 41.72
397,468
$ 40.78
360,688
$ 43.06
Granted ...................................
Exercised ................................
Forfeited .................................
20,000
(28,050)
(15,000)
40.47
25.96
44.29
20,000
(25,650)
(4,500)
35.49
23.18
36.86
51,500
(4,225)
(10,495)
23.99
21.46
44.53
Outstanding at end of year ......
364,268
$ 42.76
387,318
$ 41.72
397,468
$ 40.78
Exercisable at end of year .......
220,293
$ 44.25
197,447
$ 42.89
159,701
$ 40.71
54
A summary of the Company's stock options outstanding at December 31, 2011 follows:
Outstanding
Exercisable
Exercise Price Range
$20.28 – 29.99 ........................................
$30.00 – 39.99 ........................................
$40.00 – 57.79 ........................................
Total ........................................................
Options
28,500
40,100
295,668
364,268
Weighted
average
exercise
price
$ 23.24
$ 35.48
$ 45.63
$ 42.76
Options
13,500
26,600
180,193
220,293
Weighted
average
exercise
price
$ 23.29
$ 35.71
$ 47.09
$ 44.25
Intrinsic value of outstanding stock options at December 31, 2011 ........................................
Intrinsic value of exercisable stock options at December 31, 2011 .........................................
$ 889,941
$ 463,431
The intrinsic value of stock options exercised during the years ended December 31, 2011, 2010, and 2009,
were $396,532, $382,576, and $50,188 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, 2011, or the price on the date of
exercise for those exercised during the year. As of December 31, 2011, there was approximately $0.7 million of
total unrecognized compensation cost related to stock option compensation arrangements granted under our stock
award plans. That cost is expected to be recognized over a weighted-average period of approximately 3.6 years.
The weighted average remaining contractual life of all options is 6.2 years, and for exercisable options is 5.7 years.
Non-vested stock
The Company has also issued 533,486 shares of non-vested stock to employees which vest over one 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, 2011, the fair
market value of the non-vested stock on the date of grant ranged from $28.66 to $41.07. During 2011, 106,602
shares of non-vested stock were issued to employees and directors with an aggregate fair value of $3.7 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
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:
2011
2010
2009
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: ................................
192,776
$ 39.34
154,593
$ 39.79
130,807
$ 44.79
Granted ...................................
Vested .....................................
Forfeited .................................
106,602
(52,744)
-
35.02
37.19
-
78,152
(39,969)
-
37.03
36.55
-
59,590
(35,349)
(455)
29.70
41.25
43.95
Unvested at end of year ..........
246,634
$ 37.93
192,776
$ 39.34
154,593
$ 39.79
55
Compensation expense of $1.5 million, $1.3 million and $1.4 million was recognized for the vested portion
of non-vested stock grants in 2011, 2010 and 2009, respectively. The fair value of non-vested stock that vested
during 2011, 2010 and 2009 was $2.0 million, $1.5 million and $1.5 million, respectively. The total unrecognized
compensation cost related to non-vested stock was $7.8 million at December 31, 2011, and the remaining weighted-
average period over which this expense will be recognized was 4.1 years.
Performance-based vesting restricted stock
The Company granted a total of 42,040 performance shares under the Plan during 2011 which are included
above. Performance shares granted are based upon the Company’s performance over a three year period depending
on the Company’s total shareholder return relative to a group of peer companies. Performance based nonvested
shares are recognized as compensation expense based on fair value on date of grant, the number of shares ultimately
expected to vest and the vesting period. For accounting purposes, the performance shares are considered to have a
market condition. The effect of the market condition is reflected in the grant date fair value of the award and, thus
compensation expense is recognized on this type of award provided that the requisite service is rendered (regardless
of whether the market condition is achieved). The Company estimated the fair value of each performance share
granted under the Plan on the date of grant using a Monte Carlo simulation that uses the assumptions noted in Note
2.
Compensation expense of $0.1 million was recognized for the performance shares granted in 2011. The
total unrecognized compensation cost related to non-vested performance shares was $1.2 million at December 31,
2011 and the weighted-average period over which this expense will be recognized is 2 years.
Deferred compensation plan for directors
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 this plan are 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. The Directors may not elect to receive cash in lieu of shares. Under this plan there were a total of
45,025 units outstanding at December 31, 2011. Fees that were earned and credited to Directors’ accounts are
recorded as compensation expense which totaled $0.2 million, $0.2 million and $0.1 million in 2011, 2010 and
2009, respectively.
11. 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 $72,000, $70,000, and $114,000
for the years ended December 31, 2011, 2010 and 2009, respectively.
12. 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 are managed by the Company. The
carrying value of the Company’s investment at December 31, 2011 was $20.2 million. Twenty five properties were
acquired by Sovran HHF in 2008 for approximately $171.5 million and no additional properties have been acquired
by Sovran HHF since then. In 2008, the Company contributed $18.6 million to the joint venture as its share of
capital required to fund the acquisitions. In 2011 the Company contributed an additional $0.8 million to the joint
venture. As of December 31, 2011, 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
56
capitalization of certain acquisition related costs in 2008. This difference is included in the carrying value of the
investment, which is assessed for other-than-temporary impairment on a periodic basis. No other-than-temporary
impairments have been recorded on this investment.
The Company has a 15% ownership interest in Sovran HHF Storage Holdings II LLC (“Sovran HHF II”), a
joint venture that was formed in 2011 to acquire self-storage properties that are managed by the Company. The
carrying value of the Company’s investment at December 31, 2011 was $11.7 million. Twenty properties were
acquired by Sovran HHF II during 2011 for approximately $166.1 million. During 2011, the Company contributed
$12.8 million to the joint venture as its share of capital required to fund the acquisitions. The carrying value of this
investment, which is assessed for other-than-temporary impairment on a periodic basis and no other-than-temporary
impairments have been recorded on this investment.
As manager of Sovran HHF and Sovran HHF II, the Company earns a management and call center fee of
7% of gross revenues which totaled $1.9 million, $1.3 million, and $1.2 million for 2011, 2010, and 2009,
respectively. The Company also received an acquisition fee of $0.7 million, for securing purchases for Sovran HHF
II in 2011. The Company's share of Sovran HHF and Sovran HHF II’s (loss) income for 2011, 2010 and 2009 was
($0.4 million), $0.3 million and $0.2 million, respectively.
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 $196,049. The carrying value of the Company's investment is a liability of $0.5 million at December
31, 2011 and $0.6 million at December 31, 2010, and is included in accounts payable and accrued liabilities in the
accompanying consolidated balance sheets. For the years ended December 31, 2011, 2010, and 2009, the
Company's share of Iskalo Office Holdings, LLC's (loss) income was ($82,000), ($79,000) and $7,000, respectively.
The Company paid rent to Iskalo Office Holdings, LLC of $688,000, $644,000 and $608,000 in 2011, 2010, and
2009, respectively. Future minimum lease payments under the lease are $0.7 million per year through 2015.
A summary of the unconsolidated joint ventures' financial statements as of and for the year ended
December 31, 2011 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 .....................................................................
Depreciation and amortization of customer list ...................
Other expenses .....................................................................
Net income (loss) ...............................................................
Sovran HHF
Storage
Holdings LLC
Sovran HHF
Storage
Holdings II LLC
Iskalo Office
Holdings, LLC
$ 162,668
-
3,936
$ 166,604
=======
$ 276
71,239
2,518
74,033
74,057
18,514
$ 166,604
=======
$ 164,605
-
3,436
$ 168,041
=======
$ 313
88,300
1,513
90,126
66,228
11,687
$ 168,041
=======
$ -
5,321
580
$ 5,901
=======
$ -
6,752
731
7,483
(1,080)
(502)
$ 5,901
=======
$ 18,393
(3,667)
(12,995)
$ 1,731
=======
$ 8,732
(2,234)
(11,591)
$ (5,093)
=======
$ 923
(221)
(869)
$ (167)
=======
57
Included in other expenses of Sovran HHF II for the year ended December 31, 2011 is $5.5 million of
property acquisition related costs. The Company does not guarantee the debt of Sovran HHF, Sovran HHF II, or
Iskalo Office Holdings, LLC.
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 II. A summary of our cash flows arising from the off-
balance sheet arrangements with Sovran HHF, Sovran HHF II and Iskalo Office Holdings, LLC for the three years
ended December 31, 2011 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 (losses) income of joint ventures ..................................
Distributions from unconsolidated joint ventures ........................
Investing activities
Investment in joint ventures .........................................................
(Advances to) reimbursement of advances to joint ventures .......
Year ended December 31,
2011
2010
2009
$ 2,578
688
(340)
944
(13,571)
(413)
$ 1,260
644
241
494
$1,243
608
235
686
-
(80)
(331)
163
13. SHAREHOLDERS’ EQUITY
On September 14, 2011, the Company entered into a continuous equity offering program (“Equity
Program”) with Wells Fargo Securities, LLC (“Wells Fargo”), pursuant to which the Company may sell from time
to time up to $125 million in aggregate offering price of shares of the Company’s common stock. Actual sales
under the Equity Program will depend on a variety of factors and conditions, including, but not limited to, market
conditions, the trading price of the Company’s common stock, and determinations of the appropriate sources of
funding for the Company. The Company expects to continue to offer, sell, and issue shares of common stock under
the Equity Program from time to time based on various factors and conditions, although the Company is under no
obligation to sell any shares under the Equity Program.
During 2011, the Company issued 1,166,875 shares of common stock under the Equity Program at a
weighted average issue price of $40.59 per share, generating net proceeds of $46.4 million after deducting $0.9
million of sales commissions payable to Wells Fargo. In addition to sales commissions paid to Wells Fargo, the
Company incurred expenses of $0.4 million in connection with the Equity Program during 2011. The Company used
the proceeds from the Equity Program to reduce the outstanding balance under the Company’s revolving line of
credit. As of December 31, 2011, the Company had $77.6 million available for issuance under the Equity Program.
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. Our Dividend Reinvestment and Stock
Purchase Plan was suspended in November 2009.
58
14. SUPPLEMENTARY QUARTERLY FINANCIAL DATA (UNAUDITED)
The following is a summary of quarterly results of operations for the years ended December 31, 2011 and
2010 (dollars in thousands, except per share data).
Operating revenue........................................
Income from continuing operations .............
Net Income ..................................................
Net income attributable to common
shareholders ...............................................
Net Income Per Share Attributable to
Common Shareholders
March 31
June 30
Sept. 30
Dec. 31
2011 Quarter Ended
$ 49,535
$ 8,700
$ 8,700
$ 50,709
$ 10,080
$ 10,080
$ 54,254
$ 2,366
$ 2,366
$ 56,658
$ 10,383
$ 10,383
$ 8,260
$ 9,737
$ 2,339
$10,256
Basic ..........................................................
Diluted .......................................................
$ 0.30
$ 0.30
$ 0.35
$ 0.35
$ 0.08
$ 0.08
$ 0.37
$ 0.37
Operating revenue........................................
Income from continuing operations (a) .......
Income (loss) 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
2010 Quarter Ended
$ 47,284
$ 8,012
$ (124)
$ 7,888
$ 47,309
$ 8,618
$ 7,686
$ 16,304
$ 48,623
$ 9,374
$ 48,856
$ 8,975
$ -
$ 9,374
$ -
$ 8,975
$ 7,427
$ 15,761
$ 8,923
$ 8,531
Basic ..........................................................
Diluted .......................................................
$ 0.27
$ 0.27
$ 0.57
$ 0.57
$ 0.32
$ 0.32
$ 0.31
$ 0.31
2010 data as presented in this table differ from the amounts as presented in the Company’s quarterly reports
(a)
due to the impact of discontinued operations accounting with respect to the ten properties sold in 2010 as described
in Note 5.
15. COMMITMENTS AND CONTINGENCIES
Sovran HHF Storage Holdings II LLC, a joint venture in which the Company is a 15% owner, was under
contract with a seller to acquire ten self-storage facilities in Dallas and Fort Worth, Texas for approximately $29
million. Sovran HHF Storage Holdings II LLC purchased the ten facilities in February 2012. The Company
contributed cash of $4.3 million to the joint venture as its share of capital required to fund the acquisition. This
contribution will be recorded as an addition to investments in unconsolidated joint ventures in the first quarter of
2012.
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.
59
At December 31, 2011, the Company has signed contracts in place with third party contractors for
expansion and enhancements at its existing facilities. The Company expects to pay $7.5 million under these
contracts in 2012.
16. SUBSEQUENT EVENTS
On January 3, 2012, the Company declared a quarterly dividend of $0.45 per common share. The dividend
was paid on January 26, 2012 to shareholders of record on January 13, 2012. The total dividend paid amounted to
$13.0 million.
60
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, 2011. 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, 2011.
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, 2011. 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, 2011 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, 2011
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, 2011 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
61
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. internal control over financial reporting as of December 31,
2011, 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. 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, 2011, 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, 2011 and
2010 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, 2011 of Sovran Self Storage, Inc. and our
report dated February 28, 2012 expressed an unqualified opinion thereon.
/s/ Ernst & Young LLP
Buffalo, New York
February 28, 2012
62
Item 9B.
Other Information
None.
Part III
Item 10.
Directors, Executive Officers and Corporate Governance
The information contained in our Proxy Statement for the 2012 Annual Meeting of Shareholders to be filed
with the SEC within 120 days of the fiscal year ended December 31, 2011(“2012 Proxy Statement”) , 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 in the 2012 Proxy Statement and is incorporated herein by reference.
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 2012 Proxy Statement and is
incorporated herein by reference.
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 2012 Proxy Statement and is incorporated herein by reference.
Item 14.
Principal Accountant Fees and Services
The information required herein is incorporated by reference to "Appointment of Independent Auditor" in
the 2012 Proxy Statement and is incorporated herein by reference.
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, 2011 and 2010.
Consolidated Statements of Operations for Years Ended December 31, 2011, 2010, and 2009.
Consolidated Statements of Comprehensive Income for Years Ended December 31, 2011, 2010, and
2009.
Consolidated Statements of Shareholders' Equity.
(iv)
63
(v)
(vi)
Consolidated Statements of Cash Flows for Years Ended December 31, 2011, 2010, and 2009 and
Notes to Consolidated Financial Statements.
2.
The following financial statement Schedule as of the period ended December 31, 2011 is included in this
Annual Report on Form 10-K.
Schedule III Real Estate and Accumulated Depreciation.
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
3.4
3.5
3.6
4.1
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 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 9.85% Series B Cumulative Redeemable Preferred Stock (incorporated
by reference to Exhibit 1.6 to Registrant's Form 8-A filed July 29, 1999).
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).
Articles Supplementary to the Amended and Restated Articles of Incorporation of the Registrant
reclassifying shares of Series B Cumulative Redeemable Preferred Stock into Preferred. (incorporated
by reference to Exhibit 3.1 to Registrant's Current Report on Form 8-K filed May 31, 2011).
Bylaws, as amended, of the Registrant (incorporated by reference to Exhibit 3.4 to Registrant’s Annual
Report on Form 10-K filed February 26, 2010).
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.
10.2+
10.3+
10.4+
Sovran Self Storage, Inc. 1995 Outside Directors’ Stock Option Plan, as amended (incorporated by
reference to Exhibit 10.2 to Registrant’s Annual Report on Form 10-K filed February 26, 2010).
Employment Agreement between the Registrant and Robert J. Attea (incorporated by reference to
Exhibit 10.3 to Registrant’s Annual Report on 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 Annual Report on Form 10-K filed February 27, 2009).
10.5+
Employment Agreement between the Registrant and David L. Rogers (incorporated by reference to
64
Exhibit 10.5 to Registrant’s Annual Report on Form 10-K filed February 27, 2009).
10.6*+
Form of restricted stock grant pursuant to Sovran Self Storage, Inc. 2005 Award and Option Plan.
10.7*+
Form of stock option grant pursuant to Sovran Self Storage, Inc. 2005 Award and Option Plan.
10.8+
10.9+
10.10+
10.11+
Form of Long Term Incentive Restricted Stock Award Notice pursuant to Sovran Self Storage, Inc. 2005
Award and Option Plan (incorporated by reference to Exhibit 10.1 to Registrant’s Current Report on
Form 8-K filed December 6, 2011).
Form of Performance-Based Vesting Restricted Stock Award Notice pursuant to Sovran Self Storage,
Inc. 2005 Award and Option Plan (incorporated by reference to Exhibit 10.2 to Registrant’s Current
Report on Form 8-K filed December 6, 2011).
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, SEC File Number 001-13820, Film Number 061238147).
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, SEC File Number 001-13820, Film Number 061238147).
10.12+
Deferred Compensation Plan for Directors (incorporated by reference to Schedule 14A Proxy Statement
filed April 10, 2008).
10.13
10.14
10.15
10.16
10.17
10.18
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, SEC File Number 001-13820, Film Number 06971617).
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 Annual Report
on Form 10-K filed February 27, 2009).
Fourth Amended and Restated Revolving Credit and Term Loan Agreement, dated as of August 5, 2011
among Sovran Self Storage, Inc. and Sovran Acquisition Limited Partnership, Manufacturers and
Traders Trust Company and certain other lenders a party thereto or which may become a party thereto
(collectively, the “Lenders”), Manufacturers and Traders Trust Company, as administrative agent for
itself and the other Lenders, SunTrust Bank, as syndication agent for itself and the other Lenders, U.S.
Bank National Association and Wells Fargo Bank, National Association, as co-documentation agents
(incorporated by reference to Exhibit 10.1 to Registrant’s Current Report on Form 8-K filed August 8,
2011).
Note Purchase Agreement dated as of August 5, 2011 among Sovran Self Storage, Inc., Sovran
Acquisition Limited Partnership and the institutions named in Schedule A thereto as purchasers and $100
million, 5.54% Senior Guaranteed Notes, Series D due August 5, 2021 (incorporated by reference to
Exhibit 10.2 to Registrant’s Current Report on Form 8-K filed August 8, 2011).
$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
65
Exhibits 10.27, 10.28, and 10.29 to Registrant’s Current Report on Form 8-K filed May 1, 2006, SEC
File Number 001-13820, Film Number 06795352).
10.19
10.20
Equity Distribution Agreement dated as of September 14, 2011 by and among Sovran Self Storage, Inc.,
Sovran Acquisition Limited Partnership and Wells Fargo Securities, LLC, as agent (incorporated by
reference to Exhibit 1.1 to Registrant’s Current Report on Form 8-K filed September 14, 2011).
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).
10.21+
Sovran Self Storage, Inc. 2009 Outside Directors Stock Option and Award Plan (incorporated by
reference to Registrant’s Proxy Statement filed April 9, 2009).
10.22+
Outside Director Fee Schedule (incorporated by reference to Exhibit 10.1 to Registrant’s Current Report
on Form 8-K filed November 5, 2010).
10.23+
Sovran Self Storage, Inc. Annual Incentive Compensation Plan for Executive Officers (incorporated by
reference to Exhibit 10.1 to Registrant’s Current Report on Form 8-K filed February 21, 2012).
10.24+
10.25+
10.26+
Employment Agreement between Sovran Self Storage, Inc., Sovran Acquisition Limited Partnership and
Andrew Gregoire amended and restated effective January 1, 2009 (incorporated by reference to Exhibit
10.1 to Registrant’s Current Report on Form 8-K filed February 14, 2012).
Employment Agreement between Sovran Self Storage, Inc., Sovran Acquisition Limited Partnership and
Paul Powell amended and restated effective January 1, 2009 (incorporated by reference to Exhibit 10.2 to
Registrant’s Current Report on Form 8-K filed February 14, 2012).
Employment Agreement between Sovran Self Storage, Inc., Sovran Acquisition Limited Partnership and
Edward Killeen amended and restated effective January 1, 2009 (incorporated by reference to Exhibit
10.3 to Registrant’s Current Report on Form 8-K filed February 14, 2012).
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*
32.1*
101#
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.
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.
The following financial statements from the Company’s Annual Report on Form
10-K for the year ended December 31, 2011, formatted in XBRL, as follows:
(i)
(ii)
Consolidated Balance Sheets at December 31, 2011 and 2010;
Consolidated Statements of Operations for Years Ended December 31, 2011, 2010, and 2009;
66
(iii)
(iv)
(v)
(vi)
Consolidated Statements of Comprehensive Income for Years Ended December 31, 2011, 2010,
and 2009.
Consolidated Statements of Shareholders' Equity for Years Ended December 31, 2011, 2010, and
2009;
Consolidated Statements of Cash Flows for Years Ended December 31, 2011, 2010, and 2009;
and
Notes to Consolidated Financial Statements
*
+
#
Filed herewith.
Management contract or compensatory plan or arrangement.
Pursuant to Rule 406T of Regulation S-T, the Interactive Data Files on Exhibit 101 hereto are deemed
not filed or part of a registration statement or prospectus for purposes of Section 11 or 12 of the
Securities Act of 1933, as amended, are deemed not filed for purposes of Section 18 of the Securities and
Exchange Act of 1934, as amended, and otherwise are not subject to liability under those sections.
67
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 28, 2012
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/ James R. Boldt
James R. Boldt
/s/ Anthony P. Gammie
Anthony P. Gammie
/s/ Charles E. Lannon
Charles E. Lannon
Director
Director
Director
February 28, 2012
February 28, 2012
February 28, 2012
February 28, 2012
February 28, 2012
February 28, 2012
68
Sovran Self Storage, Inc.
Schedule III
Combined Real Estate and Accumulated Depreciation
(in thousands)
December 31, 2011
Cost Capitalized
Subsequent to
Gross Amount at Which
Initial Cost to Company Acquisition
Carried at Close of Period
Life on
which
depreciation
in latest
income
Building,
Building,
Equipment
Equipment
Encum
and
and
Building,
Equipment
and
Accum.
Date of
Date
statement
Description
ST
brance
Land
Improvements
Improvements
Land
Improvements
Total
Deprec.
Construction
Acquired
is computed
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
West Palm l
Atlanta-Metro IV
Atlanta-Metro V
Atlanta-Metro VI
Atlanta-Metro VII
Atlanta-Metro VIII
Baltimore I
Baltimore II
Melbourne I
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
FL
GA
GA
GA
GA
GA
MD
MD
FL
$363
$1,679
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
1,503
398
423
483
308
170
413
154
479
883
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
3,619
1,035
1,015
1,166
1,116
786
999
555
1,742
2,104
2,398
2,142
2,103
3,631
2,977
1,812
4,825
2,546
2,552
1,750
2,010
3,910
1,715
3,204
1,926
1,240
1,246
1,774
1,349
5,228
4,587
3,279
2,475
2,785
1,580
2,234
1,881
2,028
1,830
1,730
3,443
2,554
1,426
4,573
1,380
1,447
2,239
1,706
1,543
1,735
1,794
4,583
3,760
$2,761
2,822
2,447
4,047
3,374
2,559
5,596
2,785
3,253
1,948
2,789
4,393
1,939
3,701
2,321
1,404
1,933
2,042
1,583
6,673
5,031
3,928
2,862
3,629
1,883
2,751
2,202
2,402
2,019
2,218
4,045
3,067
1,620
6,076
1,778
1,871
2,722
2,014
1,717
2,148
2,100
5,062
4,643
$926
888
755
1,092
869
726
1,861
862
987
671
927
1,243
676
1,316
807
552
531
762
547
1,495
1,080
1,320
881
1,141
672
725
737
851
678
767
1,042
1,089
572
1,627
648
650
757
787
609
794
569
1,251
1,463
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
1985
1989
1988
1986
1981
1975
1984
1988
1986
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
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
$719
526
834
2,115
1,553
1,149
2,092
1,436
893
1,010
893
2,158
907
1,747
522
480
1,053
526
506
4,526
2,974
950
1,073
764
478
1,691
731
710
1,111
542
2,036
624
514
954
345
433
1,073
590
761
736
1,391
2,841
1,656
$363
680
344
416
397
747
771
239
701
198
779
483
224
497
395
164
687
268
234
1,445
444
649
387
844
303
517
321
374
189
488
602
513
194
1,503
398
424
483
308
174
413
306
479
883
69
Cost Capitalized
Subsequent to
Gross Amount at Which
Initial Cost to Company Acquisition
Carried at Close of Period
Building,
Building,
Equipment
Equipment
Encum
and
and
Building,
Equipment
and
Life on
which
depreciation
in latest
income
Accum.
Date of
Date
statement
Description
ST
brance
Land
Improvements
Improvements
Land
Improvements
Total
Deprec.
Construction
Acquired
is computed
Newport News
Pensacola I
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
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
VA
FL
CT
GA
VA
FL
FL
CT
GA
VA
VA
AL
AL
AL
FL
FL
FL
FL
FL
FL
FL
MS
MS
VA
FL
AL
PA
PA
NY
FL
FL
VA
AL
SC
FL
TX
TX
TX
TX
TX
NY
AL
FL
FL
FL
MA
FL
OH
OH
316
632
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
360
627
470
205
412
442
353
237
766
442
408
328
436
289
481
279
345
229
359
251
344
557
667
1,471
2,962
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
1,641
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
872
1,257
1,209
2,647
2,455
482
1,152
1,985
1,923
991
453
1,672
724
783
489
2,824
2,727
619
1,020
1,157
830
2,276
651
892
316
651
715
619
1,376
244
1,591
612
256
313
278
385
730
863
326
369
720
226
1,088
526
672
796
209
443
1,174
1,162
939
645
3,743
1,338
314
546
1,302
731
686
688
348
1,107
344
1,202
-1,161
2,397
1,176
395
512
1,198
2,311
420
826
474
424
360
692
472
206
413
442
353
232
766
442
408
328
436
289
671
433
345
383
359
297
310
688
683
70
2,343
4,200
2,904
3,450
5,674
1,383
2,461
2,468
3,167
2,453
1,457
3,009
2,449
2,824
2,004
4,182
3,379
1,665
3,617
3,115
3,269
3,403
1,615
2,494
3,928
2,445
2,286
5,902
3,048
1,225
2,248
2,894
2,030
1,549
2,488
2,115
2,769
1,668
2,961
0
3,766
2,036
1,657
1,242
2,485
3,182
1,708
2,683
2,837
2,659
4,851
3,619
4,069
7,050
1,627
4,052
3,080
3,423
2,766
1,735
3,394
3,179
3,687
2,330
4,551
4,099
1,891
4,705
3,641
3,941
4,199
1,824
2,937
5,090
2,869
2,646
6,594
3,520
1,431
2,661
3,336
2,383
1,781
3,254
2,557
3,177
1,996
3,397
289
4,437
2,469
2,002
1,625
2,844
3,479
2,018
3,371
3,520
961
1,839
1,051
1,031
1,996
666
1,125
783
1,026
992
626
964
1,056
1,189
876
1,254
733
718
1,574
1,196
1,291
1,002
739
1,007
1,598
1,050
972
1,260
1,094
655
1,079
916
744
622
983
847
1,035
684
1,097
0
1,228
676
663
481
955
1,083
662
467
527
1988
1983
1988
1988
1984
1986
1986
1992
1988
1984
1989
1990
1990
1982
1987
1986
1990
1990
1989
1985
1988
1990
1990
1987
1986
1970
1983
1985
1987
1988
1991/94
1988/93
1984
1985
1985
1987
1986
1986
1986
1986
1983
1988
1986
1986
1988
1986
1987
1988
1988
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
12/29/1995
5 to 40 years
12/29/1995
5 to 40 years
12/27/1995
5 to 40 years
12/28/1995
5 to 40 years
12/28/1995
5 to 40 years
1/5/1996
5 to 40 years
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
Cost Capitalized
Subsequent to
Gross Amount at Which
Initial Cost to Company Acquisition
Carried at Close of Period
Building,
Building,
Equipment
Equipment
Encum
and
and
Building,
Equipment
and
Life on
which
depreciation
in latest
income
Accum.
Date of
Date
statement
Description
ST
brance
Land
Improvements
Improvements
Land
Improvements
Total
Deprec.
Construction
Acquired
is computed
Baltimore III
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
Grand Rapids l
Grand Rapids ll
Kalamazoo
Lansing
San Antonio lll
Universal
San Antonio lV
Houston-Eastex
Houston-Nederland
Houston-College
Lynchburg-Lakeside
Lynchburg-
Timberlake
Lynchburg-Amherst
Christiansburg
Chesapeake
Orlando-W 25th St
Delray l-Mini
Savannah ll
Delray ll-Safeway
Cleveland X-Avon
Dallas-Skillman
Dallas-Centennial
Dallas-Samuell
Dallas-Hargrove
Houston-Antoine
Atlanta-Alpharetta
Atlanta-Marietta
Atlanta-Doraville
GreensboroHilltop
GreensboroStgCch
Baton Rouge-Airline
Baton Rouge-
Airline2
MD
FL
FL
FL
NC
NC
FL
NY
OH
OH
OH
OH
OH
OH
OH
OH
MI
MI
MI
MI
TX
TX
TX
TX
TX
TX
VA
VA
VA
VA
VA
FL
FL
GA
FL
OH
TX
TX
TX
TX
TX
GA
GA
GA
NC
NC
LA
LA
777
568
436
535
487
315
314
704
600
751
725
637
495
761
418
606
455
219
516
327
474
346
432
634
566
293
335
328
155
245
260
289
491
296
921
301
960
965
570
370
515
1,033
769
735
268
89
396
282
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
1,631
790
1,845
1,332
1,686
1,236
1,560
2,565
2,279
1,357
1,342
1,315
710
1,120
1,043
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
503
1,105
602
399
590
366
1,184
2,396
2,121
1,905
1,525
1,897
971
1,414
1,707
1,441
1,102
1,001
1,811
1,723
467
506
1,747
1,203
401
591
1,403
1,016
386
725
3,390
808
704
479
585
2,196
1,674
1,419
876
627
606
517
504
372
410
1,672
1,047
384
777
568
436
538
487
315
314
707
693
751
725
701
495
761
418
606
624
219
694
542
504
346
432
634
566
293
335
328
152
245
260
616
491
296
921
304
960
943
611
370
515
1,033
825
735
231
89
421
282
71
3,273
3,133
2,237
2,429
2,344
1,497
2,297
4,889
4,170
4,581
4,111
4,751
2,752
4,128
3,628
3,605
2,564
1,791
3,478
2,840
2,123
1,742
3,307
3,768
2,680
1,948
2,745
2,331
1,099
1,845
4,433
1,641
2,460
1,675
3,867
3,407
5,521
5,305
3,120
2,113
2,680
4,270
3,236
3,801
1,544
2,048
2,853
1,687
4,050
3,701
2,673
2,967
2,831
1,812
2,611
5,596
4,863
5,332
4,836
5,452
3,247
4,889
4,046
4,211
3,188
2,010
4,172
3,382
2,627
2,088
3,739
4,402
3,246
2,241
3,080
2,659
1,251
2,090
4,693
2,257
2,951
1,971
4,788
3,711
6,481
6,248
3,731
2,483
3,195
5,303
4,061
4,536
1,775
2,137
3,274
1,969
1,275
1,229
918
1,049
801
575
824
1,305
1,169
1,561
1,434
1,865
1,044
1,514
1,320
1,112
461
654
595
458
763
620
1,130
1,358
986
676
916
875
451
581
832
601
977
626
1,491
943
1,960
1,926
1,150
843
1,021
1,634
1,205
1,452
562
594
971
660
1990
1987
1985
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
1975
1990
1988
1986
1978
1979
1979
1977
1970
1982
1976
1983
1978
1987
1981
1985
1995
9/16/1996
5 to 40 years
9/16/1996
5 to 40 years
10/30/1996
5 to 40 years
12/20/1996
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
1/10/1997
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
1993/95
3/26/1997
5 to 40 years
1995
1995
1982
1985
1987
1985/90
1988/95
1984
1969
1988
1980
1989
1975
1977
1975
1975
1984
1994
1996
1995
1995
1997
1982
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
3/31/1997
5 to 40 years
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
Cost Capitalized
Subsequent to
Gross Amount at Which
Initial Cost to Company Acquisition
Carried at Close of Period
Building,
Building,
Equipment
Equipment
Encum
and
and
Building,
Equipment
and
Life on
which
depreciation
in latest
income
Accum.
Date of
Date
statement
Description
ST
brance
Land
Improvements
Improvements
Land
Improvements
Total
Deprec.
Construction
Acquired
is computed
Harrisburg-Peiffers
Chesapeake-Military
Chesapeake-Volvo
Virginia Beach-Shell
Virginia Beach-
Central
Norfolk-Naval Base
Tampa-
E.Hillsborough
Northbridge
Harriman
Greensboro-High
Point
Lynchburg-
Timberlake
Titusville
Salem
Chattanooga-Lee
Hwy
Chattanooga-Hwy 58
Ft. Oglethorpe
Birmingham-Walt
East Greenwich
Durham-
Hillsborough
Durham-Cornwallis
Salem-Policy
Warren-Elm
Warren-Youngstown
Indian Harbor Beach
Jackson 3 - I55
Katy-N.Fry
Hollywood-Sheridan
Pompano Beach-
Atlantic
Pompano Beach-
Sample
Boca Raton-18th St
Vero Beach
Humble
Houston-Old Katy
Webster
Carrollton
Hollywood-N.21st
San Marcos
Austin-McNeil
Austin-FM
Euless
N. Richland Hills
Batavia
Jackson-N.West
Katy-Franz
W.Warwick
PA
VA
VA
VA
VA
VA
FL
MA
NY
NC
VA
FL
MA
TN
TN
GA
AL
RI
NC
NC
NH
OH
OH
FL
MS
TX
FL
FL
FL
FL
FL
TX
TX
TX
TX
FL
TX
TX
TX
TX
TX
OH
MS
TX
RI
635
542
620
540
864
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
550
670
390
460
507
447
2,550
2,210
2,532
2,211
3,994
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
1,998
2,407
1,570
1,642
2,058
1,776
562
393
966
310
844
813
840
1,032
615
634
545
1,077
1,271
552
2,158
632
1,089
1,437
777
799
469
1,272
1,864
1,839
185
3,301
577
637
542
620
540
864
1,243
709
694
843
397
488
688
733
384
414
349
544
702
775
940
742
569
633
662
744
419
1,208
524
944
380
1,147
141
2,260
466
157
331
562
2,032
2,449
498
718
1,598
1,007
532
1,672
854
903
1,503
489
740
698
635
548
840
324
510
481
550
670
390
460
507
447
72
3,110
2,603
3,498
2,521
4,838
5,832
4,075
2,567
4,009
2,468
2,291
2,871
4,212
1,923
3,238
1,882
3,031
4,258
3,880
4,562
3,446
3,089
3,572
4,493
3,206
4,825
5,431
4,327
4,023
7,206
1,954
3,757
3,107
2,459
2,319
3,935
3,525
4,426
2,452
2,716
4,005
2,577
2,174
3,730
2,630
3,747
3,145
4,118
3,061
5,702
7,075
4,784
3,261
4,852
2,865
2,779
3,559
4,945
2,307
3,652
2,231
3,575
4,960
4,655
5,502
4,188
3,658
4,205
5,155
3,950
5,244
6,639
1,155
929
1,208
942
1,729
2,069
1,554
408
1,459
882
821
478
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
1993/95
2/5/1998
5 to 40 years
1975
1985
1988
2/5/1998
5 to 40 years
2/4/1998
5 to 40 years
2/9/1998
5 to 40 years
1989/95
2/4/1998
5 to 40 years
1993
2/10/1998
5 to 40 years
1990/96
1986/90
2/18/1998
5 to 40 years
2/25/1998
5 to 40 years
1,529
1979
3/3/1998
5 to 40 years
736
829
685
1,107
1,402
1,357
1,596
1,197
1,012
1,010
877
1,130
953
1,855
1987
1985
1989
1984
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
1984/88
3/26/1998
5 to 40 years
1988/91
1990/96
1980
1986
1986
1985
1995
1994
1988
4/9/1998
5 to 40 years
4/9/1998
5 to 40 years
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
5,271
1,529
1985
7/1/1998
5 to 40 years
4,926
8,709
2,443
4,497
3,805
3,094
2,867
4,775
3,849
4,936
2,933
3,266
4,675
2,967
2,634
4,237
3,077
1,420
2,438
746
1,026
935
858
788
1,370
875
925
841
855
1,114
764
840
954
891
1988
1991
1997
1986
1996
1997
1997
1987
1994
1994
1996
1996
1996
1988
1984
1993
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
9/29/1998
5 to 40 years
10/9/1998
5 to 40 years
11/19/1998
5 to 40 years
12/1/1998
5 to 40 years
12/15/1998
5 to 40 years
1986/94
2/2/1999
5 to 40 years
Cost Capitalized
Subsequent to
Gross Amount at Which
Initial Cost to Company Acquisition
Carried at Close of Period
Building,
Building,
Equipment
Equipment
Encum
and
and
Building,
Equipment
and
Life on
which
depreciation
in latest
income
Accum.
Date of
Date
statement
Description
ST
brance
Land
Improvements
Improvements
Land
Improvements
Total
Deprec.
Construction
Acquired
is computed
Lafayette-Pinhook 1
Lafayette-Pinhook2
Lafayette-
Ambassador
Lafayette-Evangeline
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
Birmingham-
Bessemer
Brewster
Austin-Lamar
Houston-E.Main
Ft.Myers-Abrams
Dracut
Methuen
Columbia 5
Myrtle Beach
Kingsland
Saco
Plymouth
Sandwich
Syracuse
Houston-Westward
Houston-Boone
Houston-Cook
Houston-Harwin
Houston-Hempstead
Houston-Kuykendahl
Houston-Hwy 249
Mesquite-Hwy 80
Mesquite-Franklin
Dallas-Plantation
San Antonio-Hunt
Humble-5250 FM
Pasadena
LA
LA
LA
LA
LA
AZ
AZ
AZ
AZ
AZ
AZ
AZ
AZ
AZ
ME
FL
TX
NY
MA
TX
FL
AL
NY
TX
TX
FL
MA
MA
SC
SC
GA
ME
MA
MA
NY
TX
TX
TX
TX
TX
TX
TX
TX
TX
TX
TX
TX
TX
556
708
314
188
963
651
565
330
339
291
354
453
872
849
410
667
335
276
633
633
384
254
1,716
837
733
787
1,035
1,024
883
552
470
534
1,004
670
294
853
250
285
449
545
517
299
463
734
394
381
919
612
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
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
1,090
321
811
1,534
888
1,199
583
2,459
632
987
463
910
1,006
729
1,864
829
406
1,179
883
365
590
1,302
1,001
537
650
497
649
613
1,220
963
3,097
280
2,317
478
444
899
543
343
754
997
1,372
1,084
718
706
319
1,082
419
291
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
912
268
306
480
583
553
320
496
784
421
408
919
612
73
3,041
3,181
1,906
2,186
4,784
3,678
3,179
3,365
1,978
2,013
1,868
2,520
4,482
4,130
3,490
3,202
1,927
2,491
3,456
2,982
2,012
2,361
7,656
3,385
3,934
3,631
4,317
4,195
4,300
2,896
4,803
2,158
6,901
3,494
1,614
4,274
1,545
1,482
2,539
3,159
3,426
2,279
2,558
3,612
1,887
2,600
4,115
2,759
3,597
3,889
2,220
2,374
5,747
4,450
3,744
4,098
2,317
2,304
2,222
2,973
5,354
4,979
3,900
3,869
2,262
2,767
4,089
3,615
2,396
2,615
9,637
4,351
4,775
4,533
5,421
5,286
5,242
3,485
5,469
2,728
7,905
4,208
1,941
5,186
1,813
1,788
3,019
3,742
3,979
2,599
3,054
4,396
2,308
3,008
5,034
3,371
1,172
1,067
754
771
1,471
1,068
1,038
669
611
542
643
840
1,452
1,335
947
1,053
651
666
970
944
592
543
1,244
616
680
664
1,138
1,096
1,037
745
888
581
1,399
897
453
1,104
410
407
644
830
798
561
618
892
507
596
989
667
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
1996/99
1993/97
1997
1986
1984
1985
1984
1989
1988
1996
1984
1987
1976
1983
1986
1981
1974/78
1979/83
1983
1985
1984
1985
1980
12/27/2000
5 to 40 years
2/22/2001
5 to 40 years
3/2/2001
5 to 40 years
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
12/19/2001
5 to 40 years
12/19/2001
5 to 40 years
2/5/2002
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
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
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
Cost Capitalized
Subsequent to
Gross Amount at Which
Initial Cost to Company Acquisition
Carried at Close of Period
Building,
Building,
Equipment
Equipment
Encum
and
and
Building,
Equipment
and
Life on
which
depreciation
in latest
income
Accum.
Date of
Date
statement
Description
ST
brance
Land
Improvements
Improvements
Land
Improvements
Total
Deprec.
Construction
Acquired
is computed
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
Houston-Missouri
City
Chattanooga-Hixson
Austin-Round Rock
Cicero
Bay Shore
TX
TX
TX
TX
TX
NY
NY
NY
NY
TX
TX
CT
TX
TX
TX
TX
TX
FL
TX
TN
TX
NY
NY
Springfield-Congress MA
Stamford-Hope
Houston-Jones
Montgomery-
Richard
Oxford
Austin-290E
SanAntonio-Marbach
Austin-South 1st
Pinehurst
Marietta-Austell
Baton Rouge-Florida
Cypress
Texas City
San Marcos-Hwy
35S
Baytown
Webster
Houston-Jones Rd 2
Cameron-Scott
Lafayette-Westgate
Broussard
Congress-Lafayette
Manchester
Nashua
CT
TX
AL
MA
TX
TX
TX
TX
GA
LA
TX
TX
TX
TX
NY
TX
LA
LA
LA
LA
NH
NH
925
1,014
689
817
817
407
817
2,207
1,131
635
1,251
1,039
827
2,713
773
1,195
1,103
1,061
388
1,720
1,167
1,365
2,047
527
1,131
612
1,612
1,214
1,906
470
537
556
754
484
811
719
721
867
628
596
937
707
411
463
601
542
832
617
3,159
3,286
3,286
1,650
3,287
8,866
4,564
2,918
5,744
4,201
3,776
11,013
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
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
3,443
5,086
3,433
1,852
3,566
9,523
5,077
3,279
6,130
4,267
4,094
4,132
6,205
4,250
2,259
4,383
11,730
6,208
3,914
7,382
5,306
4,921
11,361
14,074
4,949
5,004
4,817
7,123
2,497
7,087
7,827
6,943
6,645
2,823
4,675
2,646
6,801
5,081
7,949
3,523
1,920
2,650
3,247
3,349
3,864
5,435
4,109
3,629
2,663
2,514
3,913
5,571
1,796
1,933
3,675
3,453
3,373
2,955
5,722
6,199
5,920
8,184
2,885
8,807
9,393
8,308
8,696
3,350
5,806
3,258
8,413
6,296
9,855
3,993
2,411
3,206
4,001
3,833
4,675
6,154
4,830
4,496
3,645
3,110
4,850
6,278
2,207
2,396
4,276
3,995
4,205
3,572
846
1,007
861
465
870
2,239
1,155
738
1,396
913
861
2,379
916
1,004
982
1,208
435
1,391
1,154
1,328
1,255
537
842
491
1,233
871
1,380
490
364
434
578
486
661
535
635
577
414
403
597
725
323
299
511
417
505
420
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
1989/95
12/16/2002
5 to 40 years
1998
1997
1994/98
1995/99
1998/01
1998
2000
2001
2001
2003
2003
2001
1998
1998/02
2000
12/16/2002
5 to 40 years
12/16/2002
5 to 40 years
12/16/2002
5 to 40 years
8/26/2003
5 to 40 years
10/1/2003
5 to 40 years
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
8/4/2004
5 to 40 years
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
1997/99
4/14/2005
5 to 40 years
6/6/2005
5 to 40 years
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
4/26/2006
5 to 40 years
6/29/2006
5 to 40 years
284
2,102
147
202
279
657
513
361
387
66
318
348
1,779
127
267
2,696
857
101
3,482
1,374
792
702
66
145
216
133
223
1,621
-309
385
182
1,372
467
2,508
1,115
130
485
103
134
2,638
175
102
1,269
2,134
105
533
689
1,119
817
407
817
2,207
1,131
635
1,252
1,039
827
2,713
773
1,195
1,103
1,061
388
1,720
1,566
1,365
2,051
527
1,131
612
1,612
1,215
1,906
470
491
556
754
484
811
719
721
867
982
596
937
707
411
463
601
542
832
617
74
Cost Capitalized
Subsequent to
Gross Amount at Which
Initial Cost to Company Acquisition
Carried at Close of Period
Building,
Building,
Equipment
Equipment
Encum
and
and
Building,
Equipment
and
Life on
which
depreciation
in latest
income
Accum.
Date of
Date
statement
Description
ST
brance
Land
Improvements
Improvements
Land
Improvements
Total
Deprec.
Construction
Acquired
is computed
Largo 2
Pinellas Park
Tarpon Springs
New Orleans
St Louis-Meramec
St Louis-Charles
Rock
FL
FL
FL
LA
MO
MO
St Louis-Shackelford MO
St Louis-
W.Washington
St Louis-
Howdershell
St Louis-Lemay
Ferry
MO
MO
MO
St Louis-Manchester MO
Arlington-Little Rd
Dallas-Goldmark
Dallas-Manana
Dallas-Manderville
Ft. Worth-Granbury
Ft. Worth-Grapevine
San Antonio-Blanco
San Antonio-
Broadway
San Antonio-
Huebner
Chattanooga-Lee
Hwy II
Lafayette-Evangeline
Montgomery-
E.S.Blvd
Auburn-Pepperell
Pkwy
Auburn-Gatewood
Dr
Columbus-Williams
Rd
Columbus-Miller Rd
Columbus-Armour
Rd
Columbus-Amber Dr
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
Rochester-Phillips
Rd
Greenville
Port Arthur-9595
Hwy69
Beaumont-Dowlen
TX
TX
TX
TX
TX
TX
TX
TX
TX
TN
LA
AL
AL
AL
GA
GA
GA
GA
NH
NY
NY
NY
NY
NY
NY
NY
NY
NY
MS
TX
TX
1,270
929
696
1,220
1,113
766
828
734
899
890
697
1,256
605
607
1,073
549
644
963
773
1,175
619
699
1,158
590
694
736
975
0
439
813
532
437
638
348
323
315
961
375
1,003
1,100
929
1,537
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
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
187
137
119
124
273
170
176
671
217
320
125
212
94
152
63
1,076
77
97
142
148
92
1,938
664
282
226
164
-528
151
153
1,942
515
564
383
121
78
550
594
268
91
296
161
243
1,270
929
696
1,220
1,113
766
828
734
899
890
697
1,256
605
607
1,073
549
644
963
773
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
75
5,224
3,813
2,858
4,929
4,632
3,210
3,466
3,538
3,813
3,872
2,836
5,158
2,528
2,580
4,339
3,256
2,619
3,933
3,202
4,772
2,563
4,722
5,303
2,643
2,984
3,069
3,326
3,831
1,898
5,155
2,634
2,358
2,914
1,465
1,409
2,734
4,421
1,766
4,093
4,682
3,807
6,261
6,494
4,742
3,554
6,149
5,745
3,976
4,294
4,272
4,712
4,762
3,533
6,414
3,133
3,187
5,412
3,805
3,263
4,896
3,975
5,947
3,182
5,421
6,461
3,233
3,678
3,805
4,301
3,831
2,337
5,968
3,166
2,795
3,552
1,813
1,732
3,050
5,382
2,141
5,096
5,782
4,737
7,798
777
548
421
710
663
449
504
1998
2000
1999
2000
1999
1999
1999
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
540
1980/01
6/22/2006
5 to 40 years
556
543
409
738
362
370
627
346
379
569
470
675
362
579
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
1998
2002
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
6/22/2006
5 to 40 years
8/7/2006
5 to 40 years
1995/99
8/1/2006
5 to 40 years
733
1996/97
9/28/2006
5 to 40 years
354
1998
9/28/2006
5 to 40 years
392
2002/03
9/28/2006
5 to 40 years
431
450
528
257
604
324
262
390
189
185
310
502
256
503
616
484
792
2002/04/06
9/28/2006
5 to 40 years
1995
9/28/2006
5 to 40 years
2004/05
9/28/2006
5 to 40 years
1998
2000
9/28/2006
5 to 40 years
10/31/2006
5 to 40 years
1993/07
3/30/2007
5 to 40 years
1998
1997
1998
1998
3/30/2007
5 to 40 years
3/30/2007
5 to 40 years
3/30/2007
5 to 40 years
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
2002/04
2003/06
3/30/2007
5 to 40 years
1/11/2007
5 to 40 years
3/8/2007
5 to 40 years
3/8/2007
5 to 40 years
Cost Capitalized
Subsequent to
Gross Amount at Which
Initial Cost to Company Acquisition
Carried at Close of Period
Building,
Building,
Equipment
Equipment
Encum
and
and
Building,
Equipment
and
Life on
which
depreciation
in latest
income
Accum.
Date of
Date
statement
Description
ST
brance
Land
Improvements
Improvements
Land
Improvements
Total
Deprec.
Construction
Acquired
is computed
Rd
Huntsville-Memorial
Pkwy
Huntsville-Madison
1
Gulfport-Ocean
Springs
Huntsville-Hwy 72
Mobile-Airport Blvd
Gulfport-Hwy 49
Huntsville-Madison
2
Foley-Hwy 59
Pensacola 6-Nine
Mile
Auburn-College St
Gulfport-Biloxi
Pensacola 7-Hwy 98
Montgomery-
Arrowhead
Montgomery-
McLemore
San Antonio-Foster
Beaumont-S.Major
Hattiesburg-Clasic
Biloxi-Ginger
Foley-St Hwy 59
Ridgeland
Jackson-5111
AL
AL
MS
AL
AL
MS
AL
AL
FL
AL
MS
FL
AL
AL
TX
TX
MS
MS
AL
MS
MS
Cincinnati-Robertson OH
Richmond-Bridge Rd VA
Raleigh-Atlantic
Charlotte-Wallace
Raleigh-Davis Circle
Charlotte
Charlotte
Raleigh-Dillard
NC
NC
NC
NC
NC
NC
Charlotte-Zeb Morris NC
West Deptford
Fair Lawn-Wagaraw
Elizabeth-Allen
High Ridge
Decatur-N.Decatur
Rd
Humble-Pinehurst
Bedford-Crystal
Springs
Houston-Hwy 6N
Cedar Park-South
Bell
Katy-South Mason
Deer Park-Center St
Houston-W.Little
Pasadena-Fairway
NJ
PA
PA
MO
GA
TX
TX
TX
TX
TX
TX
TX
TX
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
444
384
437
1,479
1,337
852
1,047
846
961
574
513
1,129
381
965
626
796
885
197
1,043
825
693
1,243
1,559
691
1,012
575
705
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
1,799
1,548
1,757
5,965
5,377
3,409
5,981
4,095
3,702
3,975
5,317
4,767
3,575
3,355
3,419
9,467
3,073
2,132
8,252
4,201
3,552
3,106
2,727
4,435
3,312
3,557
4,223
6,624
4,244
5,702
4,904
5,033
5,385
4,779
5,641
4,294
2,849
7,227
3,071
4,441
3,632
2,923
3,149
1,934
1,630
1,896
6,392
5,509
3,574
5,983
4,149
3,747
3,993
5,344
4,799
3,592
3,375
3,420
9,502
3,151
2,158
8,278
4,250
3,569
3,114
2,721
4,432
3,315
3,569
4,240
8,231
5,261
7,125
6,110
6,249
6,686
5,943
6,988
5,323
3,535
9,038
3,803
5,517
4,517
3,599
3,891
2,378
2,014
2,333
7,871
6,846
4,426
7,030
4,995
4,708
4,567
5,857
5,928
3,973
4,340
4,046
10,298
4,036
2,355
9,321
5,075
4,262
4,357
4,280
5,123
4,327
4,144
4,945
789
1989/06
6/1/2007
5 to 40 years
524
1993/07
6/1/2007
5 to 40 years
668
584
618
632
566
686
559
357
843
387
523
433
352
354
205
168
190
636
555
277
363
107
99
105
138
127
95
89
46
125
41
29
71
28
25
22
20
30
22
25
28
1998/05
1998/06
2000/07
2002/04
2002/06
2003/06
2003/06
2003
2004/06
2006
2006
2006
2003/06
2002/05
1998
2000
2000
6/1/2007
5 to 40 years
6/1/2007
5 to 40 years
6/1/2007
5 to 40 years
6/1/2007
5 to 40 years
6/1/2007
5 to 40 years
6/1/2007
5 to 40 years
6/1/2007
5 to 40 years
6/1/2007
5 to 40 years
6/1/2007
5 to 40 years
6/1/2007
5 to 40 years
6/1/2007
5 to 40 years
6/1/2007
5 to 40 years
5/21/2007
5 to 40 years
11/14/2007
5 to 40 years
12/19/2007
5 to 40 years
12/19/2007
5 to 40 years
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
10/1/2009
5 to 40 years
1977/00
12/28/2010
5 to 40 years
2008
2008
2009
2009
2008
2007
1999
1999
1988
2007
2006
1993
2001
2000
1998
2000
1998
1998
2000
12/29/2010
5 to 40 years
12/29/2010
5 to 40 years
12/29/2010
5 to 40 years
12/29/2010
5 to 40 years
12/29/2010
5 to 40 years
12/29/2010
5 to 40 years
6/30/2011
5 to 40 years
7/14/2011
5 to 40 years
7/14/2011
5 to 40 years
7/28/2011
5 to 40 years
8/17/2011
5 to 40 years
9/22/2011
5 to 40 years
9/22/2011
5 to 40 years
9/22/2011
5 to 40 years
9/22/2011
5 to 40 years
9/22/2011
5 to 40 years
9/22/2011
5 to 40 years
9/22/2011
5 to 40 years
9/22/2011
5 to 40 years
286
232
78
129
214
16
155
168
114
117
75
56
109
46
238
125
135
82
139
427
132
165
2
54
45
18
27
32
17
20
1
35
78
26
26
49
17
8
-6
-3
3
12
17
1,607
1,017
1,423
1,206
1,216
1,301
1,164
1,347
1,029
686
1,811
732
1,076
885
676
742
444
384
437
1,479
1,337
852
1,047
846
961
574
513
1,129
381
965
626
796
885
197
1,043
825
693
1,243
1,559
691
1,012
575
705
76
Cost Capitalized
Subsequent to
Gross Amount at Which
Initial Cost to Company Acquisition
Carried at Close of Period
Building,
Building,
Equipment
Equipment
Encum
and
and
Building,
Equipment
and
Life on
which
depreciation
in latest
income
Accum.
Date of
Date
statement
Description
ST
brance
Land
Improvements
Improvements
Land
Improvements
Total
Deprec.
Construction
Acquired
is computed
Friendswood-FM
2351 Rd
Spring-Louetta Rd
Houston-W.Sam
Austin-Pond Springs
Spring-Rayford Rd
Round Rock-S. I-35
Houston-Silverado
Dr
Sugarland-Hwy 6 S
TX
TX
TX
TX
TX
TX
TX
TX
Houston-Westheimer TX
Houston-Wilcrest Dr
Woodlands-Panther
Creek
Woodlands
Houston-Katy
Freeway
Webster-W.Nasa Rd
Newport News-
Penasacola
Construction in Progress
TX
TX
TX
TX
TX
VA
FL
Corporate Office
NY
2,484
1,168
2,152
402
1,653
1,474
177
1,438
272
536
1,478
1,315
3,189
1,049
2,054
2,848
197
0
0
2,315
3,027
3,602
4,947
4,500
3,223
4,583
3,236
2,687
4,145
6,142
3,974
5,175
2,138
5,892
4,281
0
68
13
5
-6
21
-5
2
15
14
8
10
4
7
10
5
16
52
14,429
13,097
1,168
2,152
402
1,653
1,474
177
1,438
272
536
1,478
1,315
3,189
1,049
2,054
2,848
197
0
1,631
2,328
3,032
3,596
4,968
4,495
3,225
4,598
3,250
2,695
4,155
6,146
3,981
5,185
2,143
5,908
3,496
5,184
3,998
6,621
5,969
3,402
6,036
3,522
3,231
5,633
7,461
7,170
6,234
4,197
8,756
4,333
14,429
11,534
4,530
14,429
13,165
16
22
24
33
31
22
31
22
18
28
39
26
35
16
40
10
0
8,760
1994
1993
1999
1984
2006
1999
2000
2001
1997
1999
1977
2000
1999
1982
2004
1996
2010
2000
9/22/2011
5 to 40 years
9/22/2011
5 to 40 years
9/22/2011
5 to 40 years
9/22/2011
5 to 40 years
9/22/2011
5 to 40 years
9/22/2011
5 to 40 years
9/22/2011
5 to 40 years
9/22/2011
5 to 40 years
9/22/2011
5 to 40 years
9/22/2011
5 to 40 years
9/22/2011
5 to 40 years
9/22/2011
5 to 40 years
9/22/2011
5 to 40 years
9/22/2011
5 to 40 years
9/29/2011
5 to 40 years
11/15/2011
5 to 40 years
5/1/2000
5 to 40 years
$4,423
$259,749
$1,011,310
$325,044
$272,784
$1,323,319
$1,596,103
$305,585
77
Cost:
Balance at beginning of period .............
Additions during period:
Acquisitions through foreclosure ......
Other acquisitions ..............................
Improvements, etc. ............................
$ -
151,572
28,135
Deductions during period:
Cost of assets disposed ......................
Impairment write-down .......................
Casualty loss........................................
(1,011)
(1,721)
(828)
Balance at close of period .....................
Accumulated Depreciation:
Balance at beginning of period ..............
Additions during period:
Depreciation expense ........................
Deductions during period:
Accumulated depreciation of
assets disposed ...................................
Accumulated depreciation on
December 31, 2011
December 31, 2010
December 31, 2009
$1,419,956
$1,364,454
$1,343,669
$ -
34,155
21,523
$ -
-
21,952
179,707
55,678
21,952
(176)
-
-
(218)
-
(949)
(3,560)
$1,596,103
(176)
$1,419,956
(1,167)
$1,364,454
$ 271,797
$ 238,971
$ 206,739
$ 35,008
$ 32,939
$ 32,451
35,008
32,939
32,451
(432)
(113)
(128)
impaired asset ....................................
(674)
Accumulated depreciation on
casualty loss ......................................
(114)
-
-
-
(91)
Balance at close of period .....................
(1,220)
$ 305,585
(113)
$ 271,797
(219)
$ 238,971
78
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
Add: Income tax expense
Add: Fixed charges
Add: Distributed income of equity
investees
Less: Capitalized interest
Preferred dividend requirements of
consolidated subsidiaries
Earnings (1)
Fixed charges:
Interest expense
Amortization of financing fees
Capitalized interest
Estimate of interest included in rent
expense
Preferred stock dividends
Fixed charges (2)
Ratio of earnings to combined fixed
charges and preferred stock dividends
(1)/(2)
2011
Year ended December 31,
2010
2009
2008
2007
$31,869
1,524
38,848
944
(72)
$34,739
1,131
32,007
494
(83)
$20,346
937
50,410
686
(159)
$35,890
689
38,676
345
(381)
$38,297
675
35,679
98
(377)
-
73,113
-
68,288
-
72,220
-
75,219
(1,256)
73,116
37,365
1,184
72
227
-
$38,848
30,681
1,030
83
213
-
$32,007
48,847
1,203
159
201
-
$50,410
36,905
1,192
381
198
-
$38,676
32,898
963
377
185
1,256
$35,679
1.88
2.13
1.43
1.94
2.05
1
Subsidiaries
Exhibit 21.1
Sovran Acquisition Limited Partnership, a Delaware limited partnership
Sovran Holdings, Inc., a Delaware Corporation
Locke Sovran I LLC., a New York limited liability company
Locke Sovran II LLC, a New York limited liability company
The Locke Group, LLC, a Delaware limited liability company
Uncle Bob’s Management, LLC, a New York limited liability company
Iskalo Land Holdings, LLC, a New York limited liability company
Sovran Jones Road, LLC, a Delaware limited liability company
Sovran Congress, LLC, a Delaware limited liability company
Sovran Cameron, LLC, a Delaware limited liability company
Sovran Huebner, LLC, a Delaware limited liability company
Sovran Little Road, LLC, a Delaware limited liability company
Sovran Granbury, LLC, a Delaware limited liability company
Sovran Shackelford, LLC, a Delaware limited liability company
Sovran Manchester, LLC, a Delaware limited liability company
Sovran DeGaulle, LLC, a Delaware limited liability company
Sovran Grapevine, LLC, a Delaware limited liability company
Sovran Washington, LLC, a Delaware limited liability company
Sovran Meramac, LLC, a Delaware limited liability company
Sovran Seminole, LLC, a Delaware limited liability company
1
Exhibit 23.1
Consent of Independent Registered Public Accounting Firm
We consent to the incorporation by reference in the following Registration Statements:
(1) Registration Statement (Form S-8 No. 333-21679) of Sovran Self Storage, Inc.
(2) Registration Statement (Form S-8 No. 333-42272) pertaining to the 1995 Award and Option Plan and to
the 1995 Outside Directors' Stock Option Plan,
(3) Registration Statement (Form S-8 No. 333-42270) pertaining to the Deferred Compensation Plan for
Directors of Sovran Self Storage, Inc.,
(4) Registration Statement (Form S-8 No. 333-73806) pertaining to the 1995 Award and Option Plan,
(5) Registration Statement (Form S-8 No. 333-107464) pertaining to the 1995 Outside Directors' Stock
Option Plan,
(6) Registration Statement (Form S-8 No. 333-138937) pertaining to the 2005 Award and Option Plan and,
(7) Registration Statement (Form S-3 No. 333-174668) and related Prospectus of Sovran Self Storage, Inc.
for the registration of common stock, preferred stock, warrants, debt securities and units.
of our reports dated February 28, 2012, with respect to the consolidated financial statements and schedule of Sovran
Self Storage, Inc., and the effectiveness of internal control over financial reporting of Sovran Self Storage, Inc.,
included in this Annual Report (Form 10-K) for the year ended December 31, 2011.
/s/ Ernst & Young LLP
Buffalo, New York
February 28, 2012
1
Certification of Chief Executive Officer Pursuant to Rule 13a-14(a) and 15d-14(a) of the Securities Exchange
Act, as amended
I, Robert J. Attea, certify that:
Exhibit 31.1
1.
2.
3.
4.
5.
I have reviewed this report on Form 10-K of Sovran Self Storage, Inc.;
Based on my knowledge, this annual report does not contain any untrue statement of a material fact or
omit to state a material fact necessary to make the statements made, in light of the circumstances under
which such statements were made, not misleading with respect to the period covered by this annual
report;
Based on my knowledge, the financial statements, and other financial information included in this
annual report, fairly present in all material respects the financial condition, results of operations and
cash flows of the registrant as of, and for, the periods presented in this annual report;
The registrant's other certifying officers and I are responsible for establishing and maintaining
disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and
internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)),
for the registrant and have:
a)
designed such disclosure controls and procedures, or caused such disclosure controls and
procedures to be designed under our supervision, to ensure that material information relating
to the registrant, including its consolidated subsidiaries, is made known to us by others within
those entities, particularly during the period in which this annual report is being prepared;
designed such internal control over financial reporting, or caused such internal control over
financial reporting to be designed under our supervision, to provide reasonable assurance
regarding the reliability of financial reporting and the preparation of financial statements for
external reporting purposes in accordance with generally accepted accounting principles;
evaluated the effectiveness of the registrant's disclosure controls and procedures and
presented in this report our conclusions about the effectiveness of the disclosure controls and
procedures, as of the end of the period covered by this report based on such evaluation; and
disclosed in this report any change in the registrant's internal control over financial reporting
that occurred during the registrant's most recent fiscal quarter that has materially affected or is
reasonably likely to materially affect the registrant's internal control over financial reporting;
and
b)
c)
d)
The registrant's other certifying officers and I have disclosed, based on our most recent evaluation of
internal control over financial reporting, to the registrant's auditors and the audit committee of the
registrant's board of directors (or persons performing the equivalent functions):
a)
all significant deficiencies and material weaknesses in the design or operation of internal
controls over financial reporting which are reasonably likely to adversely affect the
registrant's ability to record, process, summarize and report financial information; and
any fraud, whether or not material, that involves management or other employees who have a
significant role in the registrant's internal controls over financial reporting.
b)
Date: February 28, 2012
/ S / Robert J. Attea
Robert J. Attea
Chairman of the Board and Chief Executive Officer
1
Certification of Chief Financial Officer Pursuant to Rule 13a-14(a) and 15d-14(a) of the Securities Exchange
Act, as amended
I, David L. Rogers, certify that:
Exhibit 31.2
1.
2.
3.
4.
5.
I have reviewed this report on Form 10-K of Sovran Self Storage, Inc.;
Based on my knowledge, this annual report does not contain any untrue statement of a material fact or
omit to state a material fact necessary to make the statements made, in light of the circumstances under
which such statements were made, not misleading with respect to the period covered by this annual
report;
Based on my knowledge, the financial statements, and other financial information included in this
annual report, fairly present in all material respects the financial condition, results of operations and
cash flows of the registrant as of, and for, the periods presented in this annual report;
The registrant's other certifying officers and I are responsible for establishing and maintaining
disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and
internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)),
for the registrant and have:
a)
designed such disclosure controls and procedures, or caused such disclosure controls and
procedures to be designed under our supervision, to ensure that material information relating
to the registrant, including its consolidated subsidiaries, is made known to us by others within
those entities, particularly during the period in which this annual report is being prepared;
designed such internal control over financial reporting, or caused such internal control over
financial reporting to be designed under our supervision, to provide reasonable assurance
regarding the reliability of financial reporting and the preparation of financial statements for
external reporting purposes in accordance with generally accepted accounting principles;
evaluated the effectiveness of the registrant's disclosure controls and procedures and
presented in this report our conclusions about the effectiveness of the disclosure controls and
procedures, as of the end of the period covered by this report based on such evaluation; and
disclosed in this report any change in the registrant's internal control over financial reporting
that occurred during the registrant's most recent fiscal quarter that has materially affected or is
reasonably likely to materially affect the registrant's internal control over financial reporting;
and
b)
c)
d)
The registrant's other certifying officers and I have disclosed, based on our most recent evaluation of
internal control over financial reporting, to the registrant's auditors and the audit committee of the
registrant's board of directors (or persons performing the equivalent functions):
a)
all significant deficiencies and material weaknesses in the design or operation of internal
controls over financial reporting which are reasonably likely to adversely affect the
registrant's ability to record, process, summarize and report financial information; and
any fraud, whether or not material, that involves management or other employees who have a
significant role in the registrant's internal controls over financial reporting.
b)
Date: February 28, 2012
/ S / David L. Rogers
David L. Rogers
Secretary, Chief Financial Officer
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
Exhibit 32.1
Each of the undersigned of Sovran Self Storage, Inc. (the "Company") does hereby certify, pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350, that:
1)
2)
The report on Form 10-K of the Company for the annual period ended December 31,
2011(the "Report") fully complies with the requirements of Section 13(a) of the Securities
Exchange Act of 1934 (15 U.S.C. 78m); and
The information contained in the Report fairly presents, in all material respects, the
financial condition and results of operations of the Company.
Dated: February 28, 2012
/ S / Robert J. Attea
Robert J. Attea
Chairman of the Board
Chief Executive Officer
/ S / David L. Rogers
David L. Rogers
Chief Financial Officer
1
Dear Fellow Shareholder
Our focus as we began 2011 was to “return to growth”. We weathered the economic crisis of 2008/2009
by keeping our balance sheet strong, our customer base intact and our operations lean. We spent 2010
enhancing our operating systems and marketing programs, and made additional investments in our
technology and our people. Meanwhile, our efforts at sourcing and acquiring quality acquisitions began
to bear fruit.
As a result, 2011 proved to be the most dynamic in our 25-plus years in the storage business. During the
past year we:
Achieved same store revenue increases of 4.2% and same store net operating income increases
of 6.2%; among the best in the industry
Invested $155 million to acquire 29 quality stores in good, growing markets
Formed another joint venture with our partners at Heitman, LLC and acquired 20 stores in New
Jersey - primarily in the metro New York and Philadelphia markets
Ramped up our Uncle Bob’s Management program to solicit new third party management
contracts – at the end of 2011, we were operating 54 stores via this program
Executed a $500 million financing package which significantly extended the term of our loans,
provided for a better interest rate, and expanded our line of credit to $175 million
Implemented an “At the Market” equity offering program and issued $46 million of common stock
in an effective and efficient manner
We invested heavily in technology again this year – our internet marketing group, revenue management
team and employee training staff all utilize state of the art operating platforms to deliver higher market
share, stronger rental rates and better operating margins. Increasingly, such systems and technology are
the main drivers differentiating us from the owners of 90% of the properties in the industry who do not
have the resources to make such investments. Self storage is rapidly becoming a business in which scale
is all important – and at 435 stores and growing, we have significant scale.
Early in 2012, we made some changes to the executive structure of our team. Throughout our history of
almost three decades as both a private and a publicly owned company, the three of us have managed
Sovran as a partnership and we will continue as a team to provide core management as we grow the
Company. This year, however, we appointed Dave as CEO, reflecting his role as the more public face of
the Company. Further, we appointed Andrew Gregoire as our CFO, Paul Powell as Executive Vice
President of Real Estate Investment, and Edward Killeen as Executive Vice President of Real Estate
Management. Andy, Paul and Ed have each been with us for about 15 years and brought a wealth of
experience to us when they arrived. They are proven and valuable members of our team, and their
promotions are designed to provide an orderly transition and a plan for eventual succession in the
leadership of our Company.
We are more excited than ever to be in the self storage business, especially in our role as one of the
dominant players and leading innovators. We anticipate significant consolidation in the industry and we
are well poised with a strong balance sheet, excellent operating systems and highly qualified people to
capitalize on the opportunity to grow the size and value of our Company. Your ongoing support is
appreciated.
Officers & Directors
Robert J. Attea
Director
Executive Chairman
of the Board
James R. Boldt
Director
Chairman, President, and
Chief Executive Officer
Computer Task Group Inc.
Charles E. Lannon
Director
President
Strategic Advisory, Inc.
Kenneth F. Myszka
Director
President and
Chief Operating Officer
Anthony P. Gammie
Director
Chairman of the Board
Bowater
Incorporated (retired)
David L. Rogers
Chief Executive Officer
Andrew J. Gregoire
Chief Financial Officer
and Corporate Secretary
Edward F. Killeen
Executive Vice President
Real Estate Management
Paul T. Powell
Executive Vice President
Real Estate Investment
Registrar and Transfer Agent
American Stock Transfer & Trust Co.
6201 15th Avenue
Brooklyn, New York 11219
(800) 937-5449
Annual Meeting
May 23, 2012
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 2011:
135,789
The Chief Executive Officer has previously filed
with the New York Stock Exchange (NYSE) the
annual CEO certification for 2011 as required
by section 303A.12(a) of the NYSE listed
company manual.
As of December 31, 2011, there were
approximately 1,155 shareholders of record
of the common stock.
Store 378 - Atlanta, GA
Store 740 - Newark, NJ
Store 373 - Raleigh, NC
Robert J. Attea
Executive Chairman
Kenneth F. Myszka
President and COO
David L. Rogers
CEO
Sovran Self Storage, Inc. | 6467 Main Street | Williamsville, NY 14221 | 716.633.1850
Sovran Self Storage, Inc.
2011
Annual
Report
S
O
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A
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Sovran Self Storage
381
Sovran HHF JV
UB Management
Total
45
9
435
6467 Main Street
Williamsville, NY 14221