Sovran Self Storage Reports First Quarter Results: Revenues Increase 1

    Business Editors

    BUFFALO, N.Y.--(BUSINESS WIRE)--May 4, 2005--Sovran Self Storage, Inc. (NYSE:SSS), a self-storage real estate investment trust (REIT), reported operating results for the quarter ended March 31, 2005.
    Net income available to common shareholders for the first quarter of 2005 was $6.5 million or $.40 per diluted share. Net income available to common shareholders for the same period in 2004 was $5.4 million or $.37 per diluted share. Funds from operations per share for the quarter increased 11% to $11.3 million or $.70 per fully diluted common share compared to $9.2 million or $.63 per fully diluted share for the quarter ended March 31, 2004. Strong revenue and operating income growth and the benefits earned from the previously announced redemption of the Series B Preferred Stock contributed to the Company's performance this quarter.
    The Company also acquired three self storage facilities during the quarter and two more in April for a total cost of $27.1 million.
    David Rogers, the Company's Chief Financial Officer, commented, "We had a good first quarter. Growth is strong in most markets, and we're excited about the potential of our newly acquired stores."

    OPERATIONS:

    Total Company net operating income for the first quarter grew 12.5% compared with the same quarter in 2004 to $20.6 million. This growth was the result of improved operating performance and the income generated by 10 stores acquired in 2004. Overall average occupancy for the quarter was 83.6% and average rent per square foot for the portfolio was $9.53.
    Revenues at the 261 stores owned and/or managed for the entire quarter in both years increased 5.3% over the first quarter of 2004, the result of a 4.0% increase in rental rates, a 60 basis point increase in average occupancy and a $150,000 increase in truck rental and other revenues. Same store operating expenses rose 5.6% primarily as a result of increased insurance, snowplowing and benefits costs. As a result, same store net operating income improved by 5.2% over the 1st quarter of 2004.
    Strong performance was shown at the Company's stores throughout the Southeast, especially Florida, while some of the Ohio, Michigan and Texas stores experienced slower than expected growth during the quarter.

    ACQUISITIONS:

    During the quarter, the Company acquired three stores totaling 157,000 sq. ft. at a total cost of $15.8 million. The stores are located in markets where the Company already has an operating presence - Long Island, NY; Syracuse, NY; and Cape Cod, MA. In April, the Company acquired two more facilities in its existing markets of Stamford, CT and Springfield, MA. These two stores were acquired at a total cost of $11.3 million.

    CAPITAL TRANSACTIONS:

    In December, the Company increased its line of credit capacity from $75 million to $100 million, and provided for another $100 million of availability.
    Interest rate reductions were negotiated on the Company's $100 million five year note (it now pays 1.2% over LIBOR) and on the line of credit (it now pays 90 basis points over LIBOR).
    Both the five year note and the line of credit were extended by one year; the $100 million note now matures in September, 2009, and the line expires in September 2007, with the option to extend to 2008.
    During the quarter, the Company issued 101,000 shares through its dividend reinvestment program, direct stock purchase plan and employee option plan. A total of $3.6 million was received, which was used to fund part of the above mentioned acquisitions.
    The Company's Board of Directors authorized the repurchase of up to two million shares of the Company's common stock. To date, the Company has acquired approximately 1.2 million shares pursuant to the program. The Company expects such repurchases to be effected from time to time, in the open markets or in private transactions. The amount and timing of shares to be purchased will be subject to market conditions and will be based on several factors, including compliance with lender covenants and the price of the Company's stock. No assurance can be given as to the specific timing or amount of the share repurchases or as to whether and to what extent the share repurchase will be consummated. The Company did not acquire any shares in the quarter ended March 31, 2005.

    YEAR 2005 EARNINGS GUIDANCE:

    The Company expects conditions in most of its markets to remain stable, and estimates growth in net operating income on a same store basis to be between 4% and 4.5%. It expects to continue implementation of its Dri-guard and Uncle Bob's Truck initiatives, as well as other revenue enhancing programs, in which the Company is investing $6 to $7 million this year.
    Additionally, over the next three years, the Company plans to implement a program that will add 450,000 to 600,000 square feet of rentable space at existing stores and convert up to an additional 250,000 to 300,000 square feet to premium (climate and humidity controlled) space. The projected cost of these revenue enhancing improvements is estimated at between $32 and $40 million. Funding of these and the above mentioned improvements will be provided primarily from borrowings on the Company's line of credit, and issuance of common shares in the Company's Dividend Reinvestment Program and Stock Purchase Programs.
    As opportunities arise, the Company may acquire self-storage facilities with high growth potential for its own portfolio, and may sell certain facilities depending on market conditions. For purposes of issuing guidance, the Company is forecasting acquisitions of $50 million in 2005 and no sales of existing facilities.
    Cost increases incurred by the Company, especially for Directors and Officers insurance, and fees and expenses associated with Sarbanes Oxley Section 404 Compliance, have negatively affected operating results in 2004. The Company expects most of these costs to continue and has adjusted guidance accordingly.
    At March 31, 2005, all but $49 million of the Company's debt is either fixed rate, or covered by rate swap contracts that essentially fix the rate. Subsequent borrowings that may occur will be pursuant to the Company's Line of Credit agreement at a floating rate of LIBOR plus 0.9%.
    Management expects funds from operations for 2005 to be between $2.94 and $2.98 per share. Funds from operations for the second quarter of 2005 are projected at between $.74 and $.76 per share.

    FORWARD LOOKING STATEMENTS:

    When used within this news release, the words "intends," "believes," "expects," "anticipates," and similar expressions are intended to identify "forward looking statements" within the meaning of that term in Section 27A of the Securities Act of 1933, and in Section 21F of Securities Exchange Act of 1934. Such forward-looking statements involve known and unknown risks, uncertainties and other factors, which may cause the actual results, performance or achievements of the Company to be materially different from those expressed or implied by such forward looking statements. Such factors include, but are not limited to, the effect of competition from new self storage facilities, which could cause rents and occupancy rates to decline; the Company's ability to evaluate, finance and integrate acquired businesses into the Company's existing business and operations; the Company's ability to form joint ventures and sell existing properties to those joint ventures; the Company's existing indebtedness may mature in an unfavorable credit environment, preventing refinancing or forcing refinancing of the indebtedness on terms that are not as favorable as the existing terms; interest rates may fluctuate, impacting costs associated with the Company's outstanding floating rate debt; the regional concentration of the Company's business may subject it to economic downturns in the states of Florida and Texas; the Company's ability to effectively compete in the industries in which it does business; the Company's ability to successfully extend its truck leasing program and Dri-guard product roll-out; the Company's reliance on its call center; the Company's cash flow may be insufficient to meet required payments of principal and interest; and tax law changes which may change the taxability of future income.

    CONFERENCE CALL:

    Sovran Self Storage will hold its First Quarter Earnings Release Conference Call at 9:00 a.m. Eastern Daylight Time on Thursday, May 5, 2005. Anyone wishing to listen to the call may access the webcast via Sovran's homepage www.sovranss.com. The call will be archived for a period of 90 days after initial airing.
    Sovran Self Storage, Inc. is a self-administered and self-managed equity REIT whose business is acquiring, developing and managing self-storage facilities. The Company owns and/or operates 276 stores under the "Uncle Bob's Self Storage"(R) trade name in 21 states. For more information, please contact David Rogers, CFO or Diane Piegza, VP Corporate Communications at (716) 633-1850 or visit the Company's Web site.

SOVRAN SELF STORAGE, INC. BALANCE SHEET DATA (unaudited)

March 31, 2005 December 31, 2004 (dollars in thousands) ---------------------- ----------- ----------- Assets Investment in storage facilities: Land $151,460 $148,341 Building and equipment 678,242 663,175 ----------- ----------- 829,702 811,516 Less: accumulated depreciation (114,761) (109,750) ----------- ----------- Investments in storage facilities, net 714,941 701,766 Cash and cash equivalents 6,288 3,105 Accounts receivable 682 1,530 Receivable from related parties 75 90 Notes receivable from joint ventures 2,690 2,593 Investment in joint ventures 1,015 1,113 Prepaid expenses 3,358 3,282 Other assets 5,903 6,094 ----------- ----------- Total Assets $734,952 $719,573 =========== ===========

Liabilities Line of credit $59,000 $43,000 Term notes 200,000 200,000 Accounts payable and accrued liabilities 8,094 9,121 Deferred revenue 4,191 3,824 Fair value of interest rate swap agreements 1,632 3,425 Accrued dividends 9,731 9,663 Mortgage payable 45,867 46,075 ----------- ----------- Total Liabilities 328,515 315,108

Minority interest - Operating Partnership 11,947 12,007 Minority interest - Locke Sovran II, LLC 14,755 15,007

Shareholders' Equity 8.375% Series C Convertible Cumulative Preferred Stock 53,227 53,227 Common stock 172 171 Additional paid-in capital 422,105 418,007 Unearned restricted stock (2,162) (1,774) Dividends in excess of net income (64,971) (61,751) Accumulated other comprehensive loss (1,461) (3,254) Treasury stock at cost (27,175) (27,175) ----------- ----------- Total Shareholders' Equity 379,735 377,451 ----------- -----------

Total Liabilities and Shareholders' Equity $734,952 $719,573 =========== ===========

CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited) January 1, 2005 January 1, 2004 (dollars in thousands, except to to per share data) March 31, 2005 March 31,2004 ----------- ----------- Revenues: Rental income $31,211 $27,750 Other operating income 938 754 ----------- ----------- Total operating revenues 32,149 28,504

Expenses: Property operations and maintenance 8,500 7,412 Real estate taxes 3,017 2,745 General and administrative 2,947 2,463 Depreciation and amortization 5,228 4,692 ----------- ----------- Total operating expenses 19,692 17,312 ----------- -----------

Income from operations 12,457 11,192

Other income (expense) Interest expense (4,481) (4,138) Interest income 98 113 Minority interest - Operating Partnership (239) (313) Minority interest - consolidated joint venture (92) (77) Equity in income of joint ventures 25 45 ----------- -----------

Income from continuing operations 7,768 6,822 Income from discontinued operations - 753 ----------- -----------

Net Income 7,768 7,575 Preferred stock dividends (1,256) (2,204) ----------- ----------- Net income available to common shareholders $6,512 $5,371 =========== ===========

Per common share - basic: Continuing operations $0.41 $0.32 Discontinued operations - 0.05 ----------- ----------- Earnings per common share - basic $0.41 $0.37 =========== ===========

Per common share - diluted: Continuing operations $0.40 $0.32 Discontinued operations - 0.05 ----------- ----------- Earnings per common share - diluted $0.40 $0.37 =========== ===========

Common shares used in basic earnings per share calculation 16,037,627 14,519,510

Common shares used in diluted earnings per share calculation 16,187,848 14,707,935

Dividends declared per common share $0.6050 $0.6025 =========== ===========

COMPUTATION OF FUNDS FROM OPERATIONS (FFO) (1) (unaudited)

January 1, 2005 January 1, 2004 (dollars in thousands, except to to per share data) March 31, 2005 March 31, 2004 ----------- -----------

Net income $7,768 $7,575 Minority interest in income 331 390 Depreciation of real estate and amortization of intangible assets exclusive of deferred financing fees 5,056 4,535 Depreciation of real estate included in discontinued operations - 70 Depreciation and amortization from unconsolidated joint ventures 118 116 Gain on sale of real estate - (593) Preferred dividends (1,256) (2,204) Funds from operations allocable to minority interest in Operating Partnership (349) (336) Funds from operations allocable to minority interest in Locke Sovran II, LLC (341) (315) ----------- ----------- Funds from operations available to common shareholders 11,327 9,238 FFO per share - diluted $0.70 $0.63

(1) We believe that Funds from Operations ("FFO") provides relevant and meaningful information about our operating performance that is necessary, along with net earnings and cash flows, for an understanding of our operating results. FFO adds back historical cost depreciation, which assumes the value of real estate assets diminishes predictably in the future. In fact, real estate asset values increase or decrease with market conditions. Consequently, we believe FFO is a useful supplemental measure in evaluating our operating performance by disregarding (or adding back) historical cost depreciation.

Funds from operations is defined by the National Association of Real Estate Investment Trusts, Inc. ("NAREIT") as net income computed in accordance with generally accepted accounting principles ("GAAP"), excluding gains or losses on sales of properties, plus depreciation and amortization and after adjustments to record unconsolidated partnerships and joint ventures on the same basis. We believe that to further understand our performance, FFO should be compared with our reported net income and cash flows in accordance with GAAP, as presented in our consolidated financial statements.

Our computation of FFO may not be comparable to FFO reported by other REITs or real estate companies that do not define the term in accordance with the current NAREIT definition or that interpret the current NAREIT definition differently. FFO does not represent cash generated from operating activities determined in accordance with GAAP, and should not be considered as an alternative to net income (determined in accordance with GAAP) as an indication of our performance, as an alternative to net cash flows from operating activities (determined in accordance with GAAP) as a measure of our liquidity, or as an indicator of our ability to make cash distributions.

QUARTERLY SAME STORE DATA (2) January 1, January 1, 2005 2004 to to Percentage (dollars in thousands) March 31, March 31, Change 2005 2004 ---------- ---------- -----------

Revenues: Rental income $30,737 $29,286 5.0% Other operating income 862 712 21.1% ---------- ----------- ---------- Total operating revenues 31,599 29,998 5.3%

Expenses: Property operations, maintenance, and real estate taxes 11,286 10,687 5.6% ---------- ----------- ----------

Operating income $20,313 $19,311 5.2%

(2) Includes the 261 stores owned and/or managed by the Company for the entire periods presented.

OTHER DATA Same Store (2) All Stores ---------------------- ---------------- 2005 2004 2005 2004 --------- ---------- -------- ---------

Weighted average quarterly occupancy 84.4% 83.8% 83.6% 83.8%

Occupancy at March 31 84.6% 83.6% 83.9% 83.6%

Rent per occupied square foot $9.47 $9.11 $9.53 $9.11

Investment in Storage Facilities: --------------------------------- The following summarizes activity in storage facilities during the three months ended March 31, 2005:

Beginning balance $811,516 Property acquisitions 15,773 Improvements and equipment additions: Dri-guard / climate control installations 276 Expansions 709 Roofing, paving, painting, and equipment 1,136 Rental trucks 338 Dispositions (46) ----------- Storage facilities at cost at period end $829,702 ===========

March 31, 2005 March 31, 2004 ----------- -----------

Common shares outstanding at March 31 16,084,820 14,771,974 Operating Partnership Units outstanding at March 31 494,269 520,787

--30--CT/ny*

CONTACT: Sovran Self Storage, Inc. David Rogers or Diane Piegza, 716-633-1850

KEYWORD: NEW YORK INDUSTRY KEYWORD: REAL ESTATE BUILDING/CONSTRUCTION BANKING EARNINGS CONFERENCE CALLS SOURCE: Sovran Self Storage, Inc.

Copyright Business Wire 2005