Sovran Self Storage Inc., a self-storage real estate investment trust, reported operating results for the quarter ended March 31, 2009.
Net income available to common shareholders for the first quarter of 2009 was $7.6 million or $.35 per diluted share, compared to $9 million or $.41 per diluted share for the same period in 2008. Funds from operations for the quarter were $.74 per fully diluted common share. Higher interest expense associated with the company’s recent long-term financing and increased customer move-in incentives were the primary factors leading to lower earnings. The company also plans to reduce its regular quarterly dividend by approximately 30 percent, from $0.64 to $0.45 per share, beginning with the second-quarter payment.
Other highlights include:
- Total net operating income for the first quarter declined 0.4 percent to $31.0 million compared with the same quarter in 2008.
- Overall average occupancy for the quarter was 79.3 percent, and average rent per square foot for the portfolio was $10.57.
- Revenue at the 357 stores owned or managed for the entire quarter in both years decreased 1.4 percent over the first quarter of 2008, the result of a slight increase in effective rental rates offset by a 150 basis point drop in average occupancy.
- The company continues to make extensive use of move-in incentives; during the quarter, more than $2.7 million in “first month free” incentives were granted.
- Property taxes increased by 8.3 percent over last year’s first quarter, while all other operating costs declined by a total of 3 percent.
- During the quarter, strong revenue growth was shown at the company’s Louisiana, New York and Texas stores. Stores in Florida, Georgia and New England experienced slower than expected growth.
- The company did not acquire any properties during the quarter. As previously announced, it has severely curtailed its program of expanding and enhancing its existing stores.
Sovran is anticipating reduced consumer demand in many of its markets and for conditions to become increasingly more competitive. It expects to use leasing incentives as well as increased advertising and aggressive marketing to improve occupancy and, accordingly, estimates a decline in same store-revenue of 2 percent to 3 percent from that of 2008. Property operating costs are projected to grow by 1 percent to 2 percent, resulting in a decline in same-store NOI of 2 percent to 4 percent.
Management expects funds from operations for the second quarter to be approximately $.73 to $.75 per share, and between $3 and $3.08 for the year 2009.
Sovran will hold a conference call to discuss its first-quarter earnings release at 9 a.m. ET on May 7. Anyone wishing to listen may access the webcast via the event page at www.unclebobs.com/company/investment. The call will be archived for 90 days after the initial airing.
Sovran is a self-administered and self-managed equity REIT in the business of acquiring and managing self-storage properties. The company operates 385 facilities in 24 states under the name Uncle Bob’s Self Storage.
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