Real estate investment trust Sovran Self Storage Inc. reported operating results for the quarter ended Sept. 30, 2010.
Net income available to common shareholders was $8.9 million or $0.32 per diluted share compared to $7.5 million or $0.32 per diluted share during the same period in 2009. Funds from operations (FFO) were $0.63 per fully diluted common share compared to $0.68 for the same period last year. The impact of the company’s 4 million share offering in October 2009 offset a significant decline in interest expense, thereby contributing to the reduction in per-share FFO results.
Revenue for Sovran’s 345 self-storage facilities for the quarter was slightly higher than that of the third quarter 2009―the result of a 60-basis-point increase in average occupancy offset by a 1.1 percent decline in rental rates, and strong growth in other revenue.
“We saw solid increases in rents and occupancy this quarter,” said Kenneth F. Myszka, the president and COO. “Inquiries to our website are up dramatically, and we’re encouraged by continued strong demand in many of our markets.”
Same-store operating expenses increased by a total of 80 basis points compared to the prior-year period, primarily the result of increased healthcare, workers’-compensation and property-maintenance costs offset by a net property tax decrease of 2.6 percent. Property taxes were impacted by the reductions won at several properties as a result of successful challenges to assessed values.
Total consolidated property net operating income for the third quarter declined 27 basis points to $30.5 million compared with the same quarter in 2009. Overall average occupancy for the quarter improved 20 basis points to 82.6 percent, and average rent per square foot for the portfolio was $10.09.
General and administrative expenses grew by about $0.4 million over the same period in 2009, primarily due to increased income taxes associated with operations of the company’s taxable REIT subsidiary and marketing and Internet advertising costs.
During the third quarter of 2010, revenue growth was seen at the company’s Georgia, Tennessee and most New England stores, while stores in Arizona, Florida and Texas (primarily the Houston market area) showed revenue declines.
Sovran did not acquire or dispose of any properties during the quarter for its own portfolio or for that of its joint ventures.
“We’re seeing an increased number of facilities coming to market, and we’re well positioned to acquire the right properties at the right terms,” commented David Rogers, chief financial officer. “We have a strong balance sheet and plenty of liquidity to put to work.”
The company continues with its program of expanding and enhancing its properties. Up to 20 projects providing approximately 500,000 square feet of additional and/or improved space at existing stores is planned during 2010 at an estimated cost of $20 million. It is also evaluating up to $50 million of such improvements to undertake in 2011.