Press Releases

Sovran Self Storage Reports Third Quarter Results

BUFFALO, N.Y.--(BUSINESS WIRE)--

Sovran Self Storage, Inc. (NYSE:SSS), a self-storage real estate investment trust (REIT), reported operating results for the quarter ended September 30, 2008.

Net income available to common shareholders for the third quarter of 2008 was $9.5 million or $.44 per diluted share. Net income available to common shareholders for the same period in 2007 was $10.9 million or $.51 per diluted share. Funds from operations for the quarter were $.84 per fully diluted common share. Higher interest expense associated with the Company's recent long-term financing, increased customer move-in incentives, and damage costs of almost $300,000 associated with Hurricanes Gustav and Ike were factors resulting in lower earnings for 2008's third quarter compared to 2007's.

Kenneth F. Myszka, the Company's President and Chief Operating Officer commented, "We, like most real estate companies, are working through a challenging environment. Our Company's interests are best served by taking a long-term perspective. This quarter's results were adversely affected by several steps taken which, while currently painful, will strengthen our long-term earnings prospects. For instance, by refinancing earlier this year, we knew interest costs would increase substantially. Our judgment was to sacrifice short-term earnings for one of the stronger, more conservative balance sheets in our industry - especially important with capital markets so volatile. We've put ourselves in a good position to grow in 2009. Our occupancies are good in most markets, rental rate increases remain achievable, costs are manageable, and our balance sheet and liquidity positions are as strong as they've ever been."

OPERATIONS:

Total Company net operating income for the third quarter grew 0.8% compared with the same quarter in 2007 to $33.0 million. This growth was the result of the income generated by the joint venture properties, and was somewhat offset by a decline in same store results. Overall average occupancy for the quarter was 83.3% and average rent per square foot for the portfolio was $10.48.

Revenues at the 353 stores owned and/or managed for the entire quarter in both years increased 10 basis points over the third quarter of 2007, the result of a slight increase in effective rental rates. While average occupancy was 170 basis points lower during the third quarter of this year compared to last year's same store third quarter, the drop in month end occupancy from June 30, 2008 to September 30, 2008 was only 20 basis points. This is considerably less than the usual seasonal drop (historically 150-200 basis points), and is the result of the Company's extensive use of move-in incentives. Mr. Myszka commented, "We made a concentrated effort to attract and close customers during the summer months so that we could enter the slower fall season with as many tenants in place as possible. During the quarter, we absorbed over $2 million in 'first month free' incentives; more than double that of last year's summer incentives. While the current cost is significant, we think we'll experience benefits throughout the winter season." Same store operating expenses increased 6.3% (4.9% excluding hurricane related expenses); utility costs in Texas, payroll expenses, and point of sale costs were higher than expected. As a result, same store net operating income declined by 3.3% (2.5% excluding hurricane related expenses) over the third quarter of 2007. General and administrative expenses rose $300,000 over the same period in 2007, primarily due to costs incurred in acquiring and operating the joint venture properties.

During the quarter, strong revenue growth was shown at the Company's South Carolina, Missouri, New York, and Mississippi stores. Stores in Florida, Ohio, and the Washington, DC markets experienced slower than expected growth during the quarter.

PROPERTIES:

In June, the Company formed a joint venture with an affiliate of Heitman, LLC (the "JV") to acquire and manage up to $350 million of storage properties to be acquired from unaffiliated owners. In July, the JV purchased 21 properties at a cost of $144 million. Ten of the stores represent new markets including four in Columbus, OH; two in Louisville, KY; and four in Denver, CO. The remaining stores are located in markets where Sovran already has a presence; two each in Tampa, FL and San Antonio, TX; six in Dallas, TX; and one in Houston, TX.

The Company is continuing its program of expanding and enhancing its existing stores. While no expansions were completed during the quarter, $5.3 million was expended on 11 projects that are expected to be completed by year end, with another six to be initiated and underway by year-end.

CAPITAL TRANSACTIONS:

As previously reported, the Company refinanced its near term maturities and repaid its line of credit with the proceeds of a $250 million four year term note. The Company then entered into a group of interest rate swaps, effectively setting the interest rate on the note at 5.97% through 2012.

The Company also entered into a new, three year Line of Credit agreement, which provides $125 million of unsecured financing at a rate of LIBOR plus 1.375%. The facility is expandable, at the Company's option, to $175 million and can be extended for one additional year. At September 30, 2008, $3 million had been drawn on the Line.

David Rogers, the Company's Chief Financial Officer commented, "Our liquidity position is excellent. We have a new, virtually untapped line of credit in place and no significant financial commitments or debt maturities to worry about until 2012. We're well poised to wait out the storm and perhaps take advantage of some opportunistic situations."

During the quarter, the Company issued 82,496 shares through its Dividend Reinvestment Program, Direct Stock Purchase Plan and Employee Option Plan. A total of $3.2 million was received, and was used to fund capital improvements.

YEAR 2008 EARNINGS GUIDANCE:

The Company is anticipating conditions in most of its markets to become increasingly more competitive, and will utilize leasing incentives as well as increased advertising and aggressive marketing to improve occupancy. Because of these increased costs, the Company now estimates growth in net operating income on a same store basis to be flat for the balance of the year.

The Company will continue, on a modified basis, to expand and improve its existing properties. The projected cost of these revenue enhancing projects has been scaled back to $25 million in 2008, providing for up to 400,000 sq. ft. of additional premium space at as many as 25 stores.

For the next year at least, the Company plans to acquire stores on behalf of the recently formed JV. It expects to contribute up to $25 million as its share of the equity required to fund the JV. From time to time, the Company may acquire properties for its own portfolio or sell certain of its assets, but no such activity has been considered in providing guidance for the balance of 2008.

Funding of the JV contributions, acquisitions, and the above mentioned revenue enhancing improvements will be provided for the duration of 2008 primarily from borrowings on the Company's line of credit.

General and administrative expenses are expected to increase moderately as the Company adds properties to the JV and enters new markets. These are expected to be offset by the realization of management fees from the JV.

At September 30, 2008, all but $3 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 1.375%.

Management expects funds from operations for the fourth quarter of 2008 to be approximately $.80 to $.82 per share, and between $3.28 and $3.30 for the year 2008.

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 reliance on its call center; the Company's cash flow may be insufficient to meet required payments of principal, interest and dividends; and tax law changes which may change the taxability of future income.

CONFERENCE CALL:

Sovran Self Storage will hold its Third Quarter Earnings Release Conference Call at 9:00 a.m. Eastern Time on Thursday, November 6, 2008. Anyone wishing to listen to the call may access the webcast via the event page at www.unclebobs.com/company/investment. 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 that is in the business of acquiring and managing self-storage facilities. The Company operates 380 self-storage facilities in 24 states under the name "Uncle Bob's Self Storage"(R). 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 at www.unclebobs.com.


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

                                            September 30, December 31,
(dollars in thousands)                          2008          2007
------------------------------------------- --------------------------
Assets
  Investment in storage facilities:
     Land                                   $    239,644  $   236,349
     Building, equipment and construction
      in progress                              1,131,813    1,086,359
                                            ------------- ------------
                                               1,371,457    1,322,708
     Less: accumulated depreciation             (208,207)    (183,679)
                                            ------------- ------------
  Investment in storage facilities, net        1,163,250    1,139,029
  Cash and cash equivalents                       12,283        4,010
  Accounts receivable                              3,136        2,794
  Receivable from related parties                     14           27
  Investment in joint ventures                    16,684            -
  Prepaid expenses                                 5,863        4,771
  Intangible asset - in-place customer
   leases (net of accumulated
amortization of $4,952 in 2008 and $3,840
 in 2007)                                            389          833
  Other assets                                     7,361        6,741
  Net assets of discontinued operations                -        6,383
                                            ------------- ------------
     Total Assets                           $  1,208,980  $ 1,164,588
                                            ============= ============

Liabilities
  Line of credit                            $      3,000  $   100,000
  Term notes                                     500,000      356,000
  Accounts payable and accrued liabilities        26,940       23,752
  Deferred revenue                                 5,688        5,602
  Fair value of interest rate swap
   agreements                                      6,091        1,230
  Accrued dividends                               14,063       13,656
  Mortgages payable                              109,720      110,517
                                            ------------- ------------
     Total Liabilities                           665,502      610,757

  Minority interest - Operating Partnership        9,324        9,659
  Minority interest - consolidated joint
   ventures                                       13,082       16,783

Shareholders' Equity
  Common stock                                       231          228
  Additional paid-in capital                     664,945      654,141
  Dividends in excess of net income             (111,015)     (98,437)
  Accumulated other comprehensive income          (5,914)      (1,368)
  Treasury stock at cost                         (27,175)     (27,175)
                                            ------------- ------------
     Total Shareholders' Equity                  521,072      527,389
                                            ------------- ------------

  Total Liabilities and Shareholders'
   Equity                                   $  1,208,980  $ 1,164,588
                                            ============= ============

CONSOLIDATED STATEMENTS OF
 OPERATIONS
(unaudited)
                                    July 1, 2008       July 1, 2007
                                         to                 to
(dollars in thousands, except    September 30, 2008 September 30, 2007
 share data)
                                 -------------------------------------

Revenues
  Rental income                  $          49,801  $          48,966
  Other operating income                     2,696              1,799
                                 ------------------ ------------------
     Total operating revenues               52,497             50,765

Expenses
  Property operations and
   maintenance                              14,702             13,457
  Real estate taxes                          4,842              4,625
  General and administrative                 4,267              3,968
  Depreciation and amortization              8,384              7,738
  Amortization of in-place
   customer leases                             255                605
                                 ------------------ ------------------
     Total operating expenses               32,450             30,393
                                 ------------------ ------------------

Income from operations                      20,047             20,372

Other income (expense)
  Interest expense (including
   amortization of financing
   fees of $305 in 2008 and $232
   in 2007)                                (10,034)            (9,092)
  Interest income                               94                137
  Minority interest - Operating
   Partnership                                (183)              (215)
  Minority interest -
   consolidated joint ventures                (340)              (462)
  Equity in (losses) income of
   joint ventures                              (56)                17
                                 ------------------ ------------------

Income from continuing
 operations                                  9,528             10,757
Income from discontinued
 operations                                      -                118
                                 ------------------ ------------------

Net Income                                   9,528             10,875
Preferred stock dividends                        -                  -
                                 ------------------ ------------------
Net income available to common
 shareholders                    $           9,528  $          10,875
                                 ================== ==================

Per Common Share - basic
Continuing operations            $            0.44  $            0.50
Discontinued operations                       0.00               0.01
                                 ------------------ ------------------
    Earnings per common share -
     basic                       $            0.44  $            0.51
                                 ================== ==================

Earnings per common share -
 diluted
Continuing operations            $            0.44  $            0.50
Discontinued operations                       0.00               0.01
                                 ------------------ ------------------
    Earnings per common share -
     diluted                     $            0.44  $            0.51
                                 ================== ==================

Common shares used in basic
    earnings per share
     calculation                        21,810,755         21,390,303

Common shares used in diluted
    earnings per share
     calculation                        21,833,622         21,426,962

Dividends declared per common
 share                           $          0.6400  $          0.6300
                                 ================== ==================

CONSOLIDATED STATEMENTS OF
 OPERATIONS
(unaudited)
                                  January 1, 2008    January 1, 2007
                                         to                 to
(dollars in thousands, except    September 30, 2008 September 30, 2007
 share data)
                                 -------------------------------------

Revenues
  Rental income                  $         146,292  $         138,306
  Other operating income                     5,946              4,702
                                 ------------------ ------------------
     Total operating revenues              152,238            143,008

Expenses
  Property operations and
   maintenance                              41,852             38,674
  Real estate taxes                         14,406             13,596
  General and administrative                12,487             11,222
  Depreciation and amortization             24,637             22,060
  Amortization of in-place
   customer leases                           1,112              3,348
                                 ------------------ ------------------
     Total operating expenses               94,494             88,900
                                 ------------------ ------------------

Income from operations                      57,744             54,108

Other income (expense)

  Interest expense (including
   amortization of financing
   fees of $867 in 2008 and $716
   in 2007)                                (27,966)           (24,908)
  Interest income                              273                814
  Minority interest - Operating
   Partnership                                (561)              (581)
  Minority interest -
   consolidated joint ventures              (1,224)            (1,386)
  Equity in (losses) income of
   joint ventures                              (38)                97
                                 ------------------ ------------------

Income from continuing
 operations                                 28,228             28,144
Income from discontinued
 operations (including gain on
 disposal of $716 in 2008)                     794                332
                                 ------------------ ------------------

Net Income                                  29,022             28,476
Preferred stock dividends                        -             (1,256)
                                 ------------------ ------------------
Net income available to common
 shareholders                    $          29,022  $          27,220
                                 ================== ==================

Per Common Share - basic
Continuing operations            $            1.30  $            1.30
Discontinued operations                       0.04               0.01
                                 ------------------ ------------------
    Earnings per common share -
     basic                       $            1.34  $            1.31
                                 ================== ==================

Earnings per common share -
 diluted
Continuing operations            $            1.30  $            1.29
Discontinued operations                       0.03               0.02
                                 ------------------ ------------------
    Earnings per common share -
     diluted                     $            1.33  $            1.31
                                 ================== ==================

Common shares used in basic
    earnings per share
     calculation                        21,728,542         20,760,920

Common shares used in diluted
    earnings per share
     calculation                        21,752,986         20,813,165

Dividends declared per common
 share                           $          1.9000  $          1.8700
                                 ================== ==================

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

                                    July 1, 2008       July 1, 2007
                                         to                 to
(dollars in thousands, except    September 30, 2008 September 30, 2007
 share data)
                                 -------------------------------------

Net income                       $           9,528   $         10,875
Minority interest in income                    523                677

Depreciation of real estate and
 amortization of intangible
assets exclusive of deferred
 financing fees                              8,639              8,390
Depreciation and amortization
 from unconsolidated joint
 ventures                                      232                 14
Funds from operations allocable
 to minority interest in
Operating Partnership                         (350)              (377)
Funds from operations allocable
 to minority interest in
consolidated joint ventures                   (340)              (462)
                                 ------------------ ------------------

Funds from operations available
 to common shareholders                     18,232             19,117
FFO per share - diluted (a)      $            0.84   $           0.89

Common shares - diluted                 21,833,622         21,426,962
Common shares if Series C
 Preferred Stock is converted                    -             80,021
                                 ------------------ ------------------
Total shares used in FFO per
 share calculation (a)                  21,833,622         21,506,983


                                  January 1, 2008    January 1, 2007
                                         to                 to
(dollars in thousands, except    September 30, 2008 September 30, 2007
 share data)
                                 -------------------------------------

Net income                       $          29,022   $         28,476
Minority interest in income                  1,785              1,967

Depreciation of real estate and
 amortization of intangible
assets exclusive of deferred
 financing fees                             25,795             25,547
Depreciation and amortization
 from unconsolidated joint
 ventures                                      262                 44
Gain on sale of real estate                   (716)                 -
Preferred dividends                              -             (1,256)
Funds from operations allocable
 to minority interest in
Operating Partnership                       (1,042)            (1,069)
Funds from operations allocable
 to minority interest in
consolidated joint ventures                 (1,224)            (1,386)
                                 ------------------ ------------------
Funds from operations available
 to common shareholders                     53,882             52,323
FFO per share - diluted (a)      $            2.48   $           2.50

Common shares - diluted                 21,752,986         20,813,165
Common shares if Series C
 Preferred Stock is converted                    -            640,170
                                 ------------------ ------------------
Total shares used in FFO per
 share calculation (a)                  21,752,986         21,453,335

(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.

(a) The Series C Convertible Preferred Shares were converted on July
 9, 2007 into 920,244 common shares. The prorated shares through the
 conversion date have been added to the diluted shares outstanding to
 calculate the FFO per share in 2007.
QUARTERLY SAME STORE      July 1, 2008      July 1, 2007
 DATA (2)
                               to                to         Percentage
(dollars in thousands) September 30, 2008 September 30, 2007  Change
                       ------------------ ----------------------------

Revenues:
  Rental income        $           49,072 $          48,966       0.2%
  Other operating
   income                           1,760             1,800      -2.2%
                       ------------------ ----------------- ----------
     Total operating
      revenues                     50,832            50,766       0.1%

Expenses:
  Property operations,
   maintenance, and
   real estate taxes               19,217            18,082       6.3%
                       ------------------ ----------------- ----------

Operating income       $           31,615 $          32,684      -3.3%

(2) Includes the 353 stores owned and/or managed by the Company for
 the entire periods presented.
Same Store                      July 1, 2008  July 1, 2007
 Revenues by
 State (2)
                                     to            to       Percentage
                  (dollars in   September 30, September 30,   Change
                   thousands)       2008          2007
                  ------------- --------------------------- ----------

                  Alabama               2,635         2,668      -1.2%
                  Arizona               1,265         1,262       0.2%
                  Connecticut           1,125         1,119       0.5%
                  Florida               8,015         8,552      -6.3%
                  Georgia               3,362         3,380      -0.5%
                  Louisiana             1,855         1,847       0.4%
                  Maine                   296           284       4.2%
                  Maryland                480           515      -6.8%
                  Massachusetts         2,025         2,019       0.3%
                  Michigan                627           586       7.0%
                  Mississippi           1,342         1,289       4.1%
                  Missouri              1,125         1,062       5.9%
                  New Hampshire           548           549      -0.2%
                  New York              4,686         4,403       6.4%
                  North
                   Carolina             1,725         1,727      -0.1%
                  Ohio                  2,038         2,077      -1.9%
                  Pennsylvania            746           717       4.0%
                  Rhode Island            480           484      -0.8%
                  South
                   Carolina               969           924       4.9%
                  Tennessee               536           549      -2.4%
                  Texas                12,546        12,253       2.4%
                  Virginia              2,406         2,500      -3.8%

                                --------------------------- ----------
                    Total same
                     store      $      50,832 $      50,766       0.1%
                                =========================== ----------
YEAR TO DATE SAME      January 1, 2008    January 1, 2007
 STORE DATA (3)
                              to                 to         Percentage
(dollars in           September 30, 2008 September 30, 2007   Change
 thousands)
                      ------------------------------------- ----------

Revenues:
  Rental income                 $133,680           $132,170       1.1%
  Other operating
   income                          4,173              4,328      -3.6%
                      ------------------ ------------------ ----------
     Total operating
      revenues                   137,853            136,498       1.0%

Expenses:
  Property
   operations,
   maintenance, and
   real estate taxes              51,099             49,598       3.0%
                      ------------------ ------------------ ----------

Operating income                $ 86,754           $ 86,900      -0.2%

(3) Includes the 326 stores owned and/or managed by the Company for
 the entire periods presented.

OTHER DATA                   Same Store (2)           All Stores
                         ----------------------- ---------------------
                             2008        2007       2008       2007
                         ------------ ---------- ---------- ----------

Weighted average
 quarterly occupancy            83.4%      85.1%      83.3%      85.1%

Occupancy at September
 30                             83.3%      84.3%      83.1%      84.3%

Rent per occupied square
 foot                          $10.48     $10.39     $10.48     $10.39

Investment in Storage
 Facilities:
--------------------------------
The following summarizes activity in storage
 facilities during the nine months ended September
 30, 2008:

Beginning balance                $       1,322,708
  Property acquisitions                     14,013
  Additional investment in
   consolidated joint ventures               2,473
  Improvements and equipment
   additions:
      Expansions                            16,499
      Roofing, paving, painting,
       and equipment:
          Stabilized stores                 11,474
          Recently acquired and
           joint venture stores              2,895
  Change in construction in
   progress (Total CIP $14.8
   million)                                  1,548
  Dispositions                                (153)
                                 ------------------
Storage facilities at cost at
 period end                      $       1,371,457
                                 ==================


                                 September 30, 2008 September 30, 2007
                                 ------------------ ------------------

Common shares outstanding at
 September 30                           21,973,223          21,612,427
Operating Partnership Units
 outstanding at September 30               419,952             425,785

Source: Sovran Self Storage, Inc.