Press Releases

Sovran Self Storage Reports Second 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 June 30, 2009.

Net income available to common shareholders for the second quarter of 2009 was $6.3 million or $.28 per diluted share. Net income available to common shareholders for the same period in 2008 was $10.5 million or $.48 per diluted share. Funds from operations for the quarter were $.66 per fully diluted common share. One-time costs of almost $1 million associated with a first quarter covenant waiver, 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 for 2009's second quarter.

Occupancy levels at the Company's 385 storage facilities at June 30 improved to 82.5%, an increase of 360 basis points since March 31. Kenneth Myszka, the Company's President and Chief Operating Officer stated, "In a very challenging environment, we're pleased to see our marketing and call center efforts take hold. During the quarter, we had a net gain of 9,400 customers on a same store basis, and while we made heavy use of incentives, this got our summer season off to a solid start."

In early May, the Company announced it had breached a debt covenant with its lenders. David Rogers, the Company's Chief Financial Officer commented, "During the quarter, we took the necessary steps to fix this problem and to improve our liquidity position. We became even more prudent regarding acquisitions and expansions, reduced the dividend on our common stock, and raised some equity through our DRIP and Stock Purchase Plans. We've gained sufficient room concerning the covenant restriction and, at June 30, we have in excess of $60 million in cash and permissible borrowings remaining on our credit line."

OPERATIONS:

Total Company net operating income for the second quarter declined 2.3% ($724,000) compared with the same quarter in 2008 to $31.2 million. Overall average occupancy for the quarter was 80.9% and average rent per square foot for the portfolio was $10.16.

Revenues at the 359 stores owned and/or managed for the entire quarter in both years decreased 3.7% over the second quarter of 2008, the result of a 2.8% decrease in effective rental rates and a 130 basis point drop in average occupancy. The Company continues to make extensive use of move-in incentives; during the quarter over $3.4 million in "first month free" incentives were granted, almost 65% more than those of last spring. At the quarter end date, occupancy on a same store basis was 82.6% compared to 83.1% at June 30, 2008.

Same store operating expenses decreased by 3.6% from last year's second quarter. A 6.5% increase in property taxes, and modest growth in marketing costs and internet advertising were offset by significant declines in virtually all other operating expense categories.

General and administrative expenses grew $243,000 over the same period in 2008, primarily due to increased expenses associated with operating the Joint Venture.

During the quarter, modest revenue growth was shown at the Company's Maryland, Louisiana, and Texas stores, while stores in Florida, Georgia, and New England continued to show considerable revenue declines.

PROPERTIES:

The Company did not acquire any properties during the quarter for its own portfolio or for that of the Joint Venture.

As previously announced, the Company has curtailed its program of expanding and enhancing its existing stores, awaiting improvements in both the capital markets and the general economy. Four projects that were started in 2008 have been completed thus far this year at a cost of $5.4 million. Most improvements will be postponed indefinitely, except for about $8 million yet to be applied to projects still underway.

CAPITAL TRANSACTIONS:

The Company's line of credit and term notes require it to meet certain financial covenants, including prescribed leverage, fixed charge coverage, minimum net worth, limitations on additional indebtedness and limitations on dividend payouts. One such covenant limits total consolidated liabilities to 55% of gross asset value; at March 31 this ratio was 55.4%. In May, the Company received a waiver from its lenders at a cost of almost $1 million, and then took measures to prevent a recurrence. These included issuance of equity through its Dividend Reinvestment Program and Direct Stock Purchase Plan, reducing the quarterly dividend, and reducing discretionary capital expenditures.

1.3 million shares were issued during the quarter, generating cash proceeds of $29.4 million. This, combined with the other measures mentioned above, served to reduce the Company's liabilities by $41 million during the quarter, while providing funding for some $4 million of previously committed expansion projects and adding $4.2 million to cash and current assets.

At June 30, 2009, the Company has $500 million of unsecured term note debt and $108 million of mortgage debt outstanding. $26 million of the mortgage debt matures at the end of 2009; the next significant maturities are in 2012.

During the quarter, one of the two Credit Rating Agencies covering the Company reduced its rating on the Company's senior debt from BBB- to BB+. The other Agency reaffirmed its BBB- rating, although it did place the Company on Rating Watch "Negative". One of the effects of the rating drop was to cause an increase in the interest rate applied to two of the Company's unsecured notes. As a result, the Company's aggregate interest rate on its unsecured debt increased from 6.14% to 6.93%. There would be no additional impact on the cost of this debt should the Company suffer any further rating downgrades.

A summary of certain debt ratios at June 30, 2009 is as follows:


- Debt to Enterprise Value (at $24.60/share)   50.9%

- Debt to Book Cost                            43.4%

- Debt to EBITDA ratio                         5.7x

- Debt service coverage                        2.5x



YEAR 2009 EARNINGS GUIDANCE:

The Company is anticipating soft consumer demand in many of its markets and for conditions to remain competitive. It expects to continue the use of leasing incentives as well as increased advertising and aggressive marketing to improve occupancy and, accordingly, estimates a decline in same store revenue of 2 to 4% from that of 2008. Property operating costs are projected to decrease by 1 to 2%. Management reiterates its previous forecast of an expected decline in same store NOI of 2 to 4%.

The Company has curtailed its expansion and enhancement program and, until market conditions significantly improve, will defer most of its planned 2009 expenditures of $50 million. It has an estimated total of $8 million of commitments outstanding on construction projects remaining to be completed in 2009.

At present, the Company does not expect to actively pursue the purchase of additional facilities while the capital and real estate markets remain unstable. It is negotiating the sale of several of its non-core stores, and may sell several of these facilities in the third and fourth quarters of 2009, although the impact of these sales is not included in guidance.

General and administrative expenses are expected to increase by 5 to 7% in 2009.

At June 30, 2009, all 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 1.75%.

At June 30, 2009 the Company had 23,391,184 shares of common stock outstanding, and 419,952 Operating Partnership Units outstanding.

As a result of the above assumptions, management expects funds from operations for the third quarter of 2009 to be approximately $.65 to $.67 per share, and between $2.70 and $2.74 for the full year 2009.

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 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 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 Company's ability to comply with debt covenants; 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 Second Quarter Earnings Release Conference Call at 9:00 a.m. Eastern Time on Thursday, August 6, 2009. 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 385 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)

                                                  June 30,        December 31,

(dollars in thousands)                            2009            2008

Assets

Investment in storage facilities:

Land                                              $ 240,525       $ 240,525

Building, equipment and construction in progress    1,160,632       1,148,676

                                                    1,401,157       1,389,201

Less: accumulated depreciation                      (233,429  )     (216,644  )

Investment in storage facilities, net               1,167,728       1,172,557

Cash and cash equivalents                           10,089          4,486

Accounts receivable                                 2,199           2,971

Receivable from related parties                     -               14

Receivable from joint ventures                      161             336

Investment in joint ventures                        19,989          20,111

Prepaid expenses                                    4,854           4,691

Intangible asset - in-place customer leases (net
of accumulated

amortization of $5,395 in 2009 and $5,160 in        54              289
2008)

Other assets                                        6,526           7,171

Total Assets                                      $ 1,211,600     $ 1,212,626

Liabilities

Line of credit                                    $ -             $ 14,000

Term notes                                          500,000         500,000

Accounts payable and accrued liabilities            20,586          23,979

Deferred revenue                                    5,524           5,659

Fair value of interest rate swap agreements         19,883          25,490

Accrued dividends                                   -               14,090

Mortgages payable                                   108,314         109,261

Total Liabilities                                   654,307         692,479

Noncontrolling redeemable Operating Partnership     10,331          15,118
Units at redemption value

Equity

Common stock                                        246             232

Additional paid-in capital                          698,176         666,633

Accumulated deficit                                 (118,018  )     (122,581  )

Accumulated other comprehensive loss                (19,349   )     (25,162   )

Treasury stock at cost                              (27,175   )     (27,175   )

Total Shareholders' Equity                          533,880         491,947

Noncontrolling interest - consolidated joint        13,082          13,082
venture

Total Equity                                        546,962         505,029

Total Liabilities and Equity                      $ 1,211,600     $ 1,212,626




CONSOLIDATED STATEMENTS OF OPERATIONS

(unaudited)

                                                 April 1, 2009    April 1, 2008

                                                 to               to

(dollars in thousands, except share data)        June 30, 2009    June 30, 2008

Revenues

Rental income                                    $ 46,709         $ 48,432

Other operating income                             1,785            1,688

Management and acquisition fee income              305              -

Total operating revenues                           48,799           50,120

Expenses

Property operations and maintenance                12,440           13,355

Real estate taxes                                  5,141            4,823

General and administrative                         4,338            4,095

Depreciation and amortization                      8,432            8,181

Amortization of in-place customer leases           90               327

Total operating expenses                           30,441           30,781

Income from operations                             18,358           19,339

Other income (expense)

Interest expense (including amortization of
financing fees

of $315 in 2009 and $289 in 2008, and $923 of      (11,699    )     (8,978     )
waiver fees in 2009)

Interest income                                    20               86

Equity in income of joint ventures                 63               7

Income from continuing operations                  6,742            10,454

Income from discontinued operations                -                712

Consolidated net income                            6,742            11,166

Less: net income attributable to noncontrolling    (456       )     (625       )
interests

Net income attributable to common shareholders   $ 6,286          $ 10,541

Earnings per common share attributable to
common shareholders - basic

Continuing operations                            $ 0.28           $ 0.45

Discontinued operations                            0.00             0.04

Earnings per common share - basic                $ 0.28           $ 0.49

Earnings per common share attributable to
common shareholders - diluted

Continuing operations                            $ 0.28           $ 0.45

Discontinued operations                            0.00             0.03

Earnings per common share - diluted              $ 0.28           $ 0.48

Common shares used in basic

earnings per share calculation                     22,613,518       21,727,506

Common shares used in diluted

earnings per share calculation                     22,616,553       21,760,891

Dividends declared per common share              $ -              $ 0.6300




CONSOLIDATED STATEMENTS OF OPERATIONS

(unaudited)

                                               January 1, 2009   January 1, 2008

                                               to                to

(dollars in thousands, except share data)      June 30, 2009     June 30, 2008

Revenues

Rental income                                  $ 94,368          $ 96,490

Other operating income                           3,359             3,250

Management and acquisition fee income            616               -

Total operating revenues                         98,343            99,740

Expenses

Property operations and maintenance              25,877            27,150

Real estate taxes                                10,285            9,563

General and administrative                       8,724             8,220

Depreciation and amortization                    16,828            16,253

Amortization of in-place customer leases         235               856

Total operating expenses                         61,949            62,042

Income from operations                           36,394            37,698

Other income (expense)

Interest expense (including amortization of
financing fees

of $630 in 2009 and $562 in 2008, and $923 of    (21,678    )      (17,933    )
waiver fees in 2009)

Interest income                                  53                178

Equity in income of joint ventures               94                19

Income from continuing operations                14,863            19,962

Income from discontinued operations              -                 794

Consolidated net income                          14,863            20,756

Less: net income attributable to                 (942       )      (1,262     )
noncontrolling interests

Net income attributable to common              $ 13,921          $ 19,494
shareholders

Earnings per common share attributable to
common shareholders - basic

Continuing operations                          $ 0.62            $ 0.86

Discontinued operations                          0.00              0.04

Earnings per common share - basic              $ 0.62            $ 0.90

Earnings per common share attributable to
common shareholders - diluted

Continuing operations                          $ 0.62            $ 0.86

Discontinued operations                          0.00              0.04

Earnings per common share - diluted            $ 0.62            $ 0.90

Common shares used in basic

earnings per share calculation                   22,291,292        21,687,436

Common shares used in diluted

earnings per share calculation                   22,294,457        21,712,668

Dividends declared per common share            $ 0.6400          $ 1.2600




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

                                              April 1, 2009     April 1, 2008

                                              to                to

(dollars in thousands, except share data)     June 30, 2009     June 30, 2008

Net income attributable to controlling        $ 6,286           $ 10,541
interests

Net income attributable to noncontrolling       456               625
interests

Depreciation of real estate and amortization
of intangible

assets exclusive of deferred financing fees     8,522             8,508

Depreciation and amortization from              209               14
unconsolidated joint ventures

Gain on sale of real estate                     -                 (716       )

Funds from operations allocable to
noncontrolling

interest in Operating Partnership               (275       )      (352       )

Funds from operations allocable to
noncontrolling

interest in consolidated joint ventures         (340       )      (421       )

Funds from operations available to common

shareholders                                    14,858            18,199

FFO per share - diluted                       $ 0.66            $ 0.84

Common shares - diluted                         22,616,553        21,760,891

                                              January 1, 2009   January 1, 2008

                                              to                to

(dollars in thousands, except share data)     June 30, 2009     June 30, 2008

Net income attributable to controlling        $ 13,921          $ 19,494
interests

Net income attributable to noncontrolling       942               1,262
interests

Depreciation of real estate and amortization
of intangible

assets exclusive of deferred financing fees     17,063            17,155

Depreciation and amortization from              416               29
unconsolidated joint ventures

Gain on sale of real estate                                       (716       )

Funds from operations allocable to
noncontrolling

interest in Operating Partnership               (584       )      (691       )

Funds from operations allocable to
noncontrolling

interest in consolidated joint ventures         (680       )      (884       )

Funds from operations available to common

shareholders                                    31,078            35,649

FFO per share - diluted                       $ 1.39            $ 1.64

Common shares - diluted                         22,294,457        21,712,668




(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)     April 1, 2009     April 1, 2008

                                  to                to                Percentage

(dollars in thousands)            June 30, 2009     June 30, 2008     Change

Revenues:

Rental income                     $ 46,579          $ 48,432          -3.8  %

Other operating income              1,695             1,688           0.4   %

Total operating revenues            48,274            50,120          -3.7  %

Expenses:

Property operations and             12,379            13,355          -7.3  %
maintenance

Real estate taxes                   5,137             4,823           6.5   %

Total operating expenses            17,516            18,178          -3.6  %

Operating income                  $ 30,758          $ 31,942          -3.7  %

(2) Includes the 359 stores owned and/or managed by the Company for the entire
periods presented.

Same Store Revenues by State (2)  April 1, 2009     April 1, 2008

                                  to                to                Percentage

(dollars in thousands)            June 30, 2009     June 30, 2008     Change

Alabama                             2,536             2,647           -4.2  %

Arizona                             1,161             1,228           -5.5  %

Connecticut                         1,040             1,111           -6.4  %

Florida                             7,222             7,913           -8.7  %

Georgia                             2,948             3,298           -10.6 %

Louisiana                           1,970             1,917           2.8   %

Maine                               255               284             -10.2 %

Maryland                            489               473             3.4   %

Massachusetts                       1,915             1,963           -2.4  %

Michigan                            565               570             -0.9  %

Mississippi                         1,740             1,806           -3.7  %

Missouri                            1,038             1,090           -4.8  %

New Hampshire                       508               524             -3.1  %

New York                            4,345             4,458           -2.5  %

North Carolina                      1,600             1,669           -4.1  %

Ohio                                1,966             2,037           -3.5  %

Pennsylvania                        704               715             -1.5  %

Rhode Island                        428               482             -11.2 %

South Carolina                      879               916             -4.0  %

Tennessee                           488               545             -10.5 %

Texas                               12,236            12,149          0.7   %

Virginia                            2,241             2,325           -3.6  %

Total same store                  $ 48,274          $ 50,120          -3.7  %

YEAR TO DATE SAME STORE DATA (3)  January 1, 2009   January 1, 2008

                                  to                to                Percentage

(dollars in thousands)            June 30, 2009     June 30, 2008     Change

Revenues:

Rental income                     $ 93,375          $ 95,838          -2.6  %

Other operating income              3,194             3,245           -1.6  %

Total operating revenues            96,569            99,083          -2.5  %

Expenses:

Property operations and             25,631            27,001          -5.1  %
maintenance

Real estate taxes                   10,230            9,524           7.4   %

Total operating expenses            35,861            36,525          -1.8  %

Operating income                  $ 60,708          $ 62,558          -3.0  %

(3) Includes the 357 stores owned and/or managed by the Company for the entire
periods presented.




OTHER DATA                  Same Store (2)                   All Stores

                            2009             2008            2009       2008

Weighted average quarterly  81.0         %   82.3        %   80.9   %   82.3   %
occupancy

Occupancy at June 30        82.6         %   83.1        %   82.5   %   83.1   %

Rent per occupied square    $10.06           $10.35          $10.16     $10.35
foot

Investment in Storage
Facilities:

The following summarizes activity in storage facilities during the six months
ended June 30, 2009:

Beginning balance           $ 1,389,201

Property acquisitions         -

Improvements and equipment
additions:

Expansions                    5,369

Roofing, paving, painting,
and equipment:

Stabilized stores             3,005

Recently acquired and         238
joint venture stores

Change in construction in
progress (Total CIP $17.4     3,402
million)

Dispositions                  (58        )

Storage facilities at cost  $ 1,401,157
at period end

                            June 30, 2009    June 30, 2008

Common shares outstanding     23,391,184      21,890,727
at June 30

Operating Partnership
Units outstanding at June     419,952         422,527
30




    Source: Sovran Self Storage, Inc.