Sovran Self Storage Inc. Reports Operating Results (10-Q)
Sovran Self Storage Inc. has a market cap of $1.12 billion; its shares were traded at around $40.55 with and P/S ratio of 5.7. The dividend yield of Sovran Self Storage Inc. stocks is 4.5%.SSS is in the portfolios of Kenneth Fisher of Fisher Asset Management, LLC, Jim Simons of Renaissance Technologies LLC.
Highlight of Business Operations:Interest expense decreased from $32.6 million for the nine months ended September 30, 2009 to $23.8 million for the same period in 2010 as a result of the paydown of $100 million of term notes and the termination of the related interest rate swap agreements with the proceeds from our common stock offering in October 2009. In addition, at March 31, 2009, the Company had violated the leverage ratio covenant contained in its line of credit and term note agreements. In May 2009, the Company obtained a waiver of the violation as of March 31, 2009. The fees paid to obtain the waiver were approximately $0.9 million and were included in interest expense in 2009.
As described in Note 5 to the financial statements, during 2010 we sold ten non-strategic storage facilities for net proceeds of $23.7 million, resulting in a gain recorded in the nine months ended September 30, 2010 of $6.9 million. During 2009 the Company sold five non-strategic storage facilities for net cash proceeds of $16.3 million, resulting in a loss of $1.0 million being recorded in the nine months ended September 30, 2009. The operations of these facilities are reported in income from discontinued operations for 2010 and 2009.
On May 6, 2009, we announced a reduction in our quarterly dividend from $0.64 per share to $0.45 per share. In addition to the reduction in the dividend, in the second quarter of 2009 we changed our policy of declaring the dividend from the last week in the quarter to the first week following the quarter end. In 2010, we declared quarterly dividends of $0.45 per common share January 4, 2010, April 1, 2020, and July 1, 2010. The July dividend was paid on July 26, 2010 and the dividend paid amounted to $12.4 million. In 2010, we declared our fourth dividend of $0.45 per share in October.
On October 5, 2009, the Company completed the public offering of 4,025,000 shares of its common stock at $29.75 per share. Net proceeds to the Company after deducting underwriting discounts and commissions and estimated offering expenses were approximately $114.0 million. The Company used the net proceeds from the offering to repay $100 million of the Companys unsecured term note due June 2012 and to terminate two interest rate swaps relating to the debt repaid at a cost of $8.4 million. The Company used the remaining proceeds along with operating cash flows to payoff a maturing mortgage in December 2009 of $26.1 million.
On June 25, 2008, we entered into agreements relating to new unsecured credit arrangements, and received funds under those arrangements. As part of the agreements, the Company entered into a $250 million unsecured term note maturing in June 2012 bearing interest at LIBOR plus 1.625% (based on the Companys September 30, 2010 credit rating). The proceeds from this term note were used to repay the Companys previous line of credit that was to mature in September 2008, the Companys term note that was to mature in September 2009, the term note maturing in July 2008, and to provide for working capital. We repaid $100 million of this term note with the proceeds of our common stock offering. The agreements also provide for a $125 million (expandable to $175 million) revolving line of credit maturing June 2011 bearing interest at a variable rate equal to LIBOR plus 1.375% (based on the Companys credit rating at
In 2009 we scaled back a planned $50 million program to expand and enhance our existing properties. Instead we spent approximately $18 million to add 175,000 square feet to existing properties, and to convert 64,000 square feet to premium storage. We also completed construction of a new 78,000 square foot facility in Richmond, Virginia. Although we do not expect to construct any new facilities for the remainder of 2010, through September 30, 2010 we expended approximately $5 million to expand and enhance existing facilities, and we plan to expend up to $8 million for the remainder of 2010 on such projects.
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