-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, MjvbM7chpakHoGDoSPNGZqRRdT0PQ/34vGAyejfFtgpvrk/LXffKPBkivdglwkYw ZsCu4Xcd70itE6+TMAsHjg== 0000904802-00-000010.txt : 20000331 0000904802-00-000010.hdr.sgml : 20000331 ACCESSION NUMBER: 0000904802-00-000010 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19991231 FILED AS OF DATE: 20000330 FILER: COMPANY DATA: COMPANY CONFORMED NAME: SOVRAN ACQUISITION LTD PARTNERSHIP CENTRAL INDEX KEY: 0001060224 STANDARD INDUSTRIAL CLASSIFICATION: REAL ESTATE [6500] IRS NUMBER: 161481551 STATE OF INCORPORATION: MD FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K SEC ACT: SEC FILE NUMBER: 000-24071 FILM NUMBER: 586368 BUSINESS ADDRESS: STREET 1: 5166 MAIN ST CITY: WILLIAMSVILLE STATE: NY ZIP: 14221 BUSINESS PHONE: 7166331850 MAIL ADDRESS: STREET 1: 5166 MAIN ST CITY: WILLIAMSVILLE STATE: NY ZIP: 14221 10-K 1 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 1999 Commission File Number: 0-24071 Sovran Acquisition Limited Partnership (Exact name of Registrant as specified in its charter) Delaware 16-1481551 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 5166 Main Street Williamsville, NY 14221 (Address of principal executive offices) (Zip code) (716) 633-1850 (Registrant's telephone number including area code) Securities registered pursuant to Section 12(b) of the Act: Title of Securities Exchanges on which Registered Not Applicable Not Applicable Securities registered pursuant to section 12(g) of the Act: None Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [ X ] No [ ] Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [ X ] As of March 15, 2000, 12,984,205 Units of Limited Partnership Interest were outstanding. DOCUMENTS INCORPORATED BY REFERENCE Notice of Annual Meeting of Shareholders and Proxy Statement for Annual Meeting of Shareholders of the Company to be held on May 24, 2000 (Part III). ITEM 1. BUSINESS General Sovran Acquisition Limited Partnership (the "Operating Partnership") is the entity through which Sovran Self Storage, Inc. (the "Company"), a self-administered and self-managed real estate investment trust ("REIT"), conducts substantially all of the Company's business and owns substantially all of the Company's assets. The Operating Partnership is one of the largest owners and operators of self-storage properties in the Eastern United States and Texas. In 1995, the Company was formed under Maryland law and the Operating Partnership was organized as a Delaware limited partnership to continue and to expand the self-storage operations of the Company's privately owned predecessor organizations. The term "Company Predecessors" as used herein refers to the Company's predecessor organizations prior to the Company's initial public offering in June, 1995 (the "Initial Offering") and the completion of the various transactions that occurred simultaneously therewith (the "Formation Transactions"). The term "Company" as used herein means Sovran Self Storage, Inc. and its subsidiaries on a consolidated basis (including the Operating Partnership) or, where the context so requires, Sovran Self Storage, Inc. only, and, as the context may require, the Company Predecessors. The term "Operating Partnership" as used herein means Sovran Acquisition Limited Partnership and, as the context may require, the Company Predecessors. The Company is currently a 93.55% economic owner of the Operating Partnership and controls it through Sovran Holdings, Inc. ("Holdings"), a wholly-owned subsidiary of the Company incorporated in Delaware and the sole general partner of the Operating Partnership. This structure is commonly referred to as an umbrella partnership REIT or "UPREIT". The Board of Directors of Holdings, the members of which are the same as the members of the Board of Directors of the Company, manages the affairs of the Operating Partnership by directing the affairs of Holdings. The Company's limited partner and indirect general partner interests in the Operating Partnership entitle it to share in cash distributions from, and in the profits and losses of, the Operating Partnership in proportion to its ownership interest therein and entitle the Company to vote on all matters requiring a vote of the limited partners. The other limited partners of the Operating Partnership are persons who contributed their direct or indirect interests in certain self-storage properties to the Operating Partnership. The Operating Partnership is obligated to redeem each unit of limited partnership ("Unit") at the request of the holder thereof for cash equal to the fair market value of a share of the Company's common stock, par value $.01 per share ("Common Shares"), at the time of such redemption, provided that the Company at its option may elect to acquire any such Unit presented for redemption for one Common Share or cash. With each such redemption or acquisition by the Company, the Company's percentage ownership interest in the Operating Partnership will increase. In addition, whenever the Company issues Common Shares, the Company is obligated to contribute any net proceeds therefrom to the Operating Partnership and the Operating Partnership is obligated to issue an equivalent number of Units to the Company. The Operating Partnership may issue additional Units to acquire additional self-storage properties in transactions that in certain circumstances defer some or all of the sellers' tax consequences. The Operating Partnership believes that many potential sellers of self-storage properties have a low tax basis in their properties and would be more willing to sell the properties in transactions that defer Federal income taxes. Offering Units instead of cash for properties may provide potential sellers partial Federal income tax deferral. As of March 15, 2000 the Operating Partnership owned and operated 225 self-storage properties (individually, a "Property" and collectively, the "Properties") consisting of approximately 12.7 million net rentable square feet, situated in 21 states. As of December 31, 1999, the Properties had a weighted average occupancy of 85% and a weighted average annual rent per occupied square foot of $7.86. The Operating Partnership believes that it is the 5th largest operator of self-storage properties in the United States based on facilities owned. The Operating Partnership seeks to increase cash flow and enhance investor value through aggressive management of the Properties and selective acquisitions of new self-storage properties. Aggressive property management entails increasing rents, increasing occupancy levels, strictly controlling costs, maximizing collections, strategically expanding and improving the Properties and, should economic conditions warrant, developing new properties. The Operating Partnership believes that there continues to be significant opportunities for growth through acquisitions, and constantly seeks to acquire self-storage properties located primarily in the Eastern United States that are susceptible to realization of increased economies of scale and enhanced performance through application of the Operating Partnership's management expertise. The Operating Partnership's principal executive offices are located at 5166 Main Street, Williamsville, New York 14221, and its telephone number is (716) 633-1850. Industry Overview The Operating Partnership believes that self-storage facilities offer inexpensive storage space to residential and commercial users. In addition to fully enclosed and secure storage space, some operators, including the Operating Partnership, also offer outside storage for automobiles, recreational vehicles and boats. The storage sites are usually fenced and well lighted with gates that are either manually operated or automated. All facilities have a full-time manager/leasing agent. Customers have access to their storage area during business hours and in certain circumstances are provided with 24 hour access. Individual storage units are secured by the customer's lock, which may be purchased from the Operating Partnership, and the customer has control of access to the unit. The Operating Partnership believes that the self-storage industry is characterized by a trend toward consolidation, continuing increase in demand, relatively slow growth in supply and a targeted market of primarily residential customers. According to published data, of the approximately 30,000 facilities in the United States, less than 13% are managed by the ten largest operators. The remainder of the industry is characterized by numerous small, local operators. The shortage of skilled operators, the scarcity of financing available to small operators for acquisitions and expansions and the potential for savings through economies of scale are factors which are leading to a consolidation in the industry. The Operating Partnership believes that as a result of this trend, significant growth opportunities exist for operators with proven management systems and sufficient capital resources. The self-storage industry has also experienced relatively slow growth in supply in recent years due to the scarcity of financing available to small operators, restrictive zoning and other regulations and the substantial start up costs associated with the construction and lease-up of new facilities. Demand for self-storage service has increased as indicated by an increase in industry-wide average rents and in industry average occupancy. It is expected to remain strong because it is slow to react to changing conditions and because of various other factors, including population growth, increased mobility, expansion of condominium, townhouse and apartment living, and increasing consumer awareness, particularly by commercial users. Commercial customers tend to rent larger areas for longer terms, are more reliable payers and are less sensitive to price increases. The Operating Partnership estimates that commercial users account for approximately 30% of its total occupancy, which is substantially higher than the reported industry average of 18%. Property Management The Operating Partnership believes that it has developed substantial expertise in managing self-storage facilities. Key elements of the Operating Partnership's management system include: - Recruiting, training and retaining capable, aggressive on- site Property Managers; - Motivating Property Managers by providing incentive-based compensation; - Developing and maintaining an integrated marketing plan for each Property; - Performing regular preventive maintenance to avoid significant repair obligations; - Linking all facilities to a central customized management information system; and - Utilization of a national marketing program that attracts commercial tenants who have multi-market self-storage needs. Each Property is generally managed by a full-time Property Manager and one or more assistant managers. Each Property Manager is responsible for most operational decisions with respect to his or her Property, including rent charges and maintenance, subject to certain monetary limits. Assistant managers enable Property Managers to have sufficient time to perform marketing functions. Each Property Manager reports to an Area or Regional Manager who in turn reports to an Executive Vice President. The Operating Partnership currently employs two Executive Vice Presidents who primarily focus on marketing and overall supervision of the Area and Regional Managers. The Area and Regional Managers are responsible for overseeing site operations. Property Managers attend a thorough orientation program and undergo continuous training which emphasizes telephone skills, closing techniques, identification of selected marketing opportunities, networking with possible referral sources, and familiarization with the Operating Partnership's customized management information system. In addition to frequent contact with Area and Regional Managers and other Operating Partnership personnel, Property Managers receive periodic newsletters regarding a variety of operational issues, and from time to time attend "roundtable" seminars with other Property Managers. The Operating Partnership annually develops a written marketing plan for each of its Properties the content of which is highly dependent upon local conditions. The focus of each marketing plan is, in part, determined by occupancy rates. If all storage units of the same size at a Property are at or near 90% occupancy, then the plan will generally include increases in rental rates. If a Property has excess capacity, then the marketing plan will target selected markets such as local military bases, colleges, apartment and condominium complexes, industrial parks, medical centers, retail shopping malls and office suites. The Operating Partnership primarily uses telephone directories to advertise its services, including a map and when possible, listing Properties in the same marketplace in a single advertisement. The Operating Partnership also conducts quarterly surveys of its competitors' practices, which include "shopping" competing facilities. The Operating Partnership's customized computer system performs billing, collections and reservation functions for each Property, and also tracks information used in developing marketing plans based on occupancy levels, and tenant demographics and histories. The system generates daily, weekly and monthly financial reports for each Property that are immediately transmitted to the Operating Partnership's principal office each night. The system also requires a Property Manager to input a descriptive explanation for all debit and credit transactions, paid-to-date changes, and all other discretionary activities, which allows the accounting staff at the Operating Partnership's principal office to promptly review all such transactions. Late charges are automatically imposed. More sensitive activities such as rental rate changes and unit size or number changes are completed only by Area and Regional Managers. The Operating Partnership's customized management information system permits it to add new facilities to its portfolio with minimal additional overhead expense. The Operating Partnership's Executive Vice Presidents, Regional Managers, Area Managers and Property Managers are compensated with a base salary and may, in addition, earn incentive compensation. The Operating Partnership annually establishes a target gross income and net operating income for each Property. As incentive compensation, Property Managers earn a specific bonus per move-in; and Executive Vice Presidents, Regional Managers and Area Managers earn a percentage of the combined net operating incomes in excess of the targeted levels for all facilities reporting to them. This incentive compensation program is not subject to any caps or increment requirements. It is not unusual for any manager to earn in excess of 10% of the base salary as incentive compensation. The Operating Partnership believes that the structure of these programs causes its managers to exercise their operational autonomy in a manner to maximize income through increased rental rates. Environmental and Other Regulations The Operating Partnership is subject to federal, state, and local environmental regulations that apply generally to the ownership of real property and the operation of self-storage facilities. The Operating Partnership has not received notice from any governmental authority or private party of any material environmental noncompliance, claim, or liability in connection with any of the Properties, and is not aware of any environmental condition with respect to any of the Properties that could have a material adverse effect on the Operating Partnership's financial condition or results of operations. The Properties are also generally subject to the same types of local regulations governing other real property, including zoning ordinances. The Operating Partnership believes that the Properties are in substantial compliance with all such regulations. Insurance Each of the Properties is covered by fire, flood and property insurance, including comprehensive liability, all-risk property insurance, provided by reputable companies and with commercially reasonable terms. In addition, the Operating Partnership maintains a policy insuring against environmental liabilities resulting from tenant storage on terms customary for the industry, and title insurance insuring fee title to the Properties in an aggregate amount believed to be adequate. Competition The primary factors upon which competition in the self- storage industry is based are location, rental rates, suitability of a property's design to prospective tenants' needs, and the manner in which the property is operated and marketed. The Operating Partnership believes it competes successfully on these bases. The extent of competition depends in significant part on local market conditions. The Operating Partnership seeks to locate its facilities so as not to cause its own Properties to compete with one another for customers, but the number of self- storage facilities in a particular area could have a material adverse effect on the performance of any of the Properties. Several of the Operating Partnership's competitors, including Public Storage Management, Inc., Shurgard Incorporated, U-Haul International and Storage USA, Inc., are larger and have substantially greater financial resources than the Operating Partnership. These larger operators may, among other possible advantages, be capable of greater leverage and the payment of higher prices for acquisitions. Investment Policy While the Operating Partnership emphasizes equity real estate investments, it may, in its discretion, invest in mortgages and other real estate interests related to self-storage properties consistent with the Company's qualification as a REIT. The Operating Partnership may also retain a purchase money mortgage for a portion of the sale price in connection with the disposition of properties from time to time. Should investment opportunities become available, the Operating Partnership may look to acquire self-storage properties via a joint-venture partnership or similar entity. The Operating Partnership may or may not have a significant investment in such a venture, but would use such an opportunity to expand its portfolio of branded and managed properties. Subject to the percentage of ownership limitations and gross income tests necessary for the Company's REIT qualification, the Operating Partnership also may invest in securities of entities engaged in real estate activities or securities of other issuers, including for the purpose of exercising control over such entities. Disposition Policy Management periodically reviews the assets comprising the Operating Partnership's portfolio. The Operating Partnership has no current intention to dispose of any of the Properties, although it reserves the right to do so. Any disposition decision will be based on a variety of factors, including, but not limited to, the (i) potential to continue to increase cash flow and value, (ii) sale price, (iii) strategic fit with the rest of the Operating Partnership's portfolio, (iv) potential for, or existence of, environmental or regulatory issues, (v) alternative uses of capital, and (vi) maintaining the Company's qualification as a REIT. In 1999, the Operating Partnership sold a facility located in Tennessee for $2.5 million resulting in a gain of $.65 million. Borrowing Policy The Board of Directors of the Company currently limits the amount of debt that may be incurred by the Company to less than 50% of the sum of market value of the issued and outstanding Common and Preferred Stock plus the Company's debt (Market Capitalization). The Company, however, may from time to time re- evaluate and modify its borrowing policy in light of then current economic conditions, relative costs of debt and equity capital, market values of properties, growth and acquisition opportunities and other factors. The Operating Partnership increased the balance outstanding on the $150 million credit facility from $112 million in 1998 to $123 million at December 31, 1999. The proceeds were used to fund a portion of the 1999 acquisitions. The credit facility matures February 2001 and provides for funds at LIBOR plus 1.25%. In July 1999, the Operating Partnership issued 1,200,000 shares of 9.85% Series B Cumulative Redeemable Preferred Stock. The net proceeds of $28.6 million were used to repay a portion of the credit facility. The Operating Partnership also has a $75 million unsecured term note that bears interest at LIBOR plus 1.50%. To the extent that the Operating Partnership desires to obtain additional capital to pay distributions, to provide working capital, to pay existing indebtedness or to finance acquisitions, expansions or development of new properties, the Company may utilize preferred stock offerings, floating or fixed rate debt financing, retention of cash flow (subject to satisfying the Operating Partnership's distribution requirements under the REIT rules) or a combination of these methods. Additional debt financing may also be obtained through mortgages on its Properties, which may be recourse, non-recourse, or cross- collateralized and may contain cross-default provisions. The Operating Partnership has not established any limit on the number or amount of mortgages that may be placed on any single Property or on its portfolio as a whole. For additional information regarding borrowings, see "Management's Discussion and Analysis of Financial Condition and Results of Operations - Liquidity and Capital Resources" and Note 5 to the Operating Partnership's Financial Statements appearing elsewhere herein. Employees The Operating Partnership currently employs a total of 608 employees, including 242 Property Managers, 14 Area Managers, 6 Regional Managers, 2 Executive Vice Presidents and 300 part time employees. At the Operating Partnership's headquarters, in addition to the Company's 3 senior executive officers, the Operating Partnership employs 41 people engaged in various support activities such as accounting and management information systems. None of the Operating Partnership's employees is covered by a collective bargaining agreement. The Operating Partnership considers its employee relations to be excellent. ITEM 2. PROPERTIES Overview At December 31, 1999, the Operating Partnership, owned 100% fee simple interests in, and operated, a total of 222 Properties, consisting of approximately 12.5 million net rentable square feet, situated in twenty-one states in the Eastern and Midwestern United States, Arizona and Texas. As of December 31, 1999, the Properties had a weighted average occupancy of 85% and a weighted average annual rent per square foot of $7.86. The Operating Partnership believes that it is the 5th largest operator of self- storage properties in the United States based on facilities owned. The Operating Partnership's self-storage facilities offer inexpensive, easily accessible, enclosed storage space to residential and commercial users on a month-to-month basis. Most of the Operating Partnership's Properties are fenced with computerized gates and are well lighted. All but twenty-three of the Properties are single-story, thereby providing customers with the convenience of direct vehicle access to their storage units. All Properties have a Property Manager on-site during business hours. Customers have access to their storage areas during business hours, and some commercial customers are provided 24- hour access. Individual storage units are secured by a lock furnished by the customer to provide the customer with control of access to the unit. Currently, 212 of the Properties conduct business under the user-friendly trade name "Uncle BoB's Self-Storage" and the remainder are operated under various names acquired with the Properties. The Operating Partnership intends to convert all of the Properties to the "Uncle BoB's" trade name. The table below provides certain information regarding the properties:
Uncle BoB's Occupancy Year Trade at Mgr. Location Built Sq. Ft. Name 12/31/99 Acres Units Bldgs. Floors Apt. Construction __________________________________________________________________________________________________________________________________ ALABAMA Birmingham I 1990 36,975 Y 79% 2.7 297 9 1 Y Masonry/Steel Roof Birmingham II 1990 52,550 Y 87% 4.7 404 8 1 Y Masonry/Steel Roof Montgomery I 1982 74,830 Y 81% 5.0 619 16 1 Y Masonry/Steel Roof Birmingham III 1970 72,410 Y 77% 4.3 409 6 1 Y Masonry/Steel Roof Montgomery II 1984 42,305 Y 95% 2.7 287 10 1 N Masonry/Steel Roof Montgomery III 1988 41,550 Y 90% 2.4 391 9 1 Y Steel Bldg./Steel Roof Birmingham-Walt 1984 63,380 Y 69% 3.3 390 6 1 Y Masonry Wall/Metal Roof ARIZONA Gilbert-Elliot Rd 1995 59,320 Y 79% 3.3 701 8 1 Y Masonry Wall/Metal Roof Glendale-59th Ave 1997 67,076 Y 82% 4.6 634 7 1 Y Masonry Wall/Metal Roof Mesa-Baseline 1986 39,125 Y 87% 1.8 393 11 1 Y Masonry Wall/Metal Roof Mesa-E. Broadway 1986 38,825 Y 75% 1.8 371 5 1 Y Masonry Wall/Metal Roof Mesa-W. Broadway 1976 36,405 Y 78% 1.9 403 5 1 Y Masonry Wall/Metal Roof Mesa-Greenfield 1986 48,585 Y 79% 2.1 435 8 1 N Masonry Wall/Metal Roof Phoenix-Camelback 1984 43,660 Y 76% 2.0 536 7 1 Y Masonry Wall/Metal Roof Phoenix-Bell 1984 96,630 Y 71% 4.6 942 7 1 Y Metal Wall/Metal Roof Phoenix-35th Ave 1996 72,140 Y 80% 4.3 728 8 1 Y Masonry Wall/Metal Roof CONNECTICUT New Haven 1985 48,290 Y 77% 3.9 392 5 1 N Masonry Wall/Steel Roof Hartford-Metro I 1988 49,000 Y 91% 10.0 334 10 1 N Steel Bldg./Steel Roof Hartford-Metro II 1992 39,025 Y 97% 6.0 315 7 1 N Steel Bldg./Steel Roof FLORIDA Lakeland I 1985 48,055 Y 79% 3.5 443 11 1 Y Masonry Wall/Steel Roof Tallahassee I 1973 147,059 Y 80% 18.7 713 21 1 Y Masonry Wall/Tar & Gravel Roof Tallahassee II 1975 43,740 Y 97% 4.0 241 7 1 Y Masonry Wall/Tar & Gravel Roof Port St. Lucie 1985 54,250 Y 74% 4.0 597 12 1 N Steel Bldg./Steel Roof Deltona 1984 63,992 Y 85% 5.0 453 5 1 Y Masonry Wall/Shingle Roof Jacksonville I 1985 39,882 Y 92% 2.7 295 14 1 Y Masonry Wall/Tar & Gravel Roof Orlando I 1988 50,445 Y 82% 2.8 594 3 2 Y Steel Bldg./Steel Roof Ft. Lauderdale 1985 100,900 Y 93% 7.6 647 7 1 Y Steel Bldg./Steel Roof West Palm I 1985 45,465 Y 74% 3.2 406 6 1 N Steel Bldg./Steel Roof Melbourne I 1986 83,104 Y 89% 8.3 744 11 1 Y Masonry Wall/Shingled Roof Pensacola I 1983 108,291 Y 87% 7.5 949 13 1 Y Steel Bldg./Steel Roof Pensacola II 1986 57,720 Y 94% 3.4 508 9 1 Y Steel Bldg./Steel Roof Melbourne II 1986 56,039 Y 85% 3.4 618 11 1 N Steel Bldg./Steel Roof Jacksonville II 1987 53,975 Y 95% 4.4 480 11 1 Y Masonry/Steel Roof Pensacola III 1986 64,641 Y 93% 6.1 515 12 1 N Steel Bldg./Steel Roof Pensacola IV 1990 38,850 Y 94% 2.7 280 9 1 Y Masonry/Steel Roof Pensacola V 1990 39,445 Y 81% 2.6 326 4 1 Y Masonry/Steel Roof Tampa I 1989 60,516 Y 91% 3.3 877 6 1 N Masonry/Steel Roof Tampa II 1985 56,081 Y 86% 2.9 782 10 1 N Masonry/Steel Roof Tampa III 1988 47,321 Y 93% 2.2 665 14 1 N Masonry/Steel Roof Orlando II 1986 134,834 Y 77% 8.5 1,360 20 1 Y Masonry Wall/Steel Roof Ft. Myers I 1988 27,654 Y 77% 1.1 267 6 2 Y Steel Bldg./Steel Roof Ft. Myers II 1991/94 23,053 Y 93% 1.9 300 2 1 Y Masonry/Steel Roof Tampa IV 1985 58,605 Y 88% 4.0 558 10 1 Y Masonry/Steel Roof West Palm II 1986 30,993 Y 89% 2.3 382 9 1 Y Masonry/Steel Roof Ft. Myers III 1986 36,040 Y 91% 2.4 261 9 1 Y Masonry/Steel Roof Lakeland II 1988 60,010 Y 83% 4.0 591 9 1 N Masonry Wall/Steel Roof Ft. Myers IV 1987 59,706 Y 97% 4.5 277 4 1 Y Masonry/Steel Roof Jacksonville III 1987 102,500 Y 84% 5.9 788 13 1 Y Masonry Wall/Shingle Roof Jacksonville IV 1985 43,895 Y 87% 2.7 506 7 1 Y Steel Bldg./Steel Roof Jacksonville V 1987/92 53,855 Y 98% 2.9 511 13 2 Y Steel Bldg./Masonry Wall/ Steel Roof Orlando III 1975 52,704 Y 76% 3.2 504 8 2 N Masonry Wall/Steel Roof Orlando IV-W 25th St 1984 38,636 Y 87% 2.8 408 6 1 Y Steel Bldg/Steel Roof Delray I-Mini 1969 50,355 Y 96% 3.5 486 3 1 Y Masonry Wall/Concrete Roof Delray II-Safeway 1980 70,078 Y 86% 4.3 711 17 1 Y Masonry Wall/Concrete Roof Tampa-E. Hillborough 1985 84,690 N 80% 5.3 736 16 1 Y Masonry Wall/Metal Roof Titusville 1986/90 54,850 Y 94% 6.0 417 9 1 Y Metal Wall/Shingle Roof Ft.Myers-Mall 1991/94 20,881 Y 73% 1.3 230 4 1 Y Masonry/Steel Roof Indian Harbor-Beach 1985 64,978 Y 91% 4.0 717 15 1 N Masonry Wall/Metal Roof Hollywood-Sheridan 1988 129,613 N 93% 7.0 1,167 21 1 Y Masonry Wall/Concrete Roof Pompano Beach-Atlantic 1985 75,154 N 86% 4.0 980 17 1 N Masonry Wall/Concrete Roof Pompano Beach-Sample 1988 63,610 N 83% 3.6 839 14 1 N Masonry Wall/Metal Roof Boca Raton-18th St 1991 89,527 N 85% 6.2 1,063 8 1 N Masonry Wall/Metal Roof Vero Beach 1997 34,450 Y 94% 1.9 314 2 1 N Masonry Wall/Metal Roof Hollywood-N.21st 1987 58,917 Y 96% 3.1 716 11 1 Y Masonry Wall/Metal Roof Cocoa 1982 73,242 N 86% 2.5 720 12 1 Y Masonry Wall/Metal Roof GEORGIA Savannah 1981 59,530 Y 89% 5.4 499 11 1 Y Masonry Wall/Steel Roof Atlanta-Metro I 1988 68,935 Y 91% 3.9 525 5 1 Y Steel Bldg./Steel Roof Atlanta-Metro II 1988 45,300 Y 84% 3.9 375 6 1 Y Steel Bldg./Steel Roof Atlanta-Metro III 1988 56,695 Y 72% 5.3 408 9 1 Y Steel Bldg./Steel Roof Atlanta-Metro IV 1989 42,495 Y 84% 3.5 315 7 1 Y Steel Bldg./Steel Roof Atlanta-Metro V 1988 44,545 Y 82% 4.2 308 3 1 Y Masonry Wall/Tar & Gravel Roof Atlanta-Metro VI 1986 50,400 Y 81% 3.6 452 7 1 Y Steel Bldg./Steel Roof Atlanta-Metro VII 1981 39,010 Y 79% 2.5 328 9 2 Y Masonry Wall/Tar & Gravel Roof Atlanta-Metro VIII 1975 46,791 Y 85% 3.3 438 6 2 Y Masonry Wall/Tar & Gravel Roof Augusta I 1988 52,360 Y 90% 4.0 408 13 1 Y Steel Bldg./Steel Roof Macon I 1989 40,700 Y 90% 3.2 353 14 1 Y Steel Bldg./Steel Roof Augusta II 1987 46,200 Y 87% 3.5 373 4 1 Y Masonry Wall/Steel Roof Atlanta-Metro IX 1988 55,826 Y 88% 4.6 408 6 1 Y Steel Bldg./Steel Roof Atlanta-Metro X 1988 47,895 Y 95% 6.8 412 9 1 N Steel Bldg./Steel Roof Macon II 1989/94 58,915 Y 81% 14.0 540 11 1 Y Steel Bldg./Steel Roof Savannah II 1988 49,365 Y 95% 2.6 462 8 1 Y Masonry Wall/Steel Roof Atlanta-Alpharetta 1994 80,540 Y 66% 5.8 551 8 1&2 Y Steel Bldg./Steel Roof Atlanta-Marietta-Roswell 1996 59,450 Y 83% 6.0 451 8 1&2 Y Steel Bldg./Steel Roof Atlanta-Doraville 1995 68,465 Y 90% 4.9 636 8 1&2 Y St&Masonry Bldg/Steel Roof Ft. Oglethorpe 1989 45,125 Y 83% 3.3 444 6 1 Y Masonry Wall/Metal Roof LOUISIANA Baton Rouge-Airline 1982 72,120 Y 84% 2.5 412 12 1 Y Masonry Wall/Metal Roof Baton Rouge-Airline 2 1985 44,895 Y 90% 2.8 444 9 1 N Masonry Wall/Steel Roof Lafayette-Pinhook 1 1980 57,030 Y 76% 3.2 492 7 1 Y Masonry Wall/Metal Roof Lafayette-Pinhook 2 1992/94 47,025 Y 80% 2.4 439 2 1 Y Metal Wall/Metal Roof Lafayette-Ambassador 1975 33,885 Y 79% 2.0 452 3 1 Y Masonry Wall/Shingle Roof Lafayette-Evangeline 1977 35,230 Y 56% 3.1 353 3 1 Y Masonry Wall/Metal Roof Lafayette-Guilbeau 1994 63,735 Y 79% 3.4 598 1 1 N Metal Wall/Metal Roof MAINE Westbrook 1988 41,000 N 84% 5.9 430 7 1 Y Metal Wall/Metal Roof MARYLAND Salisbury 1979 33,560 Y 82% 3.0 416 10 1 N Masonry Wall/Tar & Gravel Roof Baltimore I-Frederick 1984 21,233 Y 85% 1.9 347 2 3 N Masonry Wall/Shingled Roof Baltimore II-Gaithersburg 1988 61,834 Y 93% 2.2 539 2 4 Y Masonry Wall/Tar & Gravel Roof Baltimore III-Landover 1990 51,838 Y 93% 3.1 674 8 1 Y Steel Bldg./Steel Roof MASSACHUSETTS New Bedford 1982 42,068 Y 97% 3.4 372 7 1 Y Steel Bldg./Steel Roof Springfield 1986 42,100 Y 88% 4.7 318 5 1 N Masonry Wall/Shingle Roof Northbridge 1988 50,410 Y 90% 3.5 356 10 1 N Metal Wall/Metal Roof Salem 1979 53,205 Y 91% 2.0 498 2 2 Y Steel Wall/Metal Roof Boston-Metro I 1980 37,875 Y 98% 2.0 401 3 2 Y Masonry Wall/Tar & Gravel Roof Boston-Metro II 1986 38,315 Y 96% 3.6 439 8 2 N Masonry Wall/Tar & Gravel Roof MICHIGAN Grand Rapids 1976 57,900 Y 94% 5.4 526 9 1 Y Masonry Wall/Steel Roof Grand Rapids II 1983 32,300 Y 95% 8.0 296 6 1 N Masonry & Steel Walls Kalamazoo 1978 60,218 Y 87% 11.6 672 14 1 Y Steel Bldg/Steel & Shingle Roof Lansing 1987 45,005 Y 92% 3.8 405 9 1 Y Steel Bldg/Steel Roof Holland 1978 96,448 Y 94% 13.6 730 18 1 Y Masonry Wall/Steel Roof Waterford-Highland 1978 136,821 N 88% 16.6 1,696 16 1 Y Masonry Wall/Metal Roof MISSISSIPPI Jackson I 1990 41,960 Y 94% 2.0 343 6 1 Y Masonry/Steel Roof Jackson II 1990 38,815 Y 88% 2.1 310 9 1 Y Masonry/Steel Roof Jackson III-155 1995 62,048 Y 97% 1.3 426 2 1 N Metal Wall/Metal Roof Jackson-N.West 1984 57,175 N 90% 5.2 473 13 1 Y Masonry Wall/Metal Roof NEW HAMPSHIRE Salem-Policy 1980 62,775 Y 100% 8.7 546 9 1 Y Masonry Wall/Metal Roof NEW YORK Middletown 1988 26,000 Y 96% 2.8 283 4 1 N Steel Bldg./Steel Roof Buffalo I 1981 76,290 Y 94% 5.1 535 10 1 Y Steel Bldg./Steel Roof Rochester I 1981 41,834 Y 64% 2.9 407 5 1 Y Steel Bldg./Steel Roof Rochester II 1980 29,610 Y 90% 3.5 242 9 1 N Masonry Wall/Shingle Roof Buffalo II 1984 54,635 Y 90% 6.2 438 12 1 Y Steel Bldg./Steel Roof Syracuse I 1987 73,320 Y 87% 7.5 767 16 1 N Steel Bldg./Steel Roof Syracuse II 1983 54,650 Y 95% 3.6 424 10 1 Y Steel Bldg./Shingled Roof Rochester III 1990 67,865 Y 95% 2.7 462 1 1 N Masonry Wall/Shingle Roof Harriman 1989/95 66,240 Y 85% 6.1 642 10 1 Y Metal Wall/Metal Roof NORTH CAROLINA Charlotte 1986 37,815 Y 74% 2.9 333 6 1 Y Steel Bldg./Steel Roof Fayetteville 1980 90,992 Y 64% 6.2 1,021 12 1 Y Steel Bldg./Steel Roof Greensboro 1986 45,230 Y 70% 3.4 422 5 1 Y Steel Bldg./Mas. Wall/ Steel Roof Raleigh I 1985 58,460 Y 79% 5.0 543 8 2 Y Steel Bldg./Steel Roof Raleigh II 1985 33,125 Y 80% 2.5 325 8 1 Y Steel Bldg./Steel Roof Charlotte II 1995 48,830 Y 54% 5.6 477 7 1 Y Masonry Wall/Steel Roof Charlotte III 1995 31,320 Y 92% 2.9 336 6 1 Y Masonry Wall/Steel Roof Greensboro-Hilltop 1995 32,328 Y 86% 1.0 311 7 1 N Metal Wall/Metal Roof Greensboro-StageCoach 1997 9,625 Y 89% 2.5 91 2 1 N Metal Wall/Metal Roof Greensboro-High Point 1993 58,420 Y 65% 2.5 518 9 1 N Steel wall/Metal Roof Durham-Hillborough 1988/91 67,351 Y 78% 5.0 623 5 1 Y Metal Wall/Metal Roof Durham-Cornwallis 1990/96 79,040 Y 73% 4.7 665 9 1 Y Masonry Wall/Metal Roof Jacksonville-Center 1995 50,670 Y 68% 5.0 449 11 1 Y Metal Wall/Metal Roof Jacksonville-Gum Branch 1989 62,930 Y 83% 5.0 479 14 1 Y Metal Wall/Metal Roof Jacksonville-N. Marine 1985 43,540 Y 69% 8.4 413 6 1 Y Masonry Wall/Shingle Roof OHIO Youngstown 1980 54,830 Y 84% 5.8 364 5 1 Y Steel Bldg./Steel Roof Cleveland-Metro I 1980 48,930 Y 89% 6.4 350 9 1 Y Steel Bldg./Steel Roof Cleveland-Metro II 1987 60,890 Y 93% 4.8 453 4 1 Y Steel Bldg./Steel Roof Cincinnati 1988 48,615 Y 96% 2.8 496 7 1 Y Masonry Wall/Steel Roof Dayton 1988 62,602 Y 97% 3.6 615 8 1 Y Masonry Wall/Steel Roof Youngstown II 1988 55,750 Y 90% 3.9 499 7 1 Y Masonry Wall/Steel Roof Akron 1990 38,320 Y 89% 3.4 296 12 1 Y Masonry Wall/Steel Roof Cleveland III 1986 68,100 Y 78% 3.4 598 12 1 Y Masonry Wall/Steel Roof Cleveland IV 1978 65,810 Y 92% 3.5 597 5 1 Y Masonry Wall/Steel Roof Cleveland V 1979 74,702 Y 92% 3.1 661 9 1&2 Y Masonry Wall/Rolled Roof Cleveland VI 1979 47,165 Y 90% 2.6 377 8 1 Y Masonry Wall/Concrete Roof Cleveland VII 1977 70,140 Y 95% 4.3 609 13 1 Y Masonry Wall/Steel Roof Cleveland VIII 1970 47,975 Y 92% 5.7 477 6 1 N Masonry Wall/Steel Roof Cleveland IX 1982 54,690 Y 85% 4.4 296 5 1 N Masonry Wall/Steel Roof Cleveland 10-Avon 1989 46,700 Y 82% 5.8 369 6 1 N Metal Wall/Metal Roof Warren-Elm 1986 60,230 Y 82% 7.3 498 8 1 Y Masonry Wall/Metal Roof Warren-Youngstown 1986 59,107 Y 87% 5.0 548 11 1 N Masonry Wall/Metal Roof Batavia 1988 61,810 N 72% 5.5 547 9 1 N Metal Wall/Steel Roof PENNSYLVANIA Allentown 1983 41,700 Y 87% 6.3 342 7 1 Y Masonry Wall/Shingle Roof Sharon 1975 38,270 Y 92% 3.0 313 5 1 Y Steel Bldg./Steel Roof Harrisburg I 1983 48,850 Y 96% 4.1 445 9 1 Y Masonry Wall/Steel Roof Harrisburg II 1985 58,845 Y 90% 9.2 292 10 1 Y Masonry Wall/Steel Roof Pittsburgh 1990 57,650 Y 90% 3.4 509 6 1 Y Steel Bldg./Steel Roof Pittsburgh II 1983 102,750 Y 76% 4.8 750 4 2 Y Masonry Wall/Shingled Roof Harrisburg-Peiffers 1984 63,770 Y 92% 4.1 612 9 1 Y Masonry Wall/Metal Roof RHODE ISLAND East Greenwich 1984/88 70,955 Y 91% 4.9 672 9 1 Y Metal Wall/Metal Roof W. Warwick 1986/94 30,631 Y 89% 2.3 336 4 1 N Metal Wall/Steel Roof Providence 1984 38,670 Y 98% 3.7 388 7 1 Y Masonry Wall/Tar & Gravel Roof SOUTH CAROLINA Charleston I 1985 49,714 Y 92% 3.3 412 11 1 Y Steel Bldg./Mas. Wall/Steel Roof Columbia I 1985 47,800 Y 94% 3.3 398 7 1 Y Steel Bldg./Steel Roof Columbia II 1987 58,830 Y 90% 6.0 464 8 1 N Steel Bldg./Steel Roof Columbia III 1989 41,490 Y 76% 3.5 335 5 2 Y Steel Bldg./Steel Roof Columbia IV 1986 57,770 Y 89% 5.6 453 7 1 Y Steel Bldg./Steel Roof Spartanburg 1989 40,450 Y 76% 3.6 350 6 1 Y Steel Bldg./Steel Roof Charleston II 1985 40,318 Y 98% 2.2 331 10 1 Y Masonry Wall/Steel Roof TENNESSEE Chattanooga-Lee Hwy 1987 37,180 Y 88% 3.3 390 6 1 Y Masonry Wall/Metal Roof Chattanooga-Hwy 58 1985 35,630 Y 80% 2.4 329 4 1 Y Masonry Wall/Metal Roof Hendersonville 1986/97 93,005 Y 70% 5.7 646 16 1 Y Masonry Wall/Metal Roof TEXAS Arlington I 1987 45,965 Y 92% 2.3 384 7 1 Y Masonry Wall/Steel Roof Arlington II 1986 67,220 Y 73% 3.8 286 11 1 Y Masonry Wall/Steel Roof Ft. Worth 1986 40,875 Y 92% 2.4 341 3 1 Y Masonry Wall/Asphalt Roof San Antonio I 1986 49,920 Y 84% 3.9 486 12 1 Y Masonry Wall/Steel Roof San Antonio II 1986 40,170 Y 80% 1.9 285 7 1 Y Masonry Wall/Steel Roof San Antonio III 1981 48,782 Y 82% 2.6 495 5 1 Y Masonry Wall/Steel Roof Universal 1985 35,120 Y 94% 2.4 397 8 1 Y Masonry Wall/Steel Roof San Antonio IV 1995 44,560 Y 94% 5.4 415 11 1 Y Steel Bldg/Steel Roof Houston-Eastex 1993/95 70,030 Y 95% 6.4 563 5 1 Y Metal Wall/Steel Roof Houston-Nederland 1995 61,871 Y 95% 6.3 531 1 1 Y Metal Wall/Steel Roof Houston-College 1995 35,650 Y 98% 1.8 316 1 1 Y Metal Wall/Steel Roof Dallas-Skillman 1975 121,659 Y 81% 5.9 1,107 8 1&2 Y Masonry Wall/Steel Roof Dallas-Centennial 1977 103,783 Y 81% 6.7 1,094 8 1&2 N Masonry Wall/Steel Roof Dallas-Samuell 1975 79,046 Y 90% 3.8 793 6 1&2 Y Masonry Wall/Steel Roof Dallas-Hargrove 1975 71,914 Y 86% 3.1 747 5 1&2 Y Masonry Wall/Steel Roof Houston-Antoine 1984 75,720 Y 83% 4.1 671 9 1 Y Metal Wall/Metal Roof Katy 1994 44,030 Y 87% 8.6 438 10 1 Y Metal Wall/Metal Roof Humble 1986 63,589 Y 89% 2.3 601 6 1 Y Masonry Wall/Metal Roof Houston-Old Katy 1996 52,800 Y 88% 3.0 490 19 1 Y Masonry Wall/Shingle Roof Webster-Hwy 3 1997 54,850 Y 70% 3.3 536 6 1 Y Masonry Wall/Metal Roof Carrollton 1997 51,760 Y 84% 3.2 499 5 1 Y Masonry Wall/Metal Roof San Marcos 1994 61,690 Y 82% 5.0 432 18 1 N Metal Wall/Metal Roof Austin-McNeil 1994 72,490 Y 78% 7.0 556 19 1 Y Metal Wall/Metal Roof Austin-FM 1996 60,150 Y 95% 4.9 390 9 1 Y Metal Wall/Metal Roof Euless 1996 93,120 Y 50% 7.5 499 9 1 Y Metal Wall/Metal Roof N. Richland Hills 1996 76,545 Y 87% 7.4 549 11 1 Y Metal Wall/Metal Roof Katy-Franz 1993 67,135 Y 82% 7.2 531 10 1 Y Metal Wall/Metal Roof Cedar Hill 1985 53,735 N 93% 3.0 416 16 1 Y Metal Wall/Metal Roof VIRGINIA Newport News I 1988 50,065 Y 94% 3.2 449 7 1 Y Steel Bldg./Steel Roof Alexandria 1984 76,334 Y 88% 3.2 1,129 4 2 Y Masonry Wall/Tar & Gravel Roof Norfolk I 1984 40,350 Y 85% 2.7 328 7 1 Y Steel Bldg./Steel Roof Norfolk II 1989 45,375 Y 92% 2.1 358 4 1 Y Masonry Wall/Steel Roof Richmond 1987 52,070 Y 89% 2.7 526 5 1 Y Masonry Wall/Steel Roof Newport News II 1988/93 63,475 Y 88% 4.7 407 8 1 Y Steel Bldg./Steel Roof Lynchburg-Lakeside 1982 47,628 Y 88% 5.3 435 10 1 Y Masonry Wall/Steel Roof Lynchburg-Timberlake 1985 44,150 Y 63% 2.3 384 4 1 Y Masonry Wall/Steel Roof Lynchburg-Amherst 1987 23,388 Y 89% 1.5 202 3 1 N Masonry Wall/Metal Roof Christiansburg 1985/90 38,622 Y 79% 3.2 346 6 1 Y Masonry Wall/Metal Roof Chesapeake 1988/95 37,450 Y 85% 12.0 341 7 1 Y Metal Wall/Steel Roof Danville 1988 49,672 Y 79% 3.2 408 8 1 N Steel Wall/Metal Roof Chesapeake-Military 1996 58,435 Y 64% 3.0 592 3 1 N Masonry Wall/Metal Roof Chesapeake-Volvo 1995 63,250 Y 94% 4.0 533 4 1 N Masonry Wall/Metal Roof Virginia Beach-Shell 1991 52,566 Y 75% 2.5 588 5 1 N Masonry Wall/Metal Roof Virginia Beach-Central 1993/95 96,693 Y 70% 5.0 934 6 1 N Masonry Wall/Metal Roof NorfolK-Naval Base 1975 126,508 Y 84% 5.2 1,272 11 1 N Masonry Wall/Metal Roof Lynchburg-Timberlake 1990/96 49,727 Y 84% 5.2 458 7 1 N Masonry Wall/Metal Roof Total for all Properties 12,532,748 961 112,173 1,823 Weighted Average 85%
ITEM 3. LEGAL PROCEEDINGS A former business associate (Plaintiff) of certain officers and directors of the Company, including Robert J. Attea, Kenneth F. Myszka, David L. Rogers and Charles E. Lannon, filed a lawsuit against the Company on June 13, 1995 in the United States District Court for the Northern District of Ohio. The Plaintiff has since amended the complaint in the lawsuit alleging breach of fiduciary duty, breach of contract, breach of general partnership/joint venture arrangement, breach of duty of good faith, fraud and deceit, and other causes of action including declaratory judgement as to the Plaintiff's continuing interest in the Company. The Plaintiff is seeking money damages in excess of $15 million, as well as punitive damages and declaratory and injunctive relief (including the imposition of a constructive trust on assets of the Company in which the Plaintiff claims to have a continuing interest) and an accounting. The amended complaint also added Messrs. Attea, Myszka, Rogers and Lannon as additional defendants. The parties are currently involved in discovery and trial. The Company is vigorously defending the lawsuit. Messrs. Attea, Myszka, Rogers and Lannon have agreed to indemnify the Company for costs and any loss arising from the lawsuit. The Operating Partnership believes that the actual amount of the Plaintiff's recovery in this matter if any, would be within the ability of these individuals to provide indemnification. The Operating Partnership does not believe that the lawsuit will have a material, adverse effect upon the Company. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS No matters were submitted during the fourth quarter of the fiscal year covered by this report to a vote of security holders, through the solicitation of proxies or otherwise. PART II ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS There is no established public trading market for the Units. As of March 15, 2000, there were 17 holders of record of Units. The following table sets forth the quarterly distributions per Unit paid by the Operating Partnership to holders of its Units with respect to each such period. Quarter Ended Distributions Per Unit March 31, 1997 .520 June 30, 1997 .520 September 30, 1997 .540 December 31, 1997 .540 March 31, 1998 .540 June 30, 1998 .540 September 30, 1998 .560 December 31, 1998 .560 March 31, 1999 .560 June 30, 1999 .560 September 30, 1999 .570 December 31, 1999 .570 The partnership agreement of the Operating Partnership (the "Partnership Agreement") provides that the Operating Partnership will distribute all available cash (as defined in the Partnership Agreement) on at least a quarterly basis, in amounts determined by the general partner in its sole discretion, to the partners in accordance with their respective percentage interest in the Operating Partnership. Distributions are declared at the discretion of the Board of Directors of Holdings, the general partner of the Operating Partnership and a wholly-owned subsidiary of the Company, and will depend on actual funds from operations of the Operating Partnership, its financial condition, capital requirements, the annual distribution requirements under the REIT provisions of the Internal Revenue Code of 1986, as amended, and such other factors as the Board of Directors may deem relevant. The Board of Directors of Holdings may modify the Operating Partnership's distribution policy from time to time, subject to the terms of the Partnership Agreement. The Operating Partnership's line of credit contains customary representations, covenants and events of default, including covenants which restrict the ability of the Operating Partnership to make distributions in excess of stated amounts. In general, during any four consecutive fiscal quarters the Operating Partnership may only distribute up to 90% of the Operating Partnership's funds from operations (as defined in the related agreement). The line of credit contains exceptions to these limitations to allow the Operating Partnership to make any distributions necessary to allow the Company to maintain its status as a REIT. The Operating Partnership does not anticipate that this provision will adversely effect the ability of the Operating Partnership to make distributions, as currently anticipated. ITEM 6. SELECTED FINANCIAL DATA
Operating Partnership Predecessor (a) For Period For Period from from At or for Year Ended December 31, 6/26/95 to 1/1/95 to (Dollars in thousands, 1999 1998 1997 1996 12/31/95 6/25/95 except per Unit data) _____________________________________________________________________________ Operating Data: Total revenues $ 84,256 $ 69,360 $49,354 $33,597 $12,942 $ 9,532 Income before extraordinary item 27,347 25,155 23,763 15,682 6,744 311 Net income 27,347 24,798 23,763 15,682 6,744 311 Net income per Unit before Extraordinary item-basic 1.97 1.94 1.97 1.88 0.91 - Net income per Unit- Basic 1.97 1.91 1.97 1.88 0.91 - Net income per Unit- diluted 1.97 1.91 1.96 1.87 0.91 - Distributions declared per Unit 2.26 2.20 2.12 2.05 1.04 - Balance Sheet Data: Investment in storage facilities at cost $556,473 $502,502 $333,036 $220,711 $159,461 $114,008 Total Assets 529,719 490,124 327,073 235,415 160,437 84,527 Total Debt 203,253 190,059 39,559 - 5,000 69,102 Total Liabilities 218,281 203,439 50,319 8,131 10,697 71,311 Limited partners' capital interest at redemption value 15,888 21,683 14,454 4,435 - - Partners' capital 295,550 265,002 262,300 222,849 149,740 13,216 Other Data: Net cash provided by operating activities $ 40,502 $34,151 $31,159 $20,152 $7,188 $2,003 Net cash used in investing activities (50,836) (153,367) (98,765) (58,760) (157,965) (3,340) Net cash provided by financing activities 8,382 119,633 53,486 54,563 151,509 507 Funds from operations available to common unitholders(b) 37,815 35,762 30,294 19,816 8,036 -
(a) The Operating Partnership began operations on June 26, 1995, and had no historical results of operations before that date. Results of operations prior to June 26, 1995 relate to Sovran Capital, Inc. and the Sovran Partnerships (Company Predecessors). (b) Funds from operations ("FFO") means income (loss) before extraordinary item(computed in accordance with GAAP) (i) less gain on sale of property, (ii) plus depreciation of real estate assets and amortization of intangible assets exclusive of deferred financing costs and (iii) significant non-recurring events (unsuccessful debt offering costs in 1998). FFO is a supplemental performance measure for REITs as defined by the National Association of Real Estate Investment Trusts, Inc. FFO is presented because analysts consider FFO to be one measure of the performance of the Operating Partnership. FFO does not take into consideration scheduled principal payments on debt, capital improvements and other obligations. Accordingly, FFO is not a substitute for the Operating Partnership's cash flow or net income as a measure of the Operating Partnership liquidity or operating performance or ability to pay distributions. ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following discussion and analysis of the financial condition and results of operations should be read in conjunction with the financial statements and notes thereto included elsewhere in this report. When used in this discussion and elsewhere in this document, the words "intends," "believes," "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 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 Operating Partnership 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 would cause rents and occupancy rates to decline; the Operating Partnership's ability to evaluate, finance and integrate acquired businesses into its existing business and operations; the Operating Partnership's ability to effectively compete in the industries in which it does business; the Operating Partnership's ability to successfully implement its Uncle Bob's Flex-a-Space strategy; the Operating Partnership'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; the Operating Partnership's cash flow may be insufficient to meet required payments of principal and interest; and tax law changes which may change the taxability of future income. RESULTS OF OPERATIONS Year Ended December 31, 1999 compared to Year Ended December 31, 1998 In 1999, the Operating Partnership recorded rental revenues of $82.4 million, an increase of $14.2 million or 21% when compared to 1998 rental revenues of $68.2 million. Of this, $11.9 million resulted from the acquisition of 18 stores during 1999 and from having the 1998 acquisitions included for a full year of operations. The additional $2.3 million increase resulted from increased revenues at the 156 core properties considered in same store sales. For this core group, revenues increased 3.9%, primarily as the result of rental rate increases which were slightly offset by an average occupancy decrease of .4% to 86%. Interest and other income increased to $1.9 million in 1999 from $1.1 million in 1998 due to a $.65 million gain on the sale of a facility. Property operating and real estate tax expense increased $4.8 million or 25% during the period. Of this, $3.9 million was incurred by the facilities acquired in 1999 and from having the 1998 acquisitions included for a full year of operations, and $0.9 million additional cost was incurred in the operation of the 156 core properties. General and administrative expenses increased $.7 million in 1999. The increase was primarily a result of increased supervisory and accounting costs associated with the operation of an increased number of properties, and the start up and marketing costs related to Uncle BoB's Flex-a-Space. In 1999, interest expense increased to $13.9 million from $9.6 million as a result of increased borrowings under the line of credit. The credit facility was utilized throughout 1999 to fund the purchase of the 18 stores. Depreciation and amortization expense increased to $13.1 million from $10.3 million, primarily as a result of the additional depreciation taken on the $46 million of real estate assets acquired in 1999 and a full year of depreciation on 1998 acquisitions. Earnings before interest, depreciation and amortization, and extraordinary loss increased 20.8% from $45.1 million in 1998 to $54.4 million in 1999 as a result of the aforementioned items. Year Ended December 31, 1998 compared to Year Ended December 31, 1997 In 1998, the Operating Partnership recorded rental revenues of $68.2 million, an increase of $19.6 million or 40% when compared to 1997 rental revenues of $48.6 million. Of this, $18.4 million resulted from the acquisition of fifty stores during 1998 and from having the 1997 acquisitions included for a full year of operations. The additional $1.2 million increase resulted from increased revenues at the 111 core properties considered in same store sales. For this core group, revenues increased 3.8%, primarily as the result of rental rate increases which were slightly offset by an average occupancy decrease of 1% to 86.4%. Interest and other income increased to $1.1 million in 1998 from $.8 million in 1997. Property operating and real estate tax expense increased $5.8 million or 42% during the period. Of this, $5.5 million was incurred by the facilities acquired in 1998 and from having the 1997 acquisitions included for a full year of operations, and $0.3 million additional cost was incurred in the operation of the 111 core properties. General and administrative expenses increased $2.1 million in 1998. Of the increase, $.5 million related to the costs associated with the unsuccessful public debt offering costs in 1998. The additional increase was primarily a result of increased supervisory and accounting costs associated with the operation of an increased number of properties, and the change in the treatment of internal property acquisition costs as discussed in Note 14 to the financial statements. In 1998, interest expense increased to $9.6 million from $2.2 million as a result of increased borrowings under the line of credit and term note. The credit facility and term note were utilized throughout 1998 to fund the purchase of the fifty stores, as opposed to 1997 in which the Operating Partnership issued additional Units to fund a portion of the acquired stores. Depreciation and amortization expense increased to $10.3 million from $7.0 million, primarily as a result of the additional depreciation taken on the $170 million of real estate assets acquired in 1998 and a full year of depreciation on 1997 acquisitions. Earnings before interest, depreciation and amortization, and extraordinary loss increased 36.8% from $32.9 million in 1997 to $45.1 million in 1998 as a result of the aforementioned items. A $.36 million extraordinary loss was recorded in 1998 when the Operating Partnership's former unsecured credit facility was replaced with a new line of credit with more favorable terms. Pro Forma Year Ended December 31, 1999 compared to Pro Forma Year Ended December 31, 1998 The following unaudited pro forma information shows the results of operations as though the acquisitions of storage facilities in 1999 and 1998, and the Company's preferred stock offering in 1999 had all occurred as of the beginning of 1998. Year Ended December 31, (Dollars in thousands) 1999 1998 _________________________________________________________________ Revenues: Rental income $84,623 $82,024 Interest and other income 1,897 1,340 _________________________________________________________________ Total revenues 86,520 83,364 _________________________________________________________________ Expenses: Property operations and maintenance 17,407 16,680 Real estate taxes 7,521 6,950 General and administrative 5,591 4,940 Interest 14,667 14,667 Depreciation and amortization 13,523 13,523 _________________________________________________________________ Total expenses 58,709 56,760 _________________________________________________________________ Income before extraordinary item $ 27,811 $ 26,604 Extraordinary loss on extinguishment of debt - (357) _________________________________________________________________ Net income $ 27,811 $ 26,247 Preferred unit distribution (2,955) (2,955) _________________________________________________________________ Net income available to common unitholders $ 24,856 $ 23,292 =========================== Rental revenue of $84.6 million in 1999 increased by 3.2% over 1998's revenues of $82.0 million, primarily as a result of rate increases at the stores. Operating expenses and real estate taxes in 1999 were $24.9 million, as compared to $23.6 million in 1998, an increase of 5.5%. While cost efficiencies were enjoyed regarding insurance and yellow-page advertising, these savings were offset by the Operating Partnership's paying higher wages to attract professional managers, and increased property taxes. General and administrative costs were determined by the Operating Partnership's historical costs incurred in the management of 222 properties. Interest expense in both years was determined by applying the 1999 year-end rate and the applicable non-usage fee associated with the Operating Partnership's $150 million credit facility and $75 million term note. Such unaudited pro forma information is based upon the historical statements of operations of the Operating Partnership. It should be read in conjunction with the financial statements of the Operating Partnership and notes thereto. In management's opinion, all adjustments necessary to reflect the effects of these transactions have been made. This unaudited pro forma statement does not purport to represent what the actual results of operations of the Operating Partnership would have been assuming such transactions had been completed as set forth above, nor does it purport to represent the results of operations for future periods. LIQUIDITY AND CAPITAL RESOURCES Capital Resources, Unsecured Line of Credit and Term Note The Operating Partnership's unsecured credit facility provides availability up to $150 million, of which $123 million was drawn at December 31, 1999. The facility matures February 2001 and bears interest at LIBOR plus 1.25%. In addition to the credit facility, the Operating Partnership has an unsecured term note due December 2000, that bears interest at LIBOR plus 1.50%. The credit facility and term note currently have investment grade ratings from Standard and Poors (BBB-), Moodys (Baa3), and Duff and Phelps (BBB-). In July 1999, the Company issued 1,200,000 shares of 9.85% Series B Cumulative Redeemable Preferred Stock. The net proceeds of $28.6 million were used to repay a portion of the credit facility. The Series B Preferred Stock is currently rated by Standard and Poors (BB+), Moodys (Ba2) and Duff and Phelps (BB+). In 1998 and 1999, there has been a net outflow of capital from the REIT sector, which has depressed prices of common shares of most REIT's, including the Company's. Accordingly, management does not feel it appropriate to issue equity in the form of common shares or Operating Partnership Units, because to do so would be dilutive to existing shareholders. The Operating Partnership expects to fund its maturing obligations and its future growth through a renewal of its line of credit, issuance of 5-10 year notes of either a secured or unsecured (or combination of both) nature, issuance of preferred stock and private placement solicitation of public pension funds and other sources of capital. The Operating Partnership believes that its internally generated cash flows and borrowing capacity under the credit facility will be sufficient to fund ongoing operations, capital improvements, dividends, and acquisitions for the year 2000. In 1999, the Company continued its common stock repurchase program authorized by the Board of Directors by acquiring 300,500 shares for $6.5 million. At December 31, 1999, the total shares repurchased by the Company was 376,200 at a total cost of $8.4 million. Acquisition of Properties During 1999 the Operating Partnership used borrowings pursuant to the line of credit to acquire 18 properties comprising .9 million square feet from unaffiliated storage operators. These properties are located in existing markets in Florida, Louisiana, Rhode Island, and Texas. The Operating Partnership also entered two new states, Arizona and Maine during 1999. In 1998, fifty facilities totaling 3.2 million square feet were acquired. At December 31, 1999, a total of 222 facilities and 12.5 million square feet of net rentable storage space was owned and operated by the Operating Partnership in 21 states. Future Acquisition and Development Plans The Operating Partnership's external growth strategy is to increase the number of facilities it owns by acquiring suitable facilities in markets in which it already has operations, or to expand in new markets by acquiring several facilities at once in those new markets. At December 31, 1999, the Operating Partnership had contracts totaling of $11.2 million to acquire additional properties in New York, Massachusetts and Texas. The Operating Partnership will continue to pursue the acquisition of quality self-storage properties in markets where it already operates, and in strategic new markets where a substantial property base can be quickly established. The Operating Partnership also intends to expand and enhance certain of its existing facilities by building additional storage buildings on presently vacant land and by installing climate control and enhanced security systems at selected sites. Distribution Requirements of the Company and Impact on the Operating Partnership As a REIT, the Company is not required to pay federal income tax on income that it distributes to its shareholders, provided that the amount distributed is equal to at least 95% of taxable income. These distributions must be made in the year to which they relate, or in the following year if declared before the Company files its federal income tax return, and if it is paid before the first regular dividend of the following year. The first distribution of 2000 may be applied toward the Company's 1999 distribution requirement. The Company's source of funds for such distributions are solely and directly from the Operating Partnership. As a REIT, the Company must derive at least 95% of its total gross income from income related to real property, interest and dividends. In 1999, the Company's percentage of revenue from such sources exceeded 97%, thereby passing the 95% test, and no special measures are expected to be required to enable the Company to maintain its REIT designation. INTEREST RATE RISK As of December 31, 1999, the Operating Partnership has one outstanding interest rate collar transaction through June 30, 2000. Under the agreement, which is based on a notional amount of $70 million, if the LIBOR rate exceeds 6.5%, the bank pays the Operating Partnership the rate in excess of 6.5% multiplied by $70 million for the outstanding period. If LIBOR drops below 5.265%, the Operating Partnership must pay the bank the difference between LIBOR and 5.265% multiplied by $70 million for the outstanding period. Based upon the Operating Partnership's indebtedness at December 31, 1999, and taking the interest rate collar agreements into account, a 1% increase in interest rates would result in an increase to interest expense of approximately $1.9 million. INFLATION The Operating Partnership does not believe that inflation has had or will have a direct effect on its operations. Substantially all of the leases at the facilities allow for monthly rent increases, which provide the Operating Partnership with the opportunity to achieve increases in rental income as each lease matures. SEASONALITY The Operating Partnership's revenues typically have been higher in the third and fourth quarter, primarily because the Operating Partnership increases its rental rates on most of its storage units at the beginning of May and, to a lesser extent, because self-storage facilities tend to experience greater occupancy during the late spring, summer and early fall months due to the greater incidence of residential moves during these periods. However, the Operating Partnership believes that its tenant mix, diverse geographic locations, rental structure and expense structure provide adequate protection against undue fluctuations in cash flows and net revenues during off-peak seasons. Thus, the Operating Partnership does not expect seasonality to affect materially distributions to unitholders. IMPACT OF YEAR 2000 The Operating Partnership employs several different computer systems for financial reporting, property management, asset control and payroll. These systems are purchased by the Operating Partnership from third parties and therefore there is no internally generated programming code. The Operating Partnership's critical applications relating to financial reporting, property management and asset control were updated to Year 2000 compliant versions within the last year as part of the normal maintenance agreements at a cost of less than $50,000. UNITHOLDER INFORMATION CORPORATE HEADQUARTERS 6467 Main Street Williamsville, New York 14221 716-633-1850 SOVRAN'S WEBSITE http://www.sovranss.com http://www.unclebobsselfstorage.com FORM 10-K REPORT A copy of the Operating Partnership's Annual Report on Form 10-K for the year ended December 31, 1999, filed with the Securities Exchange Commission, will be furnished to unitholders without charge upon written request. Please contact Christine M. Aguglia, 716-633-1850 INVESTOR RELATIONS For more information or to receive Sovran's quarterly reports, please contact Andrew J. Gregoire, 716-633-1850 INDEPENDENT AUDITORS Ernst & Young LLP 1400 Key Tower Buffalo, New York 14202 ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK The information required is included in Item 7 under the heading Interest Rate Risk. ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA Balance Sheets - Sovran Acquisition Limited Partnership December 31, (Dollars in thousands) 1999 1998 Assets Investment in storage facilities: Land $111,833 $102,864 Building and equipment 444,640 399,638 ________ ________ 556,473 502,502 Less accumulated depreciation (33,453) (21,339) ________ _______ Investments in storage facilities, net 523,020 481,163 Cash and cash equivalents 1,032 2,984 Accounts receivable 1,796 1,699 Prepaid expenses and other assets 3,871 4,278 ________ _______ Total Assets $529,719 $490,124 ======== ======= Liabilities Line of credit $123,000 $112,000 Term note 75,000 75,000 Accounts payable and accrued liabilities 4,210 3,059 Deferred revenue 3,322 2,943 Accrued distributions 7,496 7,378 Mortgage payable 5,253 3,059 _______ _______ Total Liabilities 218,281 203,439 Limited partners' capital interest (853,037 and 863,037 units, respectively), at redemption value (Note 1) 15,888 21,683 Partners' Capital General partner (219,567 and units issued and outstanding, in 1999 and 1998) 5,283 5,284 Limited partner (12,079,596 and 12,093,189 units issued and outstanding, respectively) 260,267 259,718 Preferred Partners (1,200,000 Series B Preferred Units, at $25 liquidation preference) 30,000 - _______ _______ Total partners' capital 295,550 265,002 _______ _______ Total liabilities and partners' capital $529,719 $490,124 ======= ======= (See notes to financial statements.) Sovran Acquisition Limited Partnership Statements of Operations
Operating Partnership __________________________________________ Year Ended Year Ended Year Ended Dollars in thousands, December 31, December 31, December 31, except per unit data) 1999 1998 1997 Revenues: Rental income $82,387 $68,231 $48,584 Interest and other income 1,869 1,129 770 _______ _______ _______ Total revenues 84,256 69,360 49,354 Expenses: Property operations and maintenance 17,035 13,793 9,708 Real estate taxes 7,238 5,659 3,955 General and administrative 5,571 4,849 2,757 Interest 13,927 9,601 2,166 Depreciation and amortization 13,138 10,303 7,005 _______ _______ _______ Total expenses 56,909 44,205 25,591 _______ _______ _______ Income before extraordinary item 27,347 25,155 23,763 Extraordinary loss on extinguishment of debt - (357) - _______ _______ _______ Net income $27,347 $24,798 $23,763 Distributions to preferred unitholders (1,239) - - _______ _______ _______ Net income available to common unitholders $26,108 $24,798 $23,763 ======= ======= ======= Earnings per unit before extraordinary item-basic $ 1.97 $ 1.94 $ 1.97 Extraordinary loss $ - $ (0.03) $ - Earnings per unit-basic $ 1.97 $ 1.91 $ 1.97 Earnings per unit-diluted $ 1.97 $ 1.91 $ 1.96 Distributions declared per unit $ 2.26 $ 2.20 $ 2.12 (See notes to financial statements.)
Sovran Acquisition Limited Partnership Statements of Partners' Capital
Sovran Sovran Self Total Holdings, Inc. Storage Inc. Preferred Partners' Limited Partners' (Dollars in thousands) General Partner Limited Partner Partners Capital Capital Interest _____________________________________________________________________________________________________________ Balance January 1, 1997 $ 2,523 $ 220,326 $ - $ 222,849 $ 4,435 Proceeds from issuance of common stock 2,796 39,148 - 41,944 - Issuance of redeemable units for acquisition of storage facilities - - - - 9,240 Exercise of stock options - 328 - 328 - Earned portion of restricted stock - 13 - 13 - Net income 366 22,753 - 23,119 644 Distributions (413) (24,708) - (25,121) (697) Adjustment to reflect limited partners' redeemable capital at balance sheet date (15) (817) - (832) 832 _________________________________________________________________________ Balance December 31, 1997 5,257 257,043 - 262,300 14,454 Proceeds from issuance of common stock - 538 - 538 - Issuance of redeemable units for acquisition of storage facilities - - - - 11,367 Issuance of common stock for acquisition of storage facilities - 3,336 - 3,336 - Exercise of stock options - 362 - 362 - Earned portion of restricted stock - 36 - 36 - Purchase of treasury shares - (1,990) - (1,990) - Net income 443 23,097 - 23,540 1,258 Distributions (483) (26,585) - (27,068) (1,448) Adjustment to reflect limited partners' redeemable capital at balance sheet date 67 3,881 - 3,948 (3,948) __________________________________________________________________________ Balance December 31, 1998 5,284 259,718 - 265,002 21,683 Proceeds from issuance of common stock - 6,435 - 6,435 - Redemption of Partnership Units - - - - (261) Issuance of 9.85% Series B Preferred Units - (1,415) 30,000 28,585 - Exercise of stock options - 169 - 169 - Earned portion of restricted stock - 102 - 102 - Purchase of treasury shares - (6,454) - (6,454) - Deferred compensation - 22 - 22 - Net income 427 25,158 - 25,585 1,762 Distributions (517) (28,736) - (29,253) (1,939) Adjustment to reflect limited partners' redeemable capital at balance sheet date 89 5,268 - 5,357 (5,357) __________________________________________________________________________ Balance December 31, 1999 $5,283 $260,267 $30,000 $295,550 $15,888 ========================================================================== See notes to financial statements.
Sovran Acquisition Limited Partnership Statements of Cash Flows of the Operating Partnership
Year Ended December 31, (dollars in thousands) 1999 1998 1997 Operating Activities Net income $27,347 $24,798 $23,763 Adjustments to reconcile net income to net cash provided by operating activities: Extraordinary loss - 357 - Depreciation and amortization 13,138 10,303 7,005 Gain on sale of real estate (652) - - Restricted stock earned 102 36 13 Changes in assets and liabilities: Accounts receivable (873) (812) (162) Prepaid expenses and other assets 374 (1,051) (283) Accounts payable and other liabilities 988 483 894 Deferred revenue 78 37 (71) _____________________________________ Net cash provided by operating activities 40,502 34,151 31,159 Investing Activities Proceeds from sale of real estate 2,302 - - Additions to storage facilities (53,090) (153,367) (98,970) Other assets (48) - 205 ____________________________________ Net cash used in investing activities (50,836) (153,367) (98,765) Financing Activities Net proceeds from sale of common stock 6,604 900 42,273 Net proceeds from sale of preferred stock 28,585 - - Proceeds from line of credit 11,000 76,000 36,000 Proceeds from term note - 75,000 - Financing costs - (1,824) - Distributions paid (31,074) (27,953) (24,787) Purchase of treasury stock (6,454) (1,990) - Redemption of partner units (261) - - Mortgage principal payments (18) (500) - ____________________________________ Net cash provided by financing activities 8,382 119,633 53,486 ____________________________________ Net (decrease) increase in cash (1,952) 417 (14,120) Cash at beginning of period 2,984 2,567 16,687 ____________________________________ Cash at end of period $ 1,032 $ 2,984 $ 2,567 ==================================== Supplemental cash flow information Cash paid for interest $ 13,966 $ 9,024 $ 2,238 Storage facilities acquired through issuance of Operating Partnership Units and Common Stock - 14,703 9,240 Storage facilities acquired through assumption of mortgage 2,212 - 3,559 Fair value of net liabilities assumed on the acquisition of storage facilities 463 1,458 4,144 Distributions declared but unpaid at December 31, 1999, 1998 and 1997 were $7,496, $7,378, and $6,816, respectively. See notes to financial statements.
NOTES TO FINANCIAL STATEMENTS Sovran Acquisition Limited Partnership - December 31, 1999 1. ORGANIZATION Sovran Acquisition Limited Partnership (the "Operating Partnership") is the entity through which Sovran Self Storage, Inc. (the "Company"), a self-administered and self-managed real estate investment trust ("REIT"), conducts substantially all of its business and owns substantially all of its assets. In 1995, the Company was formed under Maryland law and the Operating Partnership was organized as a Delaware limited partnership to continue and to expand the self-storage operations of the Company's privately owned predecessor organizations. On June 26, 1995, the Company commenced operations, through the Operating Partnership, effective with the completion of its initial public offering of 5,890,000 shares. Since its formation the Operating Partnership has purchased a total of 149 (eighteen in 1999, fifty in 1998, forty-four in 1997, twenty-nine in 1996 and eight in 1995) self storage properties from unaffiliated third parties, increasing the total number of self-storage properties owned at December 31, 1999 to 222 properties in 21 states. As of December 31, 1999, the Company was a 93.55% economic owner of the Operating Partnership and controls it through Sovran Holdings, Inc. ("Holdings"), a wholly owned subsidiary of the Company incorporated in Delaware and the sole general partner of the Operating Partnership (this structure is commonly referred to as an umbrella partnership REIT or "UPREIT"). The board of directors of Holdings, the members of which are also members of the Board of Directors of the Company, manages the affairs of the Operating Partnership by directing the affairs of Holdings. The Company's limited partner and indirect general partner interests in the Operating Partnership entitle it to share in cash distributions from, and in the profits and losses of, the Operating Partnership in proportion to its ownership interest therein and entitle the Company to vote on all matters requiring a vote of the limited partners. The other limited partners of the Operating Partnership are persons who contributed their direct or indirect interests in certain self-storage properties to the Operating Partnership. The Operating Partnership is obligated to redeem each unit of limited partnership ("Unit") at the request of the holder thereof for cash equal to the fair market value of a share of the Company's common stock ("Common Shares") at the time of such redemption, provided that the Company at its option may elect to acquire any Unit presented for redemption for one Common Share or cash. The Company presently anticipates that it will elect to issue Common Shares to acquire Units presented for redemption, rather than paying cash. With each such redemption the Company's percentage ownership interest in the Operating Partnership will increase. In addition, whenever the Company issues Common Shares, the Company is obligated to contribute any net proceeds therefrom to the Operating Partnership and the Operating Partnership is obligated to issue an equivalent number of Units to the Company. Such limited partners' redemption rights are reflected in "limited partners' capital interest" in the accompanying balance sheets at the cash redemption amount at the balance sheet date. Capital activity with regard to such limited partners' redemption rights is reflected in the accompanying statements of partners' capital. 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Cash and Cash Equivalents: The Operating Partnership considers all highly liquid debt instruments purchased with maturity of three months or less to be cash equivalents. Revenue Recognition: Rental income is recorded when earned. Rental income received prior to the start of the rental period is included in deferred revenue. Interest and Other Income: Other income consists primarily of interest income, sales of storage-related merchandise (locks and packing supplies) and commissions from truck rentals. In 1999, the other income also includes a $652 gain on the sale of a facility in Tennessee. Investment in Storage Facilities: Storage facilities are recorded at cost. Depreciation is computed using the straight line method over estimated useful lives of forty years for buildings and improvements, and five to twenty years for furniture, fixtures and equipment. Expenditures for significant renovations or improvements which extend the useful life of assets are capitalized. Repair and maintenance costs are expensed as incurred. Whenever events or changes in circumstances indicate that the basis of the Operating Partnership's property may not be recoverable, the Operating Partnership's policy is to assess any impairment of value. Impairment is evaluated based upon comparing the sum of the expected undiscounted future cash flows to the carrying value of the property; on a property by property basis. If the sum of the cash flow is less than the carrying amount, an impairment loss is recognized for the amount by which the carrying amount of the asset exceeds the fair value of the asset. At December 31, 1999 and 1998, no assets had been determined to be impaired under this policy, and, accordingly, this policy had no impact on the Operating Partnership's financial position or results of operations. Prepaid Expenses and Other Assets: Included in prepaid expenses and other assets are prepaid expenses and intangible assets. The intangible assets at December 31, 1999, consist primarily of loan acquisition costs of approximately $1,845, net of accumulated amortization of approximately $1,023; and covenants not to compete of $785, net of accumulated amortization of $643. Loan acquisition costs are amortized over the terms of the related debt; and the covenants are amortized over the contract periods. Amortization expense was $879, $541 and $794 for the periods ended December 31, 1999, 1998 and 1997, respectively. Income Taxes: No provision has been made for income taxes in the accompanying financial statements since the Operating Partnership qualifies as a partnership for federal and state income tax purposes and its partners are required to include their respective shares of profits and losses in their income tax returns. Use of Estimates: The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates. 3. EARNINGS PER UNIT The Operating Partnership reports earnings per unit data in accordance with Statement of Financial Accounting Standards No. 128, "Earnings Per Share." The following table sets forth the computation of basic and diluted earnings per unit. Year Ended Year Ended Year Ended (Amounts in thousands, December 31, December 31, December 31, except per unit data) 1999 1998 1997 ___________________________________________________________________ Numerator: Net Income available to common unitholders $ 26,108 $ 24,798 $ 23,763 ___________________________________________________________________ Denominator: Denominator for basic earnings per unit - weighted average units 13,267 12,948 12,090 ___________________________________________________________________ Effect of Dilutive Securities: Options for Company stock 3 38 62 Denominator for diluted earnings per unit - adjusted weighted - average units and assumed conversion 13,270 12,986 12,152 __________________________________________________________________ Basic Earnings per Common Unit $ 1.97 $ 1.91 $ 1.97 Diluted Earnings per Common Unit $ 1.97 $ 1.91 $ 1.96 __________________________________________________________________ 4. INVESTMENT IN STORAGE FACILITIES The following summarizes activity in storage facilities during the years ended December 31, 1999 and December 31, 1998 (Dollars in Thousands) 1999 1998 ________________________________________________________________ Cost: Beginning balance $ 502,502 $ 333,036 Property acquisitions 45,811 157,080 Improvements and equipment additions 9,959 12,940 Dispositions (1,799) (554) ________________________________________________________________ Ending balance $ 556,473 $ 502,502 ________________________________________________________________ Accumulated Depreciation: Beginning balance $ 21,339 $ 11,639 Additions during the year 12,259 9,762 Dispositions (145) (62) ________________________________________________________________ Ending balance $ 33,453 $ 21,339 ________________________________________________________________ 5. UNSECURED LINE OF CREDIT AND TERM NOTE The Operating Partnership has a $150 million unsecured credit facility that matures February 2001 and provides for funds at LIBOR plus 1.25%. The average interest rate at December 31, 1999 on the line of credit was approximately 7.1%, 6.6% at December 31, 1998. At December 31, 1999, there was $27 million available on the line. In 1998 the Operating Partnership recorded an extraordinary loss on the extinguishment of debt of $357,000 representing the unamortized financing costs of a former revolving credit facility and related costs. In December 1998, the Operating Partnership entered into a $75 million unsecured term note that matures on December 22, 2000 and bears interest at LIBOR plus 1.50% (approximately 7.35% at December 31, 1999). As of December 31, 1999, the Operating Partnership has one outstanding interest rate collar transaction through June 30, 2000. Under the agreement, which is based on a notional amount of $70 million, if the LIBOR rate exceeds 6.5%, the bank pays the Operating Partnership the rate in excess of 6.5% multiplied by $70 million for the outstanding period. If LIBOR drops below 5.265%, the Operating Partnership must pay the bank the difference between LIBOR and 5.265% multiplied by $70 million for the outstanding period. The net carrying amount of the Operating Partnership's debt instruments approximates fair value. 6. PRO FORMA FINANCIAL INFORMATION (UNAUDITED) The following unaudited pro forma information shows the results of operations as though the acquisitions of storage facilities in 1999 and 1998, and the preferred stock offering of the Company in 1999 had all occurred as of the beginning of 1998. (Dollars in thousands, except Year ended December 31, unit data) 1999 1998 _________________________________________________________________ Total revenues $ 86,520 $ 83,364 _________________________________________________________________ Total expenses (58,709) (56,760) _________________________________________________________________ Income before extraordinary loss $ 27,811 $ 26,604 _________________________________________________________________ Net Income $ 27,811 $ 26,247 _________________________________________________________________ Net Income available to common Unitholders $ 24,856 $ 23,292 _________________________________________________________________ Earnings per common unit before extraordinary loss - basic $ 1.89 $ 1.80 _________________________________________________________________ Earnings per common unit - basic $ 1.89 $ 1.77 _________________________________________________________________ Earnings per common unit - diluted $ 1.89 $ 1.77 _________________________________________________________________ Units used in basic earnings per common unit calculation 13,152,200 13,152,200 _________________________________________________________________ Such unaudited pro forma information is based upon the historical statements of operations of the Operating Partnership. It should be read in conjunction with the financial statements of the Operating Partnership and notes thereto. In management's opinion, all adjustments necessary to reflect the effects of these transactions have been made. This unaudited pro forma statement does not purport to represent what the actual results of operations of the Operating Partnership would have been assuming such transactions had been completed as set forth above, nor does it purport to represent the results of operations for future periods. 7. STOCK OPTIONS The Operating Partnership continues to account for Company stock-based compensation using the measurement prescribed by APB Opinion No. 25 which does not recognize compensation expense because the number of stock options granted is fixed and the exercise price of the stock options equals the market price of the underlying stock on the date of grant. Statement of Financial Accounting Standards No. 123, "Accounting for Stock- Based Compensation," requires companies that choose not to adopt the new fair value accounting rules to disclose pro forma net income and earnings per unit under the new method. The Operating Partnership will issue a Unit to the Company for each common share of the Company issued under the following plans. The Company has established the 1995 Award and Option Plan (the Plan) for the purpose of attracting and retaining the Company's executive officers and other employees. The options vest ratably over four and five years, and must be exercised within ten years from the date of grant. The exercise price for qualified incentive stock options must be at least equal to the fair market value at the date of grant. As of December 31, 1999, options for 383,550 shares were outstanding under the Plan. The total options available under the Plan (including restricted stock issuances is 900,000. The Company also established the 1995 Outside Directors' Stock Option Plan (the Non-employee Plan) for the purpose of attracting and retaining the services of experienced and knowledgeable outside directors. The Non-employee Plan provides for the annual granting of options to purchase 2,500 shares of common stock to each eligible director. Such options vest over a one-year period for initial awards and immediately upon subsequent grants. The total shares reserved under the Non- employee Plan is 100,000. The exercise price for options granted under the Non-employee Plan is equal to fair market value at date of grant. As of December 31, 1999, options for 49,500 shares were outstanding under the Non-employee Plan. The fair value for these options was estimated at the date of grant using a Black-Scholes option pricing model with the following weighted-average assumptions: risk-free interest rate of 7.0% for 1999 and 5.5% for 1998, dividend yield of 10% for 1999 and 8% for 1998, volatility factor of the expected market price of the Company's common stock of .21 for 1999 and .19 for 1998. The Black-Scholes options valuation model was developed for use in estimating the fair value of traded options which have no vesting restrictions and are fully transferable. In addition, option valuation models require the input of highly subjective assumptions including the expected stock price volatility. Because the Company's employee stock options have characteristics significantly different from those of traded options, and because changes in the subjective input assumptions can materially affect the fair value estimate, in management's opinion, the existing models do not necessarily provide a reliable single measure of the fair value of its employee stock options. For purposes of pro forma disclosures, the estimated fair value of the options is amortized to expense over the options' vesting period. The Operating Partnership's pro forma information for the year ended December 31, 1999, 1998 and 1997 follows (in thousands, except for earnings per unit information). 1999 1998 1997 _________________________________________________________________ Pro forma net income available to common unitholders $ 26,001 $ 24,640 $ 23,620 Pro forma earnings per share: Basic $ 1.96 $ 1.90 $ 1.95 Diluted $ 1.96 $ 1.90 $ 1.94 The Company has also issued 18,400 shares of restricted stock to employees which vest over a four and five year periods. The fair value of the restricted stock on the date of grant ranged from $24.22 to $29.19. A summary of the Company's stock option activity and related information for the years ended December 31 follows:
1999 1998 1997 Weighted average Weighted average Weighted average Options exercise price Options exercise price Options exercise price Outstanding at beginning of year: 387,600 $25.99 295,250 $25.36 293,500 $23.97 Granted 58,200 27.18 110,350 27.91 34,000 29.93 Exercised (6,750) 23.00 (15,750) 23.00 (14,250) 23.00 Forfeited (6,000) 30.62 (2,250) 23.00 (18,000) 24.53 ____________________________________________________________________________________________________ Outstanding at end of year 433,050 $25.32 387,600 $25.99 295,250 $ 25.36 ____________________________________________________________________________________________________ Exercisable at end of year 305,910 $24.27 208,500 $24.19 146,750 $ 25.12 ____________________________________________________________________________________________________ Exercise prices for options outstanding as of December 31, 1999 ranged from $23.00 to $29.66. The weighted average remaining contractual life of those options is 6.8 years.
8. RETIREMENT PLAN Employees of the Operating Partnership qualifying under certain age and service requirements are eligible to be a participant in a 401(K) Plan which was effective September 1, 1997. The Operating Partnership contributes to the Plan at the rate of 50% of the first 4% of gross wages. Total expense to the Operating Partnership was approximately $56,000 and $53,000 for the year ended December 31, 1999 and 1998, respectively. 9. SHAREHOLDER RIGHTS PLAN In November 1996, the Company adopted a Shareholder Rights Plan and declared a dividend distribution of one Right for each outstanding share of common stock. Under certain conditions, each Right may be exercised to purchase one one-thousandth of a share of Series A Junior Participating Preferred Stock at a purchase price of $75, subject to adjustment. The Rights will be exercisable only if a person or group has acquired 10% or more of the outstanding shares of common stock, or following the commencement of a tender or exchange offer for 10% or more of such outstanding shares of common stock. If a person or group acquires more than 10% of the then outstanding shares of common stock, each Right will entitle its holder to receive, upon exercise, common stock having a value equal to two times the exercise price of the Right. In addition, if the Company is acquired in a merger or other business combination transaction, each Right will entitle its holder to purchase that number of the acquiring Company's common shares having a market value of twice the Right's exercise price. The Company will be entitled to redeem the Rights at $.01 per Right at any time prior to the earlier of the expiration of the Rights in November 2006 or the time that a person has acquired a 10% position. The Rights do not have voting or dividend rights, and until they become exercisable, have no dilutive effect on the Operating Partnership's earnings. 10. PREFERRED STOCK On July 30, 1999, the Company issued 1,200,000 shares of 9.85% Series B Cumulative Redeemable Preferred Stock. The offering price was $25 per share resulting in net proceeds of $28.8 million after expenses. The Series B Preferred Stock is not redeemable until on or after July 30, 2004, after which time the Company may redeem the shares at $25.00 per share ($30,000,000 aggregate), plus any accrued and unpaid dividends. The shares may be redeemed only with the proceeds of certain sales of equity securities. Dividends on the Series B Preferred Stock are cumulative from the date of original issue and are payble quarterly in arrears on the last day of each March, June, September, and December at a rate of $2.4625 per annum per share. Holders of the Series B Preferred Stock generally have no voting rights. However, if the Company does not pay dividends on the Sries B shares for six or more quarterly periods (whether or not consecutive), the holders of the shares, voting as a class with the holders of any other class or series of stock with similar voting rights, will be entitled to vote for the election of two additional directors to serve on the Board of Directors until all Series B dividends are paid. 11. SUPPLEMENTARY QUARTERLY FINANCIAL DATA (UNAUDITED) The following is a summary of quarterly results of operations for the years ended December 31, 1999 and 1998 (dollars in thousands, except per unit data) 1999 Quarter Ended _________________________________________ March 31 June 30 Sept. 30 Dec. 31 _________________________________________ Revenues $19,451 $20,605 $22,570 $21,630 Net income $ 6,263 $ 6,595 $ 8,177 $ 6,312 Net income available to common unitholders $ 6,263 $ 6,595 $ 7,676 $ 5,574 Net income per common unitholders Basic $ 0.47 $ 0.50 $ 0.57 $ 0.43 Diluted $ 0.47 $ 0.50 $ 0.57 $ 0.43 1998 Quarter Ended _________________________________________ March 31 June 30 Sept. 30 Dec. 31 _________________________________________ Revenue $14,375 $16,442 $19,107 $19,436 Income before extraordinary loss $ 6,203 $ 6,271 $ 6,638 $ 6,036 Net Income $ 5,853 $ 6,271 $ 6,638 $ 6,036 Net Income Per Unit (Note 3): Before extraordinary Loss - Basic $ 0.49 $ 0.49 $ 0.50 $ 0.46 Basic $ 0.46 $ 0.49 $ 0.50 $ 0.46 Diluted $ 0.46 $ 0.49 $ 0.50 $ 0.46 12. COMMITMENTS AND CONTINGENCIES The Operating Partnership's current practice is to conduct environmental investigations in connection with property acquisitions. At this time, the Operating Partnership is not aware of any environmental contamination of any of its facilities which individually or in the aggregate would be material to the Operating Partnership's overall business, financial condition, or results of operations. As of December 31, 1999, the Operating Partnership had entered into contracts for the purchase of four facilities. Three of these facilities were acquired in February and March, 2000 for a total cost of $7,917,000. 13. LEGAL PROCEEDINGS A former business associate (Plaintiff) of certain officers and directors of the Company, including Robert J. Attea, Kenneth F. Myszka, David L. Rogers and Charles E. Lannon, filed a lawsuit against the Company on June 13, 1995 in the United States District Court for the Northern District of Ohio. The Plaintiff has since amended the complaint in the lawsuit alleging breach of fiduciary duty, breach of contract, breach of general partnership/joint venture arrangement, breach of duty of good faith, fraud and deceit, and other causes of action including declaratory judgement as to the Plaintiff's continuing interest in the Company. The Plaintiff is seeking money damages in excess of $15 million, as well as punitive damages and declaratory and injunctive relief (including the imposition of a constructive trust on assets of the Company in which the Plaintiff claims to have a continuing interest) and an accounting. The amended complaint also added Messrs. Attea, Myszka, Rogers and Lannon as additional defendants. The parties are currently involved in discovery and trial. The Company is vigorously defending the lawsuit. Messrs. Attea, Myszka, Rogers and Lannon have agreed to indemnify the Company for costs and any loss arising from the lawsuit. The Operating Partnership believes that the actual amount of the Plaintiff's recovery in this matter if any, would be within the ability of these individuals to provide indemnification. The Operating Partnership does not believe that the lawsuit will have a material, adverse effect upon the Operating Partnership. 14. INTERNAL PROPERTY ACQUISITION COSTS On March 19, 1998 the Financial Accounting Standards Board Emerging Issues Task Force reached a consensus as to the accounting for internal acquisition costs incurred in connection with real property. The Task Force consensus indicates that internal costs related to the acquisition of operating properties should be expensed as incurred. The Operating Partnership had previously capitalized such costs and has complied with the consensus prospectively. The amount of such costs capitalized in 1998 (through the date of the pronouncement) and 1997 were $238,000 and $728,000, respectively. Report of Independent Auditors The Board of Directors and Partners Sovran Acquisition Limited Partnership: We have audited the accompanying balance sheets of Sovran Acquisition Limited Partnership as of December 31, 1999 and 1998 and the related statements of operations, partners' capital and cash flows for each of the three years in the period ended December 31, 1999. Our audit also included the financial statement schedule listed in the Index at Item 14(a). These financial statements and schedule are the responsibility of the management of Sovran Acquisition Limited Partnership. Our responsibility is to express an opinion on these financial statements and schedule based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Sovran Acquisition Limited Partnership as of December 31, 1999 and 1998, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 1999, in conformity with accounting principles generally accepted in the United States. Also in our opinion, the related financial statement schedule, when considered in relation to the basic financial statements taken as a whole, presents fairly in all material respects the information set forth therein. Ernst & Young LLP Buffalo, New York January 26, 2000 Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure None. Part III Item 10. Directors and Executive Officers of the Registrant Through Holdings, a wholly-owned subsidiary of the Company and the sole general partner of the Operating Partnership, the Company controls the Operating Partnership. The Board of Directors of Holdings, the members of which are the same as the members of the Board of Directors of the Company, manages the affairs of the Operating Partnership by directing the affairs of the general partner of the Operating Partnership. The Operating Partnership has no directors, or executive officers. Consequently, this information incorporated by reference reflects information with respect to the directors and executive officers of the Company and Holdings. The information required is incorporated by reference to "Election of Directors", including "Executive Officers of the Company" and "Section 16(a) Beneficial Ownership Reporting Compliance" in the Company's Proxy Statement for the Annual Meeting of Shareholders of the Company to be held on May 24, 2000. Item 11. Executive Compensation Through Holdings, a wholly-owned subsidiary of the Company and the sole general partner of the Operating Partnership, the Company controls the Operating Partnership. The Board of Directors of Holdings, the members of which are the same as the members of the Board of Directors of the Company, manages the affairs of the Operating Partnership by directing the affairs of the general partner of the Operating Partnership. The Directors and Officers of Holdings receive their compensation from the Company and are not separately compensated by Holdings. Consequently, the information incorporated by reference reflects compensation paid to the Directors and executive officers of the Company. The information required is incorporated by reference to "Executive Compensation" and "Compensation of Directors" in the Company's Proxy Statement for Annual Meeting of Shareholders of the Company to be held May 24, 2000. Item 12. Security Ownership of Certain Beneficial Owners and Management The Operating Partnership has no directors or officers. No director or officer of the Company or Holdings beneficially owns any Units. The Company beneficially owns 12,299,163 Units which constitute 93.55% of all outstanding Units. No other person holds more than a 5% beneficial ownership in the Operating Partnership. The information required herein for the Company is incorporated by reference to "Security Ownership of Certain Beneficial Owners and Management" in the Proxy Statement for Annual Meeting of Shareholders of the Company to be held on May 24, 2000. RECENT SALES OF UNREGISTERED SECURITIES During 1999, the Operating Partnership issued Units in private placements in reliance on the exemption from registration under Section 4(2) of the Securities Act of 1933, as amended, in the amounts and for the consideration set forth below: - On January 22, 1999, in connection with the Sovran Self Storage, Inc. Dividend Reinvestment and Stock Purchase Plan, the Company transferred $1,255,390 to the Operating Partnership in exchange for 52,819 Units. - On February 22, 1999, in connection with the Sovran Self Storage, Inc. Dividend Reinvestment and Stock Purchase Plan, the Company transferred $311,360 to the Operating Partnership in exchange for 13,161 Units. - On March 22, 1999, in connection with the Sovran Self Storage, Inc. Dividend Reinvestment and Stock Purchase Plan, the Company transferred $9,453 to the Operating Partnership in exchange for 399 Units. - On April 22, 1999, in connection with the Sovran Self Storage, Inc. Dividend Reinvestment and Stock Purchase Plan, the Company transferred $1,209,847 to the Operating Partnership in exchange for 52,222 Units. - On May 22, 1999, in connection with the Sovran Self Storage, Inc. Dividend Reinvestment and Stock Purchase Plan, the Company transferred $25,359 to the Operating Partnership in exchange for 999 Units. - On June 22, 1999, in connection with the Sovran Self Storage, Inc. Dividend Reinvestment and Stock Purchase Plan, the Company transferred $45,915 to the Operating Partnership in exchange for 1,809 Units. - On June 24, 1999, in connection with the Sovran Self Storage, Inc. 1995 Award and Option Plan, the Operating Partnership issued 4,500 Units to the Company. - On June 28, 1999, the Operating Partnership redeemed 10,000 Units from Storage 17, Inc. - On July 1, 1999, in connection with the Sovran Self Storage, Inc. 1995 Award and Option Plan, the Operating Partnership issued 2,250 Units to the Company. - On July 22, 1999, in connection with the Sovran Self Storage, Inc. Dividend Reinvestment and Stock Purchase Plan, the Company transferred $1,596,857 to the Operating Partnership in exchange for 64,413 Units. - On August 22, 1999, in connection with the Sovran Self Storage, Inc. Dividend Reinvestment and Stock Purchase Plan, the Company transferred $1,200,701 to the Operating Partnership in exchange for 53,061 Units. - On September 2, 1999, in connection with the Sovran Self Storage, Inc. 1995 Award and Option Plan, the Operating Partnership issued 1,000 Units to the Company. - On September 22, 1999, in connection with the Sovran Self Storage, Inc. Dividend Reinvestment and Stock Purchase Plan, the Company transferred $35,606 to the Operating Partnership in exchange for 1,543 Units. - On October 22, 1999, in connection with the Sovran Self Storage, Inc. Dividend Reinvestment and Stock Purchase Plan, the Company transferred $737,908 to the Operating Partnership in exchange for 36,119 Units. - On November 22, 1999, in connection with the Sovran Self Storage, Inc. Dividend Reinvestment and Stock Purchase Plan, the Company transferred $38,360 to the Operating Partnership in exchange for 1,917 Units. - On December 22, 1999, in connection with the Sovran Self Storage, Inc. Dividend Reinvestment and Stock Purchase Plan, the Company transferred $12,551 to the Operating Partnership in exchange for 695 Units. Item 13. Certain Relationships and Related Transactions The information required herein is incorporated by reference to "Certain Transactions" in the Company's Proxy Statement for the Annual Meeting of Shareholders to be held on May 24, 2000. Part IV Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K (a) Documents filed as part of this Annual Report on Form 10-K: 1. Financial Statements filed as part of this Annual Report on Form 10-K. (i) Balance Sheets for Years Ended December 31, 1999 and 1998. (ii) Statements of Operations for Years Ended December 31, 1999, 1998, and 1997. (iii) Statements of Partners' Capital of the for Years Ended December 31, 1999, 1998, and 1997. (iv) Statements of Cash Flows for Years Ended December 31, 1999, 1998, and 1997. (v) Selected Financial Data. (vi) Notes to Financial Statements. (vii) Report of Independent Auditors. 2. The following financial statement schedule as of the period ended December 31, 1999 is included in this Annual Report on From 10-K. Schedule III Real Estate and Accumulated Depreciation. All other financial schedules are omitted because they are inapplicable, not required, or the information is included elsewhere in the financial statements or the notes thereto. Sovran Acquisition Limited Partnership Schedule III Combined Real Estate and Accumulated Depreciation (in thousands) December 31, 1999
Cost Capitalized Initial Subsequent to Gross Amount at Which Cost to Company Acquisition Carried at Close of Period ___________________________ _____________ ____________________________ Building, Building, Building Equipment Equipment Equipment and and Land and Accumulated Description ST Land Improvements Improvements Land Improvements Total Depreciation Acquired Boston-Metro I MA $ 363 $ 1,679 $ 123 $ 363 $ 1,802 $ 2,165 $ 209 6/26/95 Boston-Metro II MA 680 1,616 101 680 1,717 2,397 197 6/26/95 E. Providence RI 345 1,268 97 345 1,365 1,710 160 6/26/95 Charleston I SC 416 1,516 114 416 1,630 2,046 198 6/26/95 Lakeland I FL 397 1,424 51 397 1,475 1,872 177 6/26/95 Charlotte NC 308 1,102 128 308 1,230 1,538 134 6/26/95 Tallahassee I FL 770 2,734 1,205 770 3,939 4,709 354 6/26/95 Youngstown OH 239 1,110 164 239 1,274 1,513 155 6/26/95 Cleveland-Metro I OH 179 836 201 179 1,037 1,216 113 6/26/95 Cleveland-Metro II OH 701 1,659 93 701 1,752 2,453 208 6/26/95 Tallahassee II FL 204 734 167 204 901 1,105 102 6/26/95 Pt. St. Lucie FL 395 1,501 176 395 1,677 2,072 214 6/26/95 Deltona FL 483 1,752 290 483 2,042 2,525 228 6/26/95 Middletown NY 224 808 153 224 961 1,185 108 6/26/95 Buffalo I NY 423 1,531 740 497 2,197 2,694 231 6/26/95 Rochester I NY 395 1,404 47 395 1,451 1,846 163 6/26/95 Salisbury MD 164 760 204 164 964 1,128 99 6/26/95 New Bedford MA 367 1,325 197 367 1,522 1,889 167 6/26/95 Fayetteville NC 853 3,057 102 853 3,159 4,012 359 6/26/95 Allentown PA 199 921 766 203 1,683 1,886 129 6/26/95 Jacksonville I FL 152 728 181 152 909 1,061 116 6/26/95 Columbia I SC 268 1,248 37 268 1,285 1,553 150 6/26/95 Rochester II NY 230 847 109 234 952 1,186 112 6/26/95 Savannah I GA 463 1,684 148 463 1,832 2,295 213 6/26/95 Greensboro NC 444 1,613 137 444 1,750 2,194 200 6/26/95 Raleigh I NC 649 2,329 123 649 2,452 3,101 277 6/26/95 New Haven CT 387 1,402 316 387 1,718 2,105 173 6/26/95 Atlanta-Metro I GA 844 2,021 245 844 2,266 3,110 254 6/26/95 Atlanta-Metro II GA 302 1,103 98 303 1,200 1,503 149 6/26/95 Buffalo II NY 315 745 118 315 863 1,178 103 6/26/95 Raleigh II NC 321 1,150 167 321 1,317 1,638 149 6/26/95 Columbia II SC 361 1,331 93 374 1,411 1,785 172 6/26/95 Columbia III SC 189 719 124 189 843 1,032 107 6/26/95 Columbia IV SC 488 1,188 135 488 1,323 1,811 162 6/26/95 Atlanta-Metro III GA 430 1,579 111 430 1,690 2,120 208 6/26/95 Orlando I FL 513 1,930 152 513 2,082 2,595 256 6/26/95 Spartanburg SC 331 1,209 39 331 1,248 1,579 148 6/26/95 Sharon PA 194 912 213 194 1,125 1,319 128 6/26/95 Ft. Lauderdale FL 1,503 3,619 176 1,503 3,795 5,298 453 6/26/95 West Palm I FL 398 1,035 57 398 1,092 1,490 148 6/26/95 Atlanta-Metro IV GA 423 1,015 138 423 1,153 1,576 135 6/26/95 Atlanta-Metro V GA 483 1,166 105 483 1,271 1,754 152 6/26/95 Atlanta-Metro VI GA 308 1,116 185 308 1,301 1,609 163 6/26/95 Atlanta-Metro VII GA 170 786 111 174 893 1,067 113 6/26/95 Atlanta-Metro VIII GA 413 999 242 413 1,241 1,654 146 6/26/95 Baltimore I MD 154 555 109 154 664 818 79 6/26/95 Baltimore II MD 479 1,742 436 479 2,178 2,657 226 6/26/95 Augusta I GA 357 1,296 91 357 1,387 1,744 159 6/26/95 Macon I GA 231 1,081 73 231 1,154 1,385 139 6/26/95 Melbourne I FL 883 2,104 1,128 883 3,232 4,115 299 6/26/95 Newport News VA 316 1,471 171 316 1,642 1,958 194 6/26/95 Pensacola I FL 632 2,962 179 651 3,122 3,773 373 6/26/95 Augusta II GA 315 1,139 142 315 1,281 1,596 147 6/26/95 Hartford-Metro I CT 715 1,695 172 715 1,867 2,582 206 6/26/95 Atlanta-Metro IX GA 304 1,118 200 304 1,318 1,622 152 6/26/95 Alexandria VA 1,375 3,220 83 1,375 3,303 4,678 372 6/26/95 Pensacola II FL 244 901 115 244 1,016 1,260 140 6/26/95 Melbourne II FL 834 2,066 107 834 2,173 3,007 289 6/26/95 Hartford-Metro II CT 234 861 55 234 916 1,150 106 6/26/95 Atlanta-Metro X GA 256 1,244 72 256 1,316 1,572 164 6/26/95 Norfolk I VA 313 1,462 189 313 1,651 1,964 176 6/26/95 Norfolk II VA 278 1,004 143 278 1,147 1,425 145 6/26/95 Birmingham I AL 307 1,415 50 307 1,465 1,772 169 6/26/95 Birmingham II AL 730 1,725 81 730 1,806 2,536 208 6/26/95 Montgomery I AL 863 2,041 121 863 2,162 3,025 252 6/26/95 Jacksonville II FL 326 1,515 119 326 1,634 1,960 191 6/26/95 Pensacola III FL 369 1,358 220 369 1,578 1,947 196 6/26/95 Pensacola IV FL 244 1,128 103 244 1,231 1,475 156 6/26/95 Pensacola V FL 226 1,046 197 226 1,243 1,469 155 6/26/95 Tampa I FL 1,088 2,597 239 1,088 2,836 3,924 339 6/26/95 Tampa II FL 526 1,958 210 526 2,168 2,694 284 6/26/95 Tampa III FL 672 2,439 208 672 2,647 3,319 317 6/26/95 Jackson I MS 343 1,580 153 343 1,733 2,076 207 6/26/95 Jackson II MS 209 964 235 209 1,199 1,408 133 6/26/95 Richmond VA 443 1,602 145 443 1,747 2,190 209 8/25/95 Orlando II FL 1,161 2,755 195 1,162 2,949 4,111 335 9/29/95 Birmingham III AL 424 1,506 219 424 1,725 2,149 185 1/16/96 Macon II GA 431 1,567 58 431 1,625 2,056 172 12/1/95 Harrisburg I PA 360 1,641 159 360 1,800 2,160 197 12/29/95 Harrisburg II PA 627 2,224 183 636 2,398 3,034 255 12/29/95 Syracuse I NY 470 1,712 120 472 1,830 2,302 191 12/27/95 Ft. Myers FL 205 912 76 206 987 1,193 143 12/28/95 Ft. Myers II FL 412 1,703 195 413 1,897 2,310 258 12/28/95 Newport News II VA 442 1,592 65 442 1,657 2,099 170 1/5/96 Montgomery II AL 353 1,299 64 353 1,363 1,716 150 1/23/96 Charleston II SC 237 858 128 232 991 1,223 100 3/1/96 Tampa IV FL 766 1,800 150 766 1,950 2,716 182 3/28/96 Arlington I TX 442 1,767 84 442 1,851 2,293 174 3/29/96 Arlington II TX 408 1,662 171 408 1,833 2,241 201 3/29/96 Ft. Worth TX 328 1,324 76 328 1,400 1,728 134 3/29/96 San Antonio I TX 436 1,759 140 436 1,899 2,335 186 3/29/96 San Antonio II TX 289 1,161 126 289 1,287 1,576 127 3/29/96 Syracuse II NY 481 1,559 311 495 1,856 2,351 166 6/5/96 Montgomery III AL 279 1,014 120 279 1,134 1,413 110 5/21/96 West Palm II FL 345 1,262 78 345 1,340 1,685 131 5/29/96 Ft. Myers III FL 229 884 57 229 941 1,170 93 5/29/96 Pittsburgh PA 545 1,940 75 545 2,015 2,560 182 6/19/96 Lakeland II FL 359 1,287 735 359 2,022 2,381 143 6/26/96 Springfield MA 251 917 371 297 1,242 1,539 127 6/28/96 Ft. Myers IV FL 344 1,254 125 344 1,379 1,723 129 6/28/96 Cincinnati OH 557 1,988 51 557 2,039 2,596 178 7/23/96 Dayton OH 667 2,379 51 667 2,430 3,097 211 7/23/96 Baltimore III MD 777 2,770 50 777 2,820 3,597 246 7/26/96 Jacksonville III FL 568 2,028 553 568 2,581 3,149 206 8/23/96 Jacksonville IV FL 436 1,635 91 436 1,726 2,162 172 8/26/96 Pittsburgh II PA 627 2,257 562 631 2,815 3,446 220 8/28/96 Jacksonville V FL 535 2,033 75 538 2,105 2,643 210 8/30/96 Charlotte II NC 487 1,754 24 487 1,778 2,265 150 9/16/96 Charlotte III NC 315 1,131 30 315 1,161 1,476 98 9/16/96 Orlando III FL 314 1,113 291 314 1,404 1,718 115 10/30/96 Rochester III NY 704 2,496 70 708 2,562 3,270 191 12/20/96 Youngstown II OH 600 2,142 66 600 2,208 2,808 168 1/10/97 Akron OH 413 1,478 29 413 1,507 1,920 115 1/10/97 Cleveland III OH 751 2,676 289 751 2,965 3,716 222 1/10/97 Cleveland IV OH 725 2,586 305 725 2,891 3,616 228 1/10/97 Cleveland V OH 637 2,918 410 637 3,328 3,965 250 1/10/97 Cleveland VI OH 495 1,781 275 495 2,056 2,551 156 1/10/97 Cleveland VII OH 761 2,714 394 761 3,108 3,869 246 1/10/97 Cleveland VIII OH 418 1,921 528 418 2,449 2,867 194 1/10/97 Cleveland IX OH 606 2,164 101 606 2,265 2,871 173 1/10/97 Grand Rapids I MI 455 1,631 31 455 1,662 2,117 124 1/17/97 Grand Rapids II MI 219 790 103 219 893 1,112 79 1/17/97 Kalamazoo MI 516 1,845 102 516 1,947 2,463 143 1/17/97 Lansing MI 327 1,332 7 327 1,339 1,666 99 1/17/97 Holland MI 451 1,830 319 451 2,149 2,600 175 1/17/97 San Antonio III TX 474 1,686 113 474 1,799 2,273 134 1/30/97 Universal TX 346 1,236 56 346 1,292 1,638 98 1/30/97 San Antonio IV TX 432 1,560 61 432 1,621 2,053 127 1/30/97 Houston-Eastex TX 634 2,565 39 634 2,604 3,238 184 3/26/97 Houston-Nederland TX 566 2,279 63 566 2,342 2,908 165 3/26/97 Houston-College TX 293 1,357 66 293 1,423 1,716 101 3/26/97 Lynchburg-Lakeside VA 335 1,342 107 335 1,449 1,784 120 3/31/97 Lynchburg-Timberlake VA 328 1,315 175 328 1,490 1,818 114 3/31/97 Lynchburg-Amherst VA 155 710 111 152 824 976 67 3/31/97 Christiansburg VA 245 1,120 80 245 1,200 1,445 82 3/31/97 Chesapeake VA 260 1,043 154 260 1,197 1,457 81 3/31/97 Danville VA 326 1,488 25 326 1,513 1,839 106 3/31/97 Orlando-W 25th St FL 289 1,160 58 289 1,218 1,507 87 3/31/97 Delray I-Mini FL 491 1,756 297 491 2,053 2,544 141 4/11/97 Savannah II GA 296 1,196 96 296 1,292 1,588 92 5/8/97 Delray II-Safeway FL 921 3,282 114 921 3,396 4,317 223 5/21/97 Cleveland X-Avon OH 301 1,214 148 303 1,360 1,663 93 6/4/97 Dallas-Skillman TX 960 3,847 418 960 4,265 5,225 315 6/30/97 Dallas-Centennial TX 965 3,864 386 943 4,272 5,215 307 6/30/97 Dallas-Samuell TX 570 2,285 334 570 2,619 3,189 195 6/30/97 Dallas-Hargrove TX 370 1,486 221 370 1,707 2,077 140 6/30/97 Houston-Antoine TX 515 2,074 218 515 2,292 2,807 169 6/30/97 Atlanta-Alpharetta GA 1,033 3,753 132 1,033 3,885 4,918 262 7/24/97 Atlanta-Marietta GA 769 2,788 27 769 2,815 3,584 179 7/24/97 Atlanta-Doraville GA 735 3,429 46 735 3,475 4,210 214 8/21/97 Greensboro-Hilltop NC 268 1,097 55 268 1,152 1,420 71 9/25/97 GreensboroStgCch NC 89 376 34 89 410 499 27 9/25/97 Baton Rouge-Airline LA 396 1,831 160 396 1,991 2,387 132 10/9/97 Baton Rouge-Airline2 LA 282 1,303 87 282 1,390 1,672 93 11/21/97 Harrisburg-Peiffers PA 635 2,550 61 637 2,609 3,246 138 12/3/97 Chesapeake-Military VA 542 2,210 42 542 2,252 2,794 113 2/5/98 Chesapeake-Volvo VA 620 2,532 49 620 2,581 3,201 129 2/5/98 Virginia Beach Shell VA 540 2,211 45 540 2,256 2,796 114 2/5/98 Virginia Beach Central VA 864 3,994 62 864 4,056 4,920 202 2/5/98 Norfolk-Naval Base VA 1,243 5,019 72 1,243 5,091 6,334 249 2/5/98 Tampa-E.Hillsborough FL 709 3,235 218 709 3,453 4,162 214 2/4/98 Northbridge MA 441 1,788 36 441 1,824 2,265 89 2/9/98 Harriman NY 843 3,394 59 843 3,453 4,296 168 2/4/98 Greensboro-High PointNC 397 1,834 136 397 1,970 2,367 97 2/10/98 Lynchburg-Timberlake VA 488 1,746 69 488 1,815 2,303 85 2/18/98 Titusville FL 492 1,990 16 492 2,006 2,498 95 2/25/98 Salem MA 733 2,941 322 733 3,263 3,996 150 3/3/98 Chattanooga-Lee Hwy TN 384 1,371 102 384 1,473 1,857 75 3/27/98 Chattanooga-Hwy 58 TN 296 1,198 89 296 1,287 1,583 60 3/27/98 Ft. Oglethorpe GA 349 1,250 39 349 1,289 1,638 60 3/27/98 Birmingham-Walt AL 544 1,942 176 544 2,118 2,662 108 3/27/98 East Greenwich RI 702 2,821 109 702 2,930 3,632 128 3/26/98 Durham-Hillborough NC 775 3,103 71 775 3,174 3,949 143 4/9/98 Durham-Cornwallis NC 940 3,763 62 940 3,825 4,765 169 4/9/98 Hendersonville TN 1,050 4,203 34 1,050 4,237 5,287 187 4/9/98 Salem-Policy NH 742 2,977 12 742 2,989 3,731 132 4/7/98 Warrem-Elm OH 522 1,864 89 522 1,953 2,475 84 4/22/98 Warren-Youngstown OH 512 1,829 16 512 1,845 2,357 78 4/22/98 Waterford-Highland MI 1,487 5,306 236 1,487 5,542 7,029 232 4/28/98 Indian Harbor FL 662 2,654 95 662 2,749 3,411 110 6/2/98 Jackson 3 - I55 MS 744 3,021 27 744 3,048 3,792 134 5/13/98 Katy-N.Fry TX 419 1,524 36 419 1,560 1,979 67 5/20/98 Hollywood-Sheridan FL 1,208 4,854 32 1,208 4,886 6,094 186 7/1/98 Pompano Beach - Atlantic FL 944 3,803 29 944 3,832 4,766 148 7/1/98 Pompano Beach - Sample FL 903 3,643 28 903 3,671 4,574 142 7/1/98 Boca Raton-18th St FL 1,503 6,059 87 1,503 6,146 7,649 234 7/1/98 Vero Beach FL 489 1,813 16 489 1,829 2,318 81 6/12/98 Humble TX 447 1,790 33 447 1,823 2,270 70 6/16/98 Houston-Old Katy TX 659 2,680 22 659 2,702 3,361 106 6/19/98 Webster TX 635 2,302 19 635 2,321 2,956 92 6/19/98 Carrollton TX 548 1,988 37 548 2,025 2,573 81 6/19/98 Hollywood-N.21st FL 840 3,373 35 840 3,408 4,248 123 8/3/98 San Marcos TX 324 1,493 37 324 1,530 1,854 60 6/30/98 Austin-McNeil TX 492 1,995 57 492 2,052 2,544 81 6/30/98 Austin-FM TX 484 1,951 69 481 2,023 2,504 80 6/30/98 Jacksonville-Center NC 327 1,329 20 327 1,349 1,676 50 8/6/98 Jacksonville- Gum Branch NC 508 1,815 73 508 1,888 2,396 65 8/17/98 Jacksonville- N. Marine NC 216 782 153 216 935 1,151 33 9/24/98 Euless TX 550 1,998 44 550 2,042 2,592 67 9/29/98 N. Richland Hills TX 670 2,407 11 670 2,418 3,088 78 10/9/98 Batavia OH 390 1,570 32 390 1,602 1,992 45 11/19/98 Jackson-N. West MS 460 1,642 150 460 1,792 2,252 62 12/1/98 Katy-Franz TX 507 2,058 11 507 2,069 2,576 58 12/15/98 W. Warwick RI 447 1,776 23 447 1,799 2,246 42 2/2/99 Lafayette-Pinhook 1 LA 556 1,951 157 556 2,108 2,664 58 2/17/99 Lafayette-Pinhook 2 LA 708 2,860 33 708 2,893 3,601 63 2/17/99 Lafayette-Ambassador LA 314 1,095 107 314 1,202 1,516 33 2/17/99 Lafayette-Evangeline LA 188 652 119 188 771 959 16 2/17/99 Lafayette-Guilbeau LA 963 3,896 23 963 3,919 4,882 85 2/17/99 Gilbert-Elliott Rd AZ 651 2,600 33 651 2,633 3,284 39 5/18/99 Glendale-59th Ave AZ 565 2,596 35 565 2,631 3,196 40 5/18/99 Mesa-Baseline AZ 330 1,309 43 330 1,352 1,682 20 5/18/99 Mesa-E. Broadway AZ 339 1,346 33 339 1,379 1,718 21 5/18/99 Mesa-W. Broadway AZ 291 1,026 35 292 1,060 1,352 16 5/18/99 Mesa-Greenfield AZ 354 1,405 35 355 1,439 1,794 21 5/18/99 Phoenix-Camelback AZ 453 1,610 37 454 1,646 2,100 25 5/18/99 Phoenix-Bell AZ 872 3,476 35 873 3,510 4,383 52 5/18/99 Phoenix-35th Ave AZ 849 3,401 40 850 3,440 4,290 51 5/21/99 Westbrook ME 410 1,626 102 411 1,727 2,138 18 8/2/99 Cocoa FL 667 2,373 33 668 2,405 3,073 16 9/29/99 Cedar Hill TX 335 1,521 20 336 1,540 1,876 7 11/9/99 Corporate Office NY 0 68 616 0 684 684 275 1/1/95 _________________ _________ _____________________________________________________ $111,650 $412,895 $ 31,928 $111,833 $444,640 $556,473 $33,453 ================= ========= =====================================================
December 31, 1999 December 31, 1998 December 31, 1997 Cost: Balance at beginning of period $ 502,502 $333,036 $ 220,711 Additions during period: Acquisitions through foreclosure $ - $ - $ - Other acquisitions 45,811 157,080 106,926 Improvements, etc. 9,959 12,940 5,527 _________ _________ ________ 55,770 170,020 112,453 Deductions during period: Cost of real estate sold (1,799) (1,799) (554) (554) (128) (128) _______ _________ _____ ________ _____ _________ Balance at close of period $ 556,473 $502,502 $ 333,036 ========= ======== ========= Accumulated Depreciation: Balance at beginning of period $ 21,339 $ 11,639 $ 5,457 Additions during period: Depreciation expense $ 12,259 12,259 $ 9,762 $ 9,762 $ 6,211 6,211 ________ _______ _______ Deductions during period: Accumulated depreciation of real estate sold (145) (145) (62) (62) (29) (29) _________ _________ ________ ________ ________ ________ Balance at close of period $ 33,453 $ 21,339 $ 11,639 ========= ========= =========
Exhibits Exhibit No. Description 3.1 Agreement of Limited Partnership of the Operating Partnership, as amended 3.2* Amended and Restated Articles of Incorporation of the Company 3.3* By-laws of the Company 3.4 Articles Supplementary to the Amended and Restated Articles of Incorporation of the Company classifying and designating the Company's Series A Junior Participating Preferred Stock (Incorporated by reference to Exhibit 3.1 to the Company's Form 8A filed December 3, 1996) 3.5 Articles Supplementary to the Amended and Restated Articles of Incorporation of the Company classifying and designating the 9.85% Series B Cumulative Redeemable Preferred Stock. (Incorporated by reference to Exhibit 1.6 to the Company's Form 8-A filed July 29, 1999) 10.1 Revolving Credit Agreement the Company, the Operating Partnership, Fleet National Bank and other lenders named therein (Incorporated by reference to Exhibit 10.1 to the Company's report on Form 10-Q for the quarter ended March 31, 1998) 10.2* Form of Non-competition Agreement between the Company and Charles E. Lannon 10.3* Form of Non-competition Agreement between the Company and Robert J. Attea 10.4* Form of Non-competition Agreement between the Company and Kenneth F. Myszka 10.5* Form of Non-competition Agreement between the Company and David L. Rogers 10.6* Sovran Self Storage, Inc. 1995 Award and Option Plan 10.7* Sovran Self Storage, Inc. 1995 Outside Directors' Option Plan 10.8* Sovran Self Storage Incentive Compensation Plan for Executive Officer 10.9* Restricted Stock Agreement between the Company and David L. Rogers 10.10* Form of Supplemental Representations, Warranties and Indemnification Agreement among the Company and Robert J. Attea, Charles E. Lannon, Kenneth F. Myszka and David L. Rogers 10.11* Form of Pledge Agreement among the Company and Robert J. Attea, Charles E. Lannon, Kenneth F. Myszka and David L. Rogers 10.12* Form of Indemnification Agreement between the Company and certain Officers and Directors of the Company 10.13* Form of Subscription Agreement (including Registration Rights Statement) among the Company and subscribers for 422,171 Common Shares 10.14* Form of Registration Rights and Lock-Up Agreement among the Company and Robert J. Attea, Charles E. Lannon, Kenneth F. Myszka and David L. Rogers 10.15* Form of Facilities Services Agreement between the Company and Williamsville Properties, Inc. 10.16 Term Loan Agreement (Incorporated by reference to Exhibit 10.16 filed with the Company's Annual Report on Form 10-K for the year ended December 31, 1998) 10.18 Sovran Self Storage, Inc. Deferred Compensation Plan for Directors (Incorporated by reference to Appendix A to the Company's Proxy Statement for the 1999 Annual Meeting of Shareholders) 12.1 Statement Re: Computation of Earnings to Fixed Charges 23 Consent of Independent Auditors 27 Financial Data Schedule _________________ * Incorporated by reference to the exhibits as filed with the Company's Registration Statement on Form S-11 (File No. 33-91422) filed June 19, 1995. SIGNATURE Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, Sovran Holdings Inc., as general partner of registrant, certifies that it has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. SOVRAN ACQUISITION LIMITED PARTNERSHIP By: Sovran Holdings, Inc. Its: General Partner March 30, 2000 By: /S/ David L. Rogers ________________________________ David L. Rogers, Chief Financial Officer Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of Sovran Holdings Inc., as general partner of registrant, and in the capacities and on the dates indicated. Signature Title Date /s/ Robert J. Attea Chairman of the March 30, 2000 ________________________ Board of Directors, Robert J. Attea Chief Executive Officer and Director (Principal Executive Officer) /s/ Kenneth F. Myszka President, Chief March 30, 2000 ________________________ Operating Officer Kenneth F. Myszka and Director /s/David L. Rogers Chief Financial March 30, 2000 ________________________ Officer (Principal David L. Rogers Financial and Accounting Officer) /s/John Burns Director March 30, 2000 _______________________ John Burns /s/Michael A. Elia Director March 30, 2000 _______________________ Michael A. Elia /s/Anthony P. Gammie Director March 30, 2000 _______________________ Anthony P. Gammie /s/Charles E. Lannon Director March 30, 2000 _______________________ Charles E. Lannon Sovran Acquisition Limited Partnership Exhibit (12.1) Statement Re: Computation of Earnings to Combined Fixed Charges and Preferred Stock Dividends Amounts in Thousands
June 26, 1995 Year ended December 31, to 1999 1998 1997 1996 December 31, 1995 __________________________________________________________ Earnings: Net income $27,347 $24,798 $ 23,763 $15,682 $ 6,744 Fixed charges 15,944 9,925 2,743 2,386 323 __________________________________________________________ Earnings (1) 43,291 34,723 26,506 18,068 7,067 Fixed charges: Interest expense 13,927 9,601 2,166 1,924 131 Preferred stock dividends 1,239 - - - - Amortization of financing fees 778 324 577 462 192 __________________________________________________________ Fixed charges (2) $15,944 $ 9,925 $ 2,743 $ 2,386 $ 323 Ratio of earnings to combined fixed charges and preferred stock dividends (1)(2) 2.72 3.50 9.66 7.57 21.88
Exhibit 23 Consent of Independent Auditors We consent to the incorporation by reference in the Registration Statement (Form S-3, No. 333-51169) of Sovran Self Storage, Inc. and Sovran Acquisition Limited Partnership and in the related Prospectus of our report dated January 26, 2000, with respect to the financial statements and schedule included in this Annual Report (Form 10-K) of Sovran Acquisition Limited Partnership. /s/ Ernst & Young LLP Buffalo, New York March 28, 2000 EX-27 2
5 12-MOS DEC-31-1999 DEC-31-1999 1,032 0 1,796 0 0 6,699 556,473 33,453 529,719 218,281 0 0 0 0 295,550 529,719 0 84,256 0 24,273 18,709 0 13,927 27,347 0 27,347 0 0 0 27,347 1.97 1.97
-----END PRIVACY-ENHANCED MESSAGE-----