FORM 10-K

UNITED STATES 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, 2008

Commission File Number: 0-24071

SOVRAN ACQUISITION LIMITED PARTNERSHIP

(Exact name of Registrant as specified in its charter)


Delaware		16-1481551

(State of incorporation or organization)		(I.R.S. Employer Identification No.)

6467 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:
Units of Limited Partnership Interest
(Title of Class)

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes þ No o

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Exchange Act.
Yes o No þ

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 þ No o

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. þ

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):


Large accelerated filer þ	Accelerated filer o	Non-accelerated filer o	Smaller reporting company o
		(Do not check if a smaller reporting company)

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No þ

As of February 15, 2009, 22,460,606 Units of Limited Partnership Interest were outstanding.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the Definitive Proxy Statement for the Annual Meeting of Shareholders of the Company to be held on May 21, 2009 (Part III).

Part I

When used in this discussion and elsewhere in this document, the words “intends,” “believes,” “expects,” “anticipates,” and similar expressions are intended to identify “forward-looking statements” within the meaning of that term in Section 27A of the Securities Exchange Act of 1933 and in Section 21E of the Securities 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 the Operating Partnership’s existing business and operations; the Operating Partnership’s ability to effectively compete in the industry in which it does business; 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; interest rates may fluctuate, impacting costs associated with the Operating Partnership’s outstanding floating rate debt; the Operating Partnership’s reliance on its call center; the Operating Partnership’s cash flow may be insufficient to meet required payments of principal, interest and distributions; and tax law changes that may change the taxability of future income.

Item 1. Business

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. We believe we are the fifth largest operator of self-storage properties in the United States. 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” 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. The term “Operating Partnership” as used herein means Sovran Acquisition Limited Partnership.

At December 31, 2008, the Company is a 98.1% 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 Operating Partnership’s other limited partners 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.

At February 15, 2009, we held ownership interests in and managed 385 Properties consisting of approximately 25.0 million net rentable square feet, situated in 24 states. Among our 385 self-storage facilities are 27 properties that we manage for a consolidated joint venture of which we are a majority owner and 25 properties that we manage for a joint venture of which we are a 20% owner. We refer to the self-storage properties in which we have an ownership interest and are managed by us as “Properties.” We began operations on June 26, 1995. We believe we are the fifth largest operator of self-storage properties in the United States based on facilities owned and managed. Our Properties conduct business under the user-friendly name Uncle Bob’s Self-Storage ^®.

Our principal executive offices are located at 6467 Main Street, Williamsville, New York 14221, our telephone number is (716) 633-1850 and our web site is www.sovranss.com.

We seek to enhance shareholder value through internal growth and acquisition of additional storage properties. Internal growth is achieved through aggressive property management: increasing rents, increasing occupancy levels, controlling costs, maximizing collections and strategically expanding and improving the Properties. Should economic conditions warrant, we may develop new properties. We believe that there continue to be opportunities for growth through acquisitions, and constantly seek to acquire self-storage properties that are susceptible to realization of increased economies of scale and enhanced performance through application of our expertise.

Industry Overview

We believe that self-storage facilities offer inexpensive storage space to residential and commercial users. In addition to fully enclosed and secure storage space, many facilities also offer outside storage for automobiles, recreational vehicles and boats. Better facilities are usually fenced and well lighted with gates that are either manually operated or automated and have a full-time manager. Our customers rent space on a month-to-month basis and 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, and the customer has sole control of access to the unit.

According to the 2009 Self-Storage Almanac, of the approximately 47,500 facilities in the United States, less than 11% 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 capital available to small operators for acquisitions and expansions, and the potential for savings through economies of scale are factors that are leading to consolidation in the industry. We believe that, as a result of this trend, significant growth opportunities exist for operators with proven management systems and sufficient capital resources.

Property Management

We believe that we have developed substantial expertise in managing self-storage facilities. Key elements of our management system include the following:

Personnel:

Property managers attend a thorough orientation program and undergo continuous training that emphasizes closing techniques, identification of selected marketing opportunities, networking with possible referral sources, and familiarization with our customized management information system. In addition to frequent contact with Area Managers and other Operating Partnership personnel, property managers receive periodic newsletters via our intranet regarding a variety of operational issues, and from time to time attend “roundtable” seminars with other property managers.

Marketing and Sales:

Responding to the increased customer demand for services, we have implemented several programs expected to increase profitability. These programs include:

	-		A Customer Care Center (call center) that services new and existing customers’ inquiries and facilitates the capture of sales leads that were previously lost;

	-		Internet marketing, which provides customers information about all of our stores via numerous portals and e-mail;

	-		A rate management system, that matches product availability with market demand for each type of storage unit at each store, and determines appropriate pricing. The Operating Partnership credits this program in achieving higher yields and controlling discounting;

	-		Dri-guard, that provides humidity-controlled spaces. We became the first self-storage operator to utilize this humidity protection technology. These environmental control systems are a premium storage feature intended to protect metal, electronics, furniture, fabrics and paper from moisture; and

	-		Uncle Bob’s trucks, that provide customers with convenient, affordable access to vehicles to help move-in their goods, and which also serve as moving billboards to help advertise our storage facilities.

Ancillary Income:

Our stores are essentially retail operations and we have in excess of 160,000 customers. As a convenience to those customers, we sell items such as locks, boxes, tarps, etc. to make their storage experience easier. We also make available renters insurance through a third party carrier, on which we earn a commission. Income from incidental truck rentals, billboards and cell towers is also earned by our Operating Partnership.

Information Systems:

Our customized computer system performs billing, collections and reservation functions for each Property. It 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 transmitted to our 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 our 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 Managers. Our customized management information system permits us to add new facilities to our portfolio with minimal additional overhead expense.

Property Maintenance:

All of our Properties are subject to regular and routine maintenance procedures, which are designed to maintain the structure and appearance of our buildings and grounds. A staff headquartered in our principal office is responsible for the upkeep of the Properties, and all maintenance service is contracted through local providers, such as lawn service, snowplowing, pest control, gate maintenance, HVAC repairs, paving, painting, roofing, etc. A codified set of specifications has been designed and is applied to all work performed on our Uncle Bob’s stores. As with many other aspects of our Operating Partnership, our size has allowed us to enjoy relatively low maintenance costs because we have the benefit of economies of scale in purchasing, travel and overhead absorption.

Environmental and Other Regulations

We are subject to federal, state, and local environmental regulations that apply generally to the ownership of real property. We have 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 are not aware of any environmental condition with respect to any of the Properties that could have a material adverse effect on our 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. We believe that the Properties are in substantial compliance with all such regulations.

Insurance

Each of the Properties is covered by fire and property insurance (including comprehensive liability), and all-risk property insurance policies, which are provided by reputable companies and on commercially reasonable terms. In addition, we maintain a policy insuring against environmental liabilities resulting from tenant storage on terms customary for the industry, and title insurance insuring fee title to the Operating Partnership-owned Properties in an amount that we believe to be adequate.

Federal Income Tax

The Operating Partnership does not pay federal income taxes because we qualify as a partnership for federal and state income tax purposes and our partners are required to include their respective shares of profits and losses in their income tax returns.

Competition

The primary factors upon which competition in the self-storage industry is based are location, rental rates, suitability of the property’s design to prospective customers’ needs, and the manner in which the property is operated and marketed. We believe we compete successfully on these bases. The extent of competition depends significantly on local market conditions. We seek to locate facilities so as not to cause our 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 our competitors, including Public Storage, U-Haul, and Extra Space Storage, are larger and have substantially greater financial resources than we do. These larger operators may, among other possible advantages, be capable of greater leverage and the payment of higher prices for acquisitions.

Investment Policy

While we emphasize equity real estate investments, we may, at our discretion, invest in mortgage and other real estate interests related to self-storage properties in a manner consistent with the Company’s qualification as a REIT. We 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, we may look to acquire self-storage properties via a joint-venture partnership or similar entity. We may or may not elect to have a significant investment in such a venture, but would use such an opportunity to expand our portfolio of branded and managed properties.

Subject to the percentage of ownership limitations and gross income tests necessary for the Company’s REIT qualification, we 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

We periodically review our Properties. 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 our portfolio, (iv) potential for, or existence of, environmental or regulatory issues, (v) alternative uses of capital, and (vi) maintaining qualification as a REIT.

During 2008 we sold one non-strategic storage facility located in Michigan for net cash proceeds of $7.0 million resulting in a gain of $0.7 million. No storage facilities were sold in 2007 or 2006.

Distribution Policy

We intend to pay regular quarterly distributions to our unitholders. However, future distributions by us will be at the discretion of the Board of Directors and will depend on the actual cash available for distribution, our financial condition and capital requirements, the annual distribution requirements under the REIT provisions of the Code and such other factors as the Board of Directors deems relevant. In order to maintain the Company’s qualification as a REIT, the Company must make annual distributions to shareholders of at least 90% of the Company’s REIT taxable income (which does not include capital gains). Under certain circumstances, we may be required to make distributions in excess of cash available for distribution in order to meet this requirement.

Borrowing Policy

Our Board of Directors currently limits the amount of debt that may be incurred by us to less than 50% of the sum of the market value of the Company’s issued and outstanding Common and Preferred Stock plus our debt. We, however, may from time to time re-evaluate and modify our 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.

On June 25, 2008, we entered into agreements relating to new unsecured credit arrangements, and received funds under those arrangements. As part of the agreements, we entered into a $250 million unsecured term note maturing in June 2012 bearing interest at LIBOR plus 1.625%. The proceeds from this term note were used to repay the Operating Partnership’s previous line of credit that was to mature in September 2008, the Operating Partnership’s term note that was to mature in September 2009, the term note maturing in July 2008, and to provide for working capital. The new agreements also provide for a $125 million (expandable to $150 million) revolving line of credit maturing June 2011 bearing interest at a variable rate equal to LIBOR plus 1.375%, and requires a 0.25% facility fee. At December 31, 2008, there was $111 million available on the unsecured line of credit.

We also maintain an $80 million term note maturing September 2013 bearing interest at a fixed rate of 6.26%, a $20 million term note maturing September 2013 bearing interest at a variable rate equal to LIBOR plus 1.50%, and a $150 million unsecured term note maturing in April 2016 bearing interest at 6.38%.

To the extent that we desire 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, we may utilize amounts available under the expanded line of credit, common or preferred stock offerings, floating or fixed rate debt financing, retention of cash flow (subject to satisfying the Company’s distribution requirements under the REIT rules) or a combination of these methods. Additional debt financing may also be obtained through mortgages on our Properties, which may be recourse, non-recourse, or cross-collateralized and may contain cross-default provisions. We have not established any limit on the number or amount of mortgages that may be placed on any single Property or on our portfolio as a whole, although certain of our existing term loans contain limits on overall mortgage indebtedness. For additional information regarding borrowings, see Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Liquidity and Capital Resources” and Note 7 to the Consolidated Financial Statements filed herewith.

Employees

We currently employ a total of 1,069 employees, including 385 property managers, 23 area managers, and 531 assistant managers and part-time employees. At our headquarters, in addition to our three senior executive officers, we employ 127 people engaged in various support activities, including accounting, customer care, and management information systems. None of our employees are covered by a collective bargaining agreement. We consider our employee relations to be excellent.

Available Information

We file with the U.S. Securities and Exchange Commission quarterly and annual reports on Forms 10-Q and 10-K, respectively, current reports on Form 8-K, and proxy statements pursuant to the Securities Exchange Act of 1934, in addition to other information as required. The public may read and copy any materials that we file with the SEC at the SEC’s Public Reference Room at 100 F Street, NE., Washington, D.C. 20549. The public may obtain information on the operation of the Public Reference Room by calling the SEC at 1 (800) SEC-0330. We file this information with the SEC electronically, and the SEC maintains an Internet site that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC at http://www.sec.gov. Our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and all amendments to those reports are available free of charge on our web site at http://www.sovranss.com as soon as reasonably practicable after such material is electronically filed with or furnished to the SEC. In addition, our codes of ethics and Charters of our Governance, Audit Committee, and Compensation Committee are available free of charge on our website at http://www.sovranss.com.

Also, copies of our annual report and Charters of our Governance, Audit Committee, and Compensation Committee will be made available, free of charge, upon written request to Sovran Self Storage, Inc., Attn: Investor Relations, 6467 Main Street, Williamsville, NY 14221.

Item 1A. Risk Factors

You should carefully consider the risks described below, together with all of the other information included in or incorporated by reference into our Form 10-K, as part of your evaluation of the Operating Partnership. If any of the following risks actually occur, our business could be harmed. In such case, the trading price of our securities could decline, and you may lose all or part of your investment.

Our Acquisitions May Not Perform as Anticipated

We have completed many acquisitions of self-storage facilities since our initial public offering of common stock in June 1995. Our strategy is to continue to grow by acquiring additional self-storage facilities. Acquisitions entail risks that investments will fail to perform in accordance with our expectations and that our judgments with respect to the prices paid for acquired self-storage facilities and the costs of any improvements required to bring an acquired property up to standards established for the market position intended for that property will prove inaccurate. Acquisitions also involve general investment risks associated with any new real estate investment.

We May Incur Problems with Our Real Estate Financing

Unsecured Credit Facility. We have a line of credit with a syndicate of financial institutions. This unsecured credit facility is recourse to us and the required payments are not reduced if the economic performance of any of the properties declines. The unsecured credit facility limits our ability to make distributions to our unitholders, except in limited circumstances. If there is an event of default, our lenders may seek to exercise their rights under the unsecured credit facility, which could have a material adverse effect on us and our ability to make expected distributions to unitholders and distributions required by the real estate investment trust provisions of the Internal Revenue Code of 1986.

Rising Interest Rates. Indebtedness that we incur under the unsecured credit facility and bank term note bears interest at a variable rate. Accordingly, increases in interest rates could increase our interest expense, which would reduce our cash available for distribution and our ability to pay expected distributions to our unitholders. We manage our exposure to rising interest rates using interest rate swaps and other available mechanisms. If the amount of our indebtedness bearing interest at a variable rate increases, our unsecured credit facility may require us to use those arrangements.

Refinancing May Not Be Available. It may be necessary for us to refinance our unsecured credit facility through additional debt financing or equity offerings. If we were unable to refinance this indebtedness on acceptable terms, we might be forced to dispose of some of our self-storage facilities upon disadvantageous terms, which might result in losses to us and might adversely affect the cash available for distribution. If prevailing interest rates or other factors at the time of refinancing result in higher interest rates on refinancings, our interest expense would increase, which would adversely affect our cash available for distribution and our ability to pay expected distributions to unitholders.

Recent turmoil in the credit markets could affect our ability to obtain debt financing on reasonable terms and have other adverse effects on us. The United States credit markets have recently experienced significant dislocations and liquidity disruptions which have caused the spreads on available debt financings to widen considerably. These circumstances have materially impacted liquidity in the debt markets, making financing terms for borrowers less attractive. A prolonged downturn in the credit markets could cause us to seek alternative sources of potentially less attractive financing, and may require us to adjust our business plan accordingly. Continued uncertainty in the credit markets may negatively impact our ability to make acquisitions.

Our Debt Levels May Increase

Our Board of Directors currently has a policy of limiting the amount of our debt at the time of incurrence to less than 50% of the sum of the market value of our issued and outstanding common stock and preferred stock plus the amount of our debt at the time that debt is incurred. However, our organizational documents do not contain any limitation on the amount of indebtedness we might incur. Accordingly, our Board of Directors could alter or eliminate the current policy limitation on borrowing without a vote of our unitholders. We could become highly leveraged if this policy were changed. However, our ability to incur debt is limited by covenants in our bank credit arrangements.

We Are Subject to the Risks Posed by Fluctuating Demand and Significant Competition in the Self-Storage Industry

Our self-storage facilities are subject to all operating risks common to the self-storage industry. These risks include but are not limited to the following:

	•		Decreases in demand for rental spaces in a particular locale;

	•		Changes in supply of similar or competing self-storage facilities in an area;

	•		Changes in market rental rates; and

	•		Inability to collect rents from customers.

Our current strategy is to acquire interests only in self-storage facilities. Consequently, we are subject to risks inherent in investments in a single industry. Our self-storage facilities compete with other self-storage facilities in their geographic markets. As a result of competition, the self-storage facilities could experience a decrease in occupancy levels and rental rates, which would decrease our cash available for distribution. We compete in operations and for acquisition opportunities with companies that have substantial financial resources. Competition may reduce the number of suitable acquisition opportunities offered to us and increase the bargaining power of property owners seeking to sell. The self-storage industry has at times experienced overbuilding in response to perceived increases in demand. A recurrence of overbuilding might cause us to experience a decrease in occupancy levels, limit our ability to increase rents and compel us to offer discounted rents.

Our Real Estate Investments Are Illiquid and Are Subject to Uninsurable Risks and Government Regulation

General Risks. Our investments are subject to varying degrees of risk generally related to the ownership of real property. The underlying value of our real estate investments and our income and ability to make distributions to our unitholders are dependent upon our ability to operate the self-storage facilities in a manner sufficient to maintain or increase cash available for distribution. Income from our self-storage facilities may be adversely affected by the following factors:

	•		Changes in national economic conditions;

	•		Changes in general or local economic conditions and neighborhood characteristics;

	•		Competition from other self-storage facilities;

	•		Changes in interest rates and in the availability, cost and terms of financing;

	•		The impact of present or future environmental legislation and compliance with environmental laws;

	•		The ongoing need for capital improvements, particularly in older facilities;

	•		Changes in real estate tax rates and other operating expenses;

	•		Adverse changes in governmental rules and fiscal policies;

	•		Uninsured losses resulting from casualties associated with civil unrest, acts of God, including natural disasters, and acts of war;

	•		Adverse changes in zoning laws; and

	•		Other factors that are beyond our control.

Illiquidity of Real Estate May Limit its Value. Real estate investments are relatively illiquid. Our ability to vary our portfolio of self-storage facilities in response to changes in economic and other conditions is limited. In addition, provisions of the Code may limit our ability to profit on the sale of self-storage facilities held for fewer than four years. We may be unable to dispose of a facility when we find disposition advantageous or necessary and the sale price of any disposition may not equal or exceed the amount of our investment.

Uninsured and Underinsured Losses Could Reduce the Value of our Self Storage Facilities. Some losses, generally of a catastrophic nature, that we potentially face with respect to our self-storage facilities may be uninsurable or not insurable at an acceptable cost. Our management uses its discretion in determining amounts, coverage limits and deductibility provisions of insurance, with a view to acquiring appropriate insurance on our investments at a reasonable cost and on suitable terms. These decisions may result in insurance coverage that, in the event of a substantial loss, would not be sufficient to pay the full current market value or current replacement cost of our lost investment. Inflation, changes in building codes and ordinances, environmental considerations, and other factors also might make it infeasible to use insurance proceeds to replace a property after it has been damaged or destroyed. Under those circumstances, the insurance proceeds received by us might not be adequate to restore our economic position with respect to a particular property.

Possible Liability Relating to Environmental Matters. Under various federal, state and local environmental laws, ordinances and regulations, a current or previous owner or operator of real property may be liable for the costs of removal or remediation of hazardous or toxic substances on, under or in that property. Those laws often impose liability even if the owner or operator did not cause or know of the presence of hazardous or toxic substances and even if the storage of those substances was in violation of a tenant’s lease. In addition, the presence of hazardous or toxic substances, or the failure of the owner to address their presence on the property, may adversely affect the owner’s ability to borrow using that real property as collateral. In connection with the ownership of the self-storage facilities, we may be potentially liable for any of those costs.

Americans with Disabilities Act. The Americans with Disabilities Act of 1990, or ADA, generally requires that buildings be made accessible to persons with disabilities. A determination that we are not in compliance with the ADA could result in imposition of fines or an award of damages to private litigants. If we were required to make modifications to comply with the ADA, our results of operations and ability to make expected distributions to our unitholders could be adversely affected.

There Are Limitations on the Ability to Change Control of Sovran

Limitation on Ownership and Transfer of Shares. To maintain the Company’s qualification as a REIT, not more than 50% in value of its outstanding shares of stock may be owned, directly or indirectly, by five or fewer individuals, as defined in the Code. To limit the possibility that it will fail to qualify as a REIT under this test, the Company’s Amended and Restated Articles of Incorporation include ownership limits and transfer restrictions on shares of its stock. The Company’s Articles of Incorporation limit ownership of its issued and outstanding stock by any single shareholder to 9.8% of the aggregate value of its outstanding stock, except that the ownership by some of its shareholders is limited to 15%.

These ownership limits may:

•

Have the effect of precluding an acquisition of control of Sovran by a third party without consent of our Board of Directors even if the change in control would be in the interest of shareholders; and

•

Limit the opportunity for shareholders to receive a premium for shares of the Company’s common stock they hold that might otherwise exist if an investor were attempting to assemble a block of common stock in excess of 9.8% or 15%, as the case may be, of the outstanding shares of its stock or to otherwise effect a change in control of Sovran.

Our Board of Directors may waive the ownership limits if it is satisfied that ownership by those shareholders in excess of those limits will not jeopardize the Company’s status as a REIT under the Code or in the event it determines that it is no longer in the Company’s best interests to be a REIT. Waivers have been granted to the former holders of the Company’s Series C preferred stock, FMR Corporation and Cohen & Steers, Inc. A transfer of its common stock and/or preferred stock to a person who, as a result of the transfer, violates the ownership limits may not be effective under some circumstances.

Other Limitations. Other limitations could have the effect of discouraging a takeover or other transaction in which holders of some, or a majority, of the Company’s outstanding common stock might receive a premium for their shares of the Company’s common stock that exceeds the then prevailing market price or that those holders might believe to be otherwise in their best interest. The issuance of additional shares of preferred stock could have the effect of delaying or preventing a change in control of Sovran even if a change in control were in the shareholders’ interest. In addition, the Maryland General Corporation Law, or MGCL, imposes restrictions and requires that specified procedures with respect to the acquisition of stated levels of share ownership and business combinations, including combinations with interested shareholders. These provisions of the MGCL could have the effect of delaying or preventing a change in control of Sovran even if a change in control were in the shareholders’ interest. Waivers and exemptions have been granted to the initial purchasers of our former Series C preferred stock in connection with these provisions of the MGCL. In addition, under the Partnership’s agreement of limited partnership, in general, we may not merge, consolidate or engage in any combination with another person or sell all or substantially all of our assets unless that transaction includes the merger or sale of all or substantially all of the assets of the Partnership, which requires the approval of the holders of 75% of the limited partnership interests thereof. If we were to own less than 75% of the limited partnership interests in the Partnership, this provision of the limited partnership agreement could have the effect of delaying or preventing us from engaging in some change of control transactions.

The Failure of Sovran Self Storage, Inc. to Qualify as a REIT Would Have Adverse Consequences

The Company intends to operate in a manner that will permit it to qualify as a REIT under the Code. Qualification as a REIT involves the application of highly technical and complex Code provisions for which there are only limited judicial and administrative interpretations. Continued qualification as a REIT depends upon the Company’s continuing ability to meet various requirements concerning, among other things, the ownership of its outstanding stock, the nature of its assets, the sources of its income and the amount of its distributions to its shareholders.

In addition, a REIT is limited with respect to the services it can provide for its tenants. The Company has provided certain conveniences for its tenants, including property insurance underwritten by a third party insurance company that pays it commissions. We believe the insurance provided by the insurance company would not constitute a prohibited service to the Company’s tenants. No assurances can be given, however, that the IRS will not challenge our position. If the IRS successfully challenged our position, the Company’s qualification as a REIT could be adversely affected.

If the Company were to fail to qualify as a REIT in any taxable year, the Company would not be allowed a deduction for distributions to shareholders in computing its taxable income and would be subject to federal income tax (including any applicable alternative minimum tax) on its taxable income at regular corporate rates. Unless entitled to relief under certain Code provisions, the Company also would be ineligible for qualification as a REIT for the four taxable years following the year during which its qualification was lost. As a result, distributions to the shareholders would be reduced for each of the years involved. Although the Company currently intends to operate in a manner designed to qualify as a REIT, it is possible that future economic, market, legal, tax or other considerations may cause its Board of Directors to revoke its REIT election.

Item 2. Properties

At December 31, 2008, we held ownership interests in and managed a total of 385 Properties situated in twenty-four states. Among the 385 self-storage facilities are 27 properties that we manage for a consolidated joint venture of which we are a majority owner and 25 properties that we manage for a joint venture of which we are a 20% owner.

Our self-storage facilities offer inexpensive, easily accessible, enclosed storage space to residential and commercial users on a month-to-month basis. Most of our Properties are fenced with computerized gates and are well lighted. A majority of the Properties are single-story, thereby providing customers with the convenience of direct vehicle access to their storage spaces. Our stores range in size from 21,000 to 187,000 net rentable square feet, with an average of approximately 65,000 net rentable square feet. The Properties generally are constructed of masonry or steel walls resting on concrete slabs and have standing seam metal, shingle, or tar and gravel roofs. 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 spaces are secured by a lock furnished by the customer to provide the customer with control of access to the space.

All of the Properties conduct business under the user-friendly name Uncle Bob’s Self-Storage ^®.

The following table provides certain information regarding the Properties in which we have an ownership interest and manage as of December 31, 2008:


	Number of
	Stores at						Percentage
	December 31,		Square		Number of		of Store
	2008		Feet		Spaces		Revenue
Alabama		22		1,602,986		11,885		5.1	%
Arizona		9		506,034		4,474		2.4	%
Connecticut		5		304,859		2,866		2.1	%
Colorado		4		276,827		2,376		0.5	%
Florida		57		3,652,019		33,327		15.6	%
Georgia		27		1,717,646		13,937		6.3	%
Kentucky		2		145,708		1,322		0.3	%
Louisiana		14		867,593		7,744		3.7	%
Maine		2		114,145		1,004		0.5	%
Maryland		4		173,181		2,040		0.9	%
Massachusetts		14		790,282		7,178		3.8	%
Michigan		6		348,843		3,010		1.2	%
Mississippi		12		925,621		7,079		3.5	%
Missouri		7		436,069		3,786		2.1	%
New Hampshire		4		260,503		2,330		1.0	%
New York		28		1,598,164		14,501		8.6	%
North Carolina		15		796,123		6,959		3.2	%
Ohio		23		1,576,639		12,900		4.4	%
Pennsylvania		6		365,520		2,919		1.4	%
Rhode Island		4		167,901		1,567		0.9	%
South Carolina		8		445,528		3,770		1.8	%
Tennessee		4		295,122		2,430		1.0	%
Texas		90		6,571,320		53,847		25.3	%
Virginia		18		1,065,013		9,896		4.4	%

Total		385		25,003,646		213,147		100.0	%

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.

EQUITY COMPENSATION PLAN INFORMATION

The following table sets forth certain information as of December 31, 2008, with respect to equity compensation plans under which shares of the Company’s Common Stock may be issued.

Number of

securities to be

issued upon

Weighted average

Number of

exercise of

exercise price of

securities

outstanding

remaining available

options, warrants

for future issuance

Plan Category

and rights (#)

and rights ($)

(#)

Equity compensation plans approved by shareholders:

2005 Award and Option Plan

274,163

45.72

1,096,464

1995 Award and Option Plan

50,525

26.74

1995 Outside Directors’ Stock Option Plan

36,000

45.74

Deferred Compensation Plan for Directors (1)

33,512

N/A

35,347

Equity compensation plans not approved by shareholders:

N/A


(1)		Under the Deferred Compensation Plan for Directors, non-employee Directors may defer all or part of their Directors’ fees that are otherwise payable in cash. Directors’ fees that are deferred under the Plan will be credited to each Directors’ account under the Plan in the form of Units. The number of Units credited is determined by dividing the amount of Directors’ fees deferred by the closing price of the Company’s Common Stock on the New York Stock Exchange on the day immediately preceding the day upon which Directors’ fees otherwise would be paid by the Company. A Director is credited with additional Units for dividends on the shares of Common Stock represented by Units in such Directors’ Account. A Director may elect to receive the shares in a lump sum on a date specified by the Director or in quarterly or annual installments over a specified period and commencing on a specified date.

Item 6. Selected Financial Data

The following selected financial and operating information should be read in conjunction with “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” and the financial statements and related notes included elsewhere in this Annual Report on Form 10-K:


	At or For Year Ended December 31,
(dollars in thousands, except per unit data)	2008			2007			2006			2005			2004
Operating Data
Operating revenues	$	203,003		$	192,857		$	165,369		$	137,373		$	122,381
Income from continuing operations		37,326			39,563			37,068			35,357			31,275
Income from discontinued operations (1)		794			434			447			472			1,772
Net income		38,120			39,997			37,515			35,829			33,047
Income from continuing operations per common unit — diluted		1.68			1.79			1.87			1.82			1.44
Net income per common unit — basic		1.72			1.81			1.90			1.87			1.56
Net income per common unit — diluted		1.72			1.81			1.90			1.85			1.55
Distributions declared per common unit		2.54			2.50			2.47			2.44			2.42

Balance Sheet Data
Investment in storage facilities at cost	$	1,389,201		$	1,322,708		$	1,136,052		$	886,191		$	804,106
Total assets		1,212,626			1,164,588			1,053,159			784,319			719,514
Total debt		623,261			566,517			462,027			339,144			289,075
Total liabilities		692,479			610,757			495,301			364,980			315,049
Limited Partners’ capital interest		15,118			16,951			24,575			22,512			20,829
Partners’ capital		491,947			520,097			516,500			382,705			368,629

Other Data
Net cash provided by operating activities	$	77,132		$	85,175		$	64,656		$	60,724		$	54,803
Net cash used in investing activities		(82,711	)		(190,267	)		(176,567	)		(79,156	)		(71,034	)
Net cash provided by (used in) financing activities		6,055			61,372			154,730			20,238			(765	)


(1)		In 2008 we sold one store and in 2004 we sold five stores whose operations and gain are classified as discontinued operations for all previous years presented.

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis of the consolidated financial condition and results of operations should be read in conjunction with the financial statements and notes thereto included elsewhere in this report.

Disclosure Regarding Forward-Looking Statements

When used in this discussion and elsewhere in this document, the words “intends,” “believes,” “expects,” “anticipates,” and similar expressions are intended to identify “forward-looking statements” within the meaning of that term in Section 27A of the Securities Exchange Act of 1933 and in Section 21E of the Securities Act of 1934. Such forward-looking statements involve known and unknown risks, uncertainties and other factors, which may cause our actual results, performance or achievements 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; our ability to evaluate, finance and integrate acquired businesses into our existing business and operations; our ability to effectively compete in the industry in which we do business; our existing indebtedness may mature in an unfavorable credit environment, preventing refinancing or forcing refinancing of the indebtedness on terms that are not as favorable as the existing terms; interest rates may fluctuate, impacting costs associated with our outstanding floating rate debt; our reliance on our call center; our cash flow may be insufficient to meet required payments of principal, interest and distributions; and tax law changes that may change the taxability of future income.

Business and Overview

We believe we are the fifth largest operator of self-storage properties in the United States based on facilities owned and managed. All of our stores are operated under the user-friendly name “Uncle Bob’s Self-Storage”^®.

Operating Strategy

Our operating strategy is designed to generate growth and enhance value by:

Increasing operating performance and cash flow through aggressive management of our stores:

Revenues continue to improve as a result of drivers implemented by us, including:

	-		Our Customer Care Center, which answers sales inquiries and makes reservations for all of our properties on a centralized basis,

	-		The Uncle Bob’s truck move-in program, under which, at present, 259 of our stores offer a free Uncle Bob’s truck to assist our customers in moving into their spaces, and

	-		An increase in internet marketing and sales.

	-		In addition to increasing revenue, we have worked to improve services and amenities at our stores. While this has caused operating expenses to increase over the past five years, it has resulted in a superior storage experience for our customers. Our managers are better qualified and receive a significantly higher level of training than they did five years ago, customer access and security are greatly enhanced as a result of advances in technology, and property appearance and functionality have been improved.

	-		Our customized property management systems enable us to improve our ability to track trends, set optimal pricing levels, enjoy considerable economies of scale in vendor and supply pricing, and control collections and accounts receivable.

Acquiring additional stores:

	-		In conjunction with the joint venture agreement entered in late May 2008, potential acquisition opportunities over the first nine months of the agreement will be offered to the joint venture. The Operating Partnership’s acquisitions over this period will therefore be limited to facilities that do not fit the joint venture’s investment objectives, but do meet ours.

	-		Our objective is to acquire new stores one or two at a time in markets we currently operate in. By so doing, we can add to our existing base, which should improve market penetration in those areas, and contribute to the benefits achieved from economies of scale.

	-		We may also enter new markets if we can do so by acquiring a group of stores in those markets. We feel that our marketing efforts and control systems would enhance even those portfolios that have been managed efficiently by independent operators, and that attractive returns can be generated by such acquisitions.

Expanding our management business:

We see our management business as a source of future acquisitions. We may develop additional joint ventures in which we are minority owners and managers of the self-storage facilities acquired by these joint ventures. The joint venture agreements will give us first right of refusal to purchase the managed properties in the event they are offered for sale.

Expanding and enhancing our existing stores:

Over the past four years, we have undertaken an announced program of expanding and enhancing our properties. Primarily, we have worked to add premium storage (i.e., air-conditioned and/or humidity controlled) space to our portfolio. In 2007, we expended approximately $25 million to add some 444,000 square feet of such space to our properties; in 2008, we spent approximately $26 million to add 403,000 square feet and to convert 95,000 square feet to premium storage. The program entailed construction of new buildings, acquisition of parcels of land contiguous to stores deemed suitable for expansion, and demolition of certain structures to make room for more optimally configured spaces. In 2009, we expect to curtail our expansion program with new expenditures of approximately $15 million on projects that began in 2008.

Supply and Demand

We believe the supply and demand model in the self-storage industry is micro market specific in that a majority of our business comes from within a five mile radius of our stores. The current turmoil in the credit markets has resulted in a decrease in new supply on a national basis. With the decrease of debt and equity capital brought about by the credit market tightening in the past year, we have seen capitalization rates on acquisitions (expected annual return on investment) increase to approximately 7.5% and expect continued increases in 2009. From 2003 to 2007 the historically low interest rates available to developers resulted in increased supply on a national basis. We experienced some of this excess supply in certain markets in Texas and Florida from 2003 to 2007, but because of the demand model, we did not see a widespread effect on our stores in those years. In 2008, the Florida market was negatively effected by the current economic downturn and we expect many markets will be effected in 2009 as consumers continue to pull back spending.

Operating Trends

In 2008 and 2007, our industry experienced some softness in demand. This was due to the economic slowdown that began in late 2007, and in part to regional issues, such as the reduction of hurricane driven demand in Florida and the Gulf Coast states, and to an overall slowdown in the housing sector. We believe the housing slowdown has impacted our industry in two ways: 1.) a reduction in lease-up activity resulting from fewer residential real estate transactions (both buyers and sellers of residences use our product in times of transition) and 2.) a contraction of housing construction activity which has reduced the number of people working in the

construction trades (trades people are a measurable part of our usual tenant base.)

While we enjoyed same store revenue growth of approximately 3% to 5% in each of the prior five years, we were only able to achieve 0.5% same store revenue growth in 2008, primarily because of the aforementioned issues. We expect conditions in most of our markets to remain challenging and are forecasting -1% to -2% revenue growth on a same store basis in 2009.

Expenses related to operating a self-storage facility have increased substantially over the last five years as a result of expanded hours, increased health care costs, property insurance costs, and the costs of amenities (such as Uncle Bob’s trucks). While we do not foresee further expansion of our cost base, we do expect the trend of increasing expenses to continue at a pace commensurate with CPI growth. Because almost all of our costs are fixed, should revenue growth fall significantly, operating margins will be reduced.

Critical Accounting Policies and Estimates

The discussion and analysis of our financial condition and results of operations are based upon our consolidated financial statements, which have been prepared in accordance with U.S. generally accepted accounting principles. The preparation of these financial statements requires us to make estimates and judgments that affect the amounts reported in our financial statements and the accompanying notes. On an on-going basis, we evaluate our estimates and judgments, including those related to carrying values of storage facilities, bad debts, and contingencies and litigation. We base these estimates on experience and on various other assumptions that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.

Carrying value of storage facilities: We believe our judgment regarding the impairment of the carrying value of our storage facilities is a critical accounting policy. Our policy is to assess any impairment of value whenever events or circumstances indicate that the carrying value of a storage facility may not be recoverable. Such events or circumstances would include negative operating cash flow or significant declining revenue per storage facility. Impairment is evaluated based upon comparing the sum of the expected undiscounted future cash flows to the carrying value of the storage facility, on a property by property basis. If the sum of the undiscounted cash flow is less than the carrying amount, an impairment loss is recognized for the amount by which the carrying amount exceeds the fair value of the asset. If cash flow projections are inaccurate and in the future it is determined that storage facility carrying values are not recoverable, impairment charges may be required at that time and could materially affect our operating results and financial position. At December 31, 2008 and 2007, no assets had been determined to be impaired under this policy.

Estimated useful lives of long-lived assets: We believe that the estimated lives used for our depreciable, long-lived assets is a critical accounting policy. Changes in estimated useful lives of these assets could have a material adverse impact on our financial condition or results of operations.

Qualification as a REIT: The Company operates, and intends to continue to operate, as a REIT under the Internal Revenue Code of 1986 (the Code), but no assurance can be given that we will at all times so qualify. To the extent that the Company continues to qualify as a REIT, it will not be taxed, with certain limited exceptions, on the taxable income that is distributed to the Company’s shareholders. If the Company fails to qualify as a REIT, any requirement to pay federal income taxes could have a material adverse impact on our financial conditions and results of operations.

YEAR ENDED DECEMBER 31, 2008 COMPARED TO
YEAR ENDED DECEMBER 31, 2007

We recorded rental revenues of $195.2 million for the year ended December 31, 2008, an increase of $8.6 million or 4.6% when compared to 2007 rental revenues of $186.6 million. Of the increase in rental revenue, $1.2 million resulted from a 0.7% increase in rental revenues at the 326 core properties considered in same store sales (those properties included in the consolidated results of operations since January 1, 2007). The increase in same store rental revenues was achieved primarily through rate increases on select units averaging 1.9%, offset by a

decrease in square foot occupancy of 150 basis points, which we believe resulted from general economic conditions, in particular the housing sector. The remaining $7.4 million increase in rental revenues resulted from the acquisition of three stores during 2008 and from having the 31 stores acquired in 2007 included for a full year of operations. Other income, which includes merchandise sales, insurance commissions, truck rentals, management fees and acquisition fees, increased in 2008 primarily as a result of $1.1 million of management and acquisition fees generated from our unconsolidated joint venture, Sovran HHF Storage Holdings LLC.

Property operating and real estate tax expense increased $5.1 million, or 7.3%, in 2008 compared to 2007. Of this increase, $2.7 million were expenses incurred by the facilities acquired in 2008 and from having expenses from the 2007 acquisitions included for a full year of operations. $2.4 million of the increase was due to increased payroll, property taxes, utilities, and maintenance expenses at the 326 core properties considered same stores. We expect same-store operating costs to increase only moderately in 2009 with increases primarily attributable to utilities and property taxes.

General and administrative expenses increased $2.0 million or 13.4% from 2007 to 2008. The increase primarily resulted from the costs associated with operating the properties acquired in 2008 and 2007, and from managing the 25 properties acquired by our joint venture in 2008.

Depreciation and amortization expense increased to $34.4 million in 2008 from $33.9 million in 2007, primarily as a result of additional depreciation taken on real estate assets acquired in 2008, and a full year of depreciation on 2007 acquisitions, offset by a decrease in amortization of in-place customers leases relating to these acquisitions.

Interest expense increased from $33.9 million in 2007 to $38.1 million in 2008 as a result of additional borrowings under our line of credit and term notes to purchase three stores in 2008, as well as an increase in interest rates as a result of our debt refinancing in June 2008.

As described in Note 5 to the financial statements, in 2008, the Operating Partnership sold one non-strategic storage facility located in Michigan for net cash proceeds of $7.0 million resulting in a gain of $0.7 million. The 2007 operations of this facility are reported as discontinued operations.

The decrease in preferred unit distributions from 2007 to 2008 was a result of the conversion of all remaining 1,200,000 shares of the Company’s Series C Preferred Stock into 920,244 shares of common stock in July 2007.

YEAR ENDED DECEMBER 31, 2007 COMPARED TO
YEAR ENDED DECEMBER 31, 2006

We recorded rental revenues of $186.6 million for the year ended December 31, 2007, an increase of $26.6 million or 16.6% when compared to 2006 rental revenues of $160.0 million. Of the increase in rental revenue, $4.8 million resulted from a 3.2% increase in rental revenues at the 284 core properties considered in same store sales (those properties included in the consolidated results of operations since January 1, 2006). The increase in same store rental revenues was achieved primarily through rate increases on select units averaging 4.4%, offset by a decrease in square foot occupancy of 175 basis points, which we believe resulted from general economic conditions, in particular the housing sector, and the return to normalcy in Florida after the hurricanes. As of April 1, 2006, the consolidated income statement includes the results of a previously unconsolidated joint venture (Locke Sovran I, LLC) that has been consolidated as a result of an additional investment in that entity by us. The rental income related to Locke Sovran I that was included in our results for the year ended December 31, 2007 was $1.7 million higher than that included in 2006 as a result of the consolidation in April 2006. The remaining $20.1 million increase in rental revenues resulted from the acquisition of 31 stores during 2007 and from having the 42 stores acquired in 2006 included for a full year of operations. Other income increased $0.9 million due to increased merchandise and insurance sales and the additional incidental revenue generated by truck rentals.

Property operating and real estate tax expense increased $10.7 million, or 18.1%, in 2007 compared to 2006. Of this increase, $8.2 million were expenses incurred by the facilities acquired in 2007 and from having expenses from the 2006 acquisitions included for a full year of operations. $1.9 million of the increase was due to

increased property insurance, utilities, maintenance expenses, and increased property taxes at the 284 core properties considered same stores. The property operating and real estate tax expense related to Locke Sovran I that was included in our results for the year ended December 31, 2007, was $0.6 million higher than that included in 2006 as a result of the consolidation in April 2006.

General and administrative expenses increased $1.1 million or 8.1% from 2006 to 2007. The increase primarily resulted from the costs associated with operating the properties acquired in 2007 and 2006.

Depreciation and amortization expense increased to $33.9 million in 2007 from $25.2 million in 2006, primarily as a result of additional depreciation taken on real estate assets acquired in 2007, a full year of depreciation on 2006 acquisitions, and the amortization of in-place customers leases relating to these acquisitions.

Interest expense increased from $29.5 million in 2006 to $33.9 million in 2007 as a result of higher interest rates, additional borrowings under our line of credit and term notes to purchase 31 stores in 2007, and the consolidation of Locke Sovran I, LLC as of April 1, 2006.

The casualty gain recorded in 2007 relates to insurance proceeds received in excess of the carrying value of a building damaged by a fire at one of our facilities.

The decrease in preferred unit distributions from 2006 to 2007 was a result of the conversion of all remaining 1,200,000 shares of the Company’s Series C Preferred Stock into 920,244 shares of common stock in July 2007.

FUNDS FROM OPERATIONS

We believe that Funds from Operations (“FFO”) provides relevant and meaningful information about our operating performance that is necessary, along with net earnings and cash flows, for an understanding of our operating results. FFO adds back historical cost depreciation, which assumes the value of real estate assets diminishes predictably in the future. In fact, real estate asset values increase or decrease with market conditions. Consequently, we believe FFO is a useful supplemental measure in evaluating our operating performance by disregarding (or adding back) historical cost depreciation.

FFO is defined by the National Association of Real Estate Investment Trusts, Inc. (“NAREIT”) as net income computed in accordance with generally accepted accounting principles (“GAAP”), excluding gains or losses on sales of properties, plus depreciation and amortization and after adjustments to record unconsolidated partnerships and joint ventures on the same basis. We believe that to further understand our performance, FFO should be compared with our reported net income and cash flows in accordance with GAAP, as presented in our consolidated financial statements.

Our computation of FFO may not be comparable to FFO reported by other REITs or real estate companies that do not define the term in accordance with the current NAREIT definition or that interpret the current NAREIT definition differently. FFO does not represent cash generated from operating activities determined in accordance with GAAP, and should not be considered as an alternative to net income (determined in accordance with GAAP) as an indication of our performance, as an alternative to net cash flows from operating activities (determined in accordance with GAAP) as a measure of our liquidity, or as an indicator of our ability to make cash distributions.

Reconciliation of Net Income to Funds From Operations


	For Year Ended December 31,
(dollars in thousands)	2008			2007			2006			2005			2004
Net income	$	38,120		$	39,997		$	37,515		$	35,829		$	33,047
Minority interest in income		1,563			1,848			1,529			490			499
Depreciation of real estate and amortization of intangible assets exclusive of deferred financing fees		34,421			33,851			25,121			21,040			19,002
Depreciation of real estate included in discontinued operations		46			185			184			182			263
Depreciation and amortization from unconsolidated joint ventures		333			59			168			484			473
Casualty gain		—			(114	)		—			—			—
Gain on sale of real estate		(716	)		—			—			—			(1,137	)
Preferred unit distributions		—			(1,256	)		(2,512	)		(4,123	)		(7,168	)
Redemption amount in excess of carrying value of Series B Preferred Stock		—			—			—			—			(1,415	)
Funds from operations allocable to minority interest in Locke Sovran I and Locke Sovran II		(1,564	)		(1,848	)		(1,785	)		(1,499	)		(1,475	)

Funds from operations available to common unitholders	$	72,203		$	72,722		$	60,220		$	52,403		$	42,089

LIQUIDITY AND CAPITAL RESOURCES

Our ability to retain cash flow is limited because the Company operates as a REIT. In order to maintain its REIT status, a substantial portion of our operating cash flow must be used to pay distributions to our unitholders. We believe that our internally generated net cash provided by operating activities and our availability on our line of credit will continue to be sufficient to fund ongoing operations, capital improvements, distributions and debt service requirements through June 2011, at which time our revolving line of credit matures.

Cash flows from operating activities were $77.1 million, $85.2 million and $64.7 million for the years ended December 31, 2008, 2007, and 2006, respectively. The decrease in operating cash flows from 2007 to 2008 was primarily due to a decrease in net income and accounts payable remaining consistent from year to year. The increase in operating cash from 2006 to 2007 was primarily attributable to increased net income, increased non-cash charges for depreciation and amortization, an increase in accounts payable related to property taxes, and a decrease in prepaid insurance.

Cash used in investing activities was $82.7 million, $190.3 million, and $176.6 million for the years ended December 31, 2008, 2007, and 2006 respectively. The decrease in cash used from 2007 to 2008 was attributable to reduced acquisition activity in 2008 as many of the properties acquired were acquired through a joint venture of which we are a 20% owner. The increase from 2006 to 2007 was due to increased acquisition activity, an increase in improvements to existing facilities, and additional investment in our consolidated joint ventures.

Cash provided by financing activities was $6.0 million in 2008 compared to $61.4 million in 2007 and $154.7 million in 2006, respectively. Our reduced acquisition activity in 2008 was the driver behind the decrease in cash provided from financing activities from 2007 to 2008. The decrease in cash provided from financing activities from 2006 to 2007 was a result of the proceeds received from our common stock offering in December of 2006 noted below.

Partnership’s term note that was to mature in September 2009, the term note maturing in July 2008, and to provide for working capital. The new agreements also provide for a $125 million (expandable to $150 million) revolving line of credit maturing June 2011 bearing interest at a variable rate equal to LIBOR plus 1.375%, and requires a 0.25% facility fee. The revolving line of credit maturity can be extended at our option until June 2012. At December 31, 2008, there was $111 million available on the unsecured line of credit.

We also maintain a $80 million term note maturing September 2013 bearing interest at a fixed rate of 6.26%, a $20 million term note maturing September 2013 bearing interest at a variable rate equal to LIBOR plus 1.50%, and a $150 million unsecured term note maturing in April 2016 bearing interest at 6.38%.

In April 2006, the Operating Partnership entered into a $150 million unsecured term note maturing in April 2016 bearing interest at 6.38%. The proceeds from this term note were used to pay down the outstanding balance on the Operating Partnership’s line of credit, to repay a $25 million term note entered in January 2006 and a $15 million term note entered in April 2006, and to make an additional investment into Locke Sovran I, LLC and Locke Sovran II, LLC (consolidated joint ventures). In December 2006, the Company issued 2.3 million shares of its common stock and realized net proceeds of $122.4 million. A portion of the proceeds were used to repay the entire outstanding balance on our line of credit that had been drawn on to finance acquisitions subsequent to April 2006. The remaining proceeds from the 2006 common stock offering were used along with 2007 borrowings under our line of credit to fund 2007 acquisitions.

The line of credit facility and term notes currently have investment grade ratings from Standard and Poor’s (BBB-) and Fitch (BBB-).

Our line of credit and term notes require us to meet certain financial covenants, including prescribed leverage, fixed charge coverage, minimum net worth, limitations on additional indebtedness and limitations on distribution payouts. As of December 31, 2008, we were in compliance with all covenants.

In addition to the unsecured financing mentioned above, our consolidated financial statements also include $109.3 million of mortgages payable as detailed below:

* 7.80% mortgage note due December 2011, secured by 11 self-storage facilities (Locke Sovran I) with an aggregate net book value of $43.8 million, principal and interest paid monthly. The outstanding balance at December 31, 2008 on this mortgage was $29.0 million.

* 7.19% mortgage note due March 2012, secured by 27 self-storage facilities (Locke Sovran II) with an aggregate net book value of $81.2 million, principal and interest paid monthly. The outstanding balance at December 31, 2008 on this mortgage was $42.6 million.

* 7.25% mortgage note due December 2011, secured by 1 self-storage facility with an aggregate net book value of $5.8 million, principal and interest paid monthly. Estimated market rate at time of acquisition 5.40%. The outstanding balance at December 31, 2008 on this mortgage was $3.5 million.

* 6.76% mortgage note due September 2013, secured by 1 self-storage facility with an aggregate net book value of $2.0 million, principal and interest paid monthly. The outstanding balance at December 31, 2008 on this mortgage was $1.0 million.

* 6.35% mortgage note due March 2014, secured by 1 self-storage facility with an aggregate net book value of $3.8 million, principal and interest paid monthly. The outstanding balance at December 31, 2008 on this mortgage was $1.1 million.

* 5.55% mortgage notes due November 2009, secured by 8 self-storage facilities with an aggregate net book value of $34.9 million, interest only paid monthly. Estimated market rate at time of acquisition 6.44%. The outstanding balance at December 31, 2008 on this mortgage was $25.9 million.

* 7.50% mortgage notes due August 2011, secured by 3 self-storage facilities with an aggregate net book value of $14.3 million, principal and interest paid monthly. Estimated market rate at time of acquisition 6.42%. The outstanding balance at December 31, 2008 on this mortgage was $6.1 million.

The 7.80% and 7.19% mortgages were incurred in 2001 and 2002 respectively as part of the financing of the consolidated joint ventures. The Operating Partnership assumed the 7.25%, 6.76%, 6.35%, 5.55% and 7.50% mortgage notes in connection with the acquisitions of storage facilities in 2005 and 2006.

On July 7, 2007, the Company issued 920,244 shares of its common stock to the holder of its 8.375% Series C Preferred Stock upon the holder’s election to convert the remaining 1,200,000 shares of Series C Preferred Stock into common stock.

During 2008, the Company issued approximately 285,000 shares via its Dividend Reinvestment and Stock Purchase Plan and Employee Stock Option Plan. We received $10.7 million from the sale of such shares. We expect to issue shares when the Company’s share price and capital needs warrant such issuance.

During 2008 and 2007, the Company did not acquire any shares of its common stock via the Share Repurchase Program authorized by the Board of Directors. From the inception of the Share Repurchase Program through December 31, 2008, the Company has reacquired a total of 1,171,886 shares pursuant to this program. From time to time, subject to market price and certain loan covenants, the Company may reacquire additional shares.

Future acquisitions, our expansion and enhancement program, and share repurchases are expected to be funded with draws on our line of credit, sale of properties and private placement solicitation of joint venture equity. Current capital market conditions may prevent us from accessing other traditional sources of capital including the issuance of common and preferred stock and the issuance of unsecured term notes. Should these capital market conditions persist, we may have to curtail acquisitions, our expansion and enhancement program, and share repurchases as we approach June 2011, when our line of credit matures.

CONTRACTUAL OBLIGATIONS

The following table summarizes our future contractual obligations:


Contractual	Payments due by period
obligations	Total	2009	2010-2011	2012-2013	2014 and thereafter
Line of credit	$ 14.0 million	—	$ 14.0 million	—	—
Term notes	$500.0 million	—	—	$350.0 million	$150.0 million
Mortgages payable	$109.3 million	$28.0 million	$ 40.3 million	$ 40.0 million	$ 1.0 million
Interest payments	$136.2 million	$28.8 million	$ 53.3 million	$ 32.6 million	$ 21.5 million
Land lease	$ 1.1 million	$ 0.1 million	$ 0.1 million	$ 0.1 million	$ 0.8 million
Building leases	$ 3.9 million	$ 0.6 million	$ 0.3 million	$ 0.1 million	$ 2.9 million

Total	$764.5 million	$57.5 million	$108.0 million	$422.8 million	$176.2 million

Interest payments includes actual interest on fixed rate debt and estimated interest for floating-rate debt based on December 31, 2008 rates.

ACQUISITION OF PROPERTIES

During 2008, we used operating cash flow, borrowings pursuant to the line of credit, borrowings under the bank term note, and proceeds from the Company’s Dividend Reinvestment and Stock Purchase Plan to acquire three Properties in Mississippi and Ohio comprising 0.2 million square feet from unaffiliated storage operators. During 2007, we used operating cash flow, borrowings pursuant to the line of credit, borrowings under the bank term note, proceeds from the Company’s Dividend Reinvestment and Stock Purchase Plan, and proceeds from the Company’s December 2006 common stock offering to acquire 31 Properties in Alabama, Florida, Mississippi, New York, and Texas comprising 2.3 million square feet from unaffiliated storage operators. During 2006, we used operating cash flow, borrowings pursuant to the line of credit, borrowings under the $150 million 10 year term note, and proceeds from the Company’s Dividend Reinvestment and Stock Purchase Plan to acquire 42 Properties in Alabama, Georgia, Florida, Louisiana, Missouri, New Hampshire, New York, Tennessee, and Texas comprising 2.6 million square feet from unaffiliated storage operators.

FUTURE ACQUISITION AND DEVELOPMENT PLANS

Our external growth strategy is to increase the number of facilities we own by acquiring suitable facilities in markets in which we already have operations, or to expand in new markets by acquiring several facilities at once in those new markets. In conjunction with the joint venture agreement entered in May 2008 (see Note 13 to the financial statements), potential acquisition opportunities over the first nine months of the agreement will be offered to the joint venture. The Operating Partnership’s acquisitions over this period will therefore be limited to facilities that do not fit the joint venture’s investment objectives, but do meet ours. In 2008, the Operating Partnership’s joint venture (Sovran HHF Storage Holdings LLC) acquired 25 properties for approximately $171.5 million. The Operating Partnership’s equity contribution to the joint venture for these purchases was approximately $18.6 million, which was financed through draws on our line of credit.

In 2008 we continued our program of expanding and enhancing our existing properties. During 2008 we spent approximately $25.6 million on such revenue enhancing improvements. In 2009 we expect to curtail our expansion of current properties with total new expenditures less than $15 million on projects started in 2008. Funding of the expansions are expected to be provided primarily from borrowings under our line of credit and issuance of common shares through the Company’s Dividend Reinvestment and Stock Purchase Plan.

DISPOSITION OF PROPERTIES

During 2008, we sold one non-strategic storage facility located in Michigan for net cash proceeds of $7.0 million resulting in a gain of $0.7 million. In 2004, as part of an asset management program, we sold five non-strategic storage facilities located in Pennsylvania, Tennessee, Ohio, and South Carolina to unaffiliated parties for $11.7 million resulting in a net gain of $1.1 million. No sales took place in 2005 through 2007.

We may seek to sell additional Properties to joint venture programs or third parties in 2009.

OFF-BALANCE SHEET ARRANGEMENTS

As manager of Sovran HHF, the Operating Partnership earns a management and call center fee of 7% of gross revenues which totaled $0.5 million for 2008. The Operating Partnership also received an acquisition fee of 0.5% of purchase price for securing purchases for the joint venture. During 2008, the Operating Partnership recorded $0.6 million in acquisition fees. The Operating Partnership’s share of Sovran HHF’s income for 2008 was $0.1 million. At December 31, 2008, Sovran HHF owed the Operating Partnership $0.3 million for payments made by the Operating Partnership on behalf of the joint venture for normal operating expenses of the joint venture.

The Operating Partnership also has a 49% ownership interest in Iskalo Office Holdings, LLC, which owns the building that houses the Operating Partnership’s headquarters and other tenants. The Operating Partnership’s investment includes a capital contribution of $49. The carrying value of the Operating Partnership’s investment is a liability of $0.5 million at December 31, 2008 and $0.4 million at December 31, 2007, and is included in accounts payable and accrued liabilities in the accompanying consolidated balance sheets. For the years ended December 31, 2008, 2007 and 2006, the Operating Partnership’s share of Iskalo Office Holdings, LLC’s (loss) income was ($6,000), $80,000, and $80,000, respectively. The Operating Partnership paid rent to Iskalo Office Holdings, LLC of $600,000, $561,000 and $583,000 in 2008, 2007, and 2006, respectively. Future minimum lease payments under the lease are $0.6 million per year through 2010.

In April 2006, the Operating Partnership made an additional investment of $2.8 million in a former off-balance sheet arrangement known as Locke Sovran I, LLC that increased the Operating Partnership’s ownership to over 70%. As a result of this transaction the Operating Partnership has consolidated the results of operations of

Locke Sovran I, LLC in its financial statements since April 1, 2006, the date that it acquired its controlling interest. In June 2008, the Operating Partnership made an additional investment of $6.1 million in Locke Sovran I, LLC that increased the Operating Partnership’s ownership from approximately 70% to 100%. Locke Sovran I, LLC, owns 11 self-storage facilities throughout the United States.

A summary of the unconsolidated joint venture’s financial statements as of and for the year ended December 31, 2008 is as follows:


	Sovran HHF
	Storage		Iskalo Office
(dollars in thousands)	Holdings LLC		Holdings, LLC
Balance Sheet Data:
Investment in storage facilities, net	$	170,176	$	—
Investment in office building		—		5,507
Other assets		3,912		568

Total Assets	$	174,088	$	6,075


Due to the Operating Partnership	$	336	$	—
Mortgages payable		79,937		7,169
Other liabilities		1,942		168

Total Liabilities		82,215		7,337

Unaffiliated partners’ equity (deficiency)		73,499		(718	)
Operating Partnership equity (deficiency)		18,374		(544	)

Total Liabilities and Partners’ Equity (deficiency)	$	174,088	$	6,075


Income Statement Data:
Total revenues	$	6,652	$	1,127
Total expenses		6,301		1,139

Net income (loss)	$	351	$	(12	)

We do not expect to have material future cash outlays relating to these joint ventures outside our share of capital for future acquisitions of properties by Sovran HHF. We do not guarantee the debt of Sovran HHF or Iskalo Office Holdings, LLC. A summary of our cash flows arising from the off-balance sheet arrangements with Sovran HHF and Iskalo Office Holdings, LLC for the three years ended December 31, 2008, and with Locke Sovran I, LLC for the three months ended March 31, 2006 (the date prior to which it began to be included in our consolidated results of operations) are as follows:


	Year ended December 31,
(dollars in thousands)	2008			2007		2006
Statement of Operations
Other income (management fees and acquisition fee income)	$	1,135		$	—	$	85
General and administrative expenses (corporate office rent)		600			561		583
Equity in income of joint ventures		104			119		172
Distributions from unconsolidated joint ventures		345			98		123

Investing activities
Investment in joint ventures		(20,287	)		—		—
(Advances to) reimbursement of advances to joint ventures		(336	)		—		17

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 90% of its 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 2009 may be applied toward the Company’s 2008 distribution requirement. The Company’s source of funds for such distributions is 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 2008, the Company’s percentage of revenue from such sources exceeded 98%, 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

We have entered into interest rate swap agreements in order to mitigate the effects of fluctuations in interest rates on our variable rate debt. At December 31, 2008, we have seven outstanding interest rate swap agreements as summarized below:


			Fixed			Floating Rate
Notional Amount	Effective Date	Expiration Date	Rate Paid			Received
$50 Million	11/14/05	9/1/09		4.3900	%	1 month LIBOR
$20 Million	9/4/05	9/4/13		4.4350	%	6 month LIBOR
$50 Million	10/10/06	9/1/09		4.4800	%	1 month LIBOR
$50 Million	7/1/08	6/25/12		4.2825	%	1 month LIBOR
$100 Million	7/1/08	6/22/12		4.2965	%	1 month LIBOR
$75 Million	9/1/09	6/22/12		4.7100	%	1 month LIBOR
$25 Million	9/1/09	6/22/12		4.2875	%	1 month LIBOR

Upon renewal or replacement of the credit facility, our total interest may change dependent on the terms we negotiate with the lenders; however, the LIBOR base rates have been contractually fixed on $270 million of our debt through the interest rate swap termination dates.

Through June 2012, $500 million of our $514 million of unsecured debt is on a fixed rate basis after taking into account the interest rate swaps noted above. Based on our outstanding unsecured debt of $514 million at December 31, 2008, a 100 basis point increase in interest rates would increase our interest expense $0.1 million annually.

The table below summarizes our debt obligations and interest rate derivatives at December 31, 2008. The estimated fair value of financial instruments is subjective in nature and is dependent on a number of important assumptions, including discount rates and relevant comparable market information associated with each financial instrument. The use of different market assumptions and estimation methodologies may have a material effect on the reported estimated fair value amounts. Accordingly, the estimates presented below are not necessarily indicative of the amounts we would realize in a current market exchange.


	Expected Maturity Date Including Discount														Fair
(dollars in thousands)	2009		2010		2011		2012		2013		Thereafter		Total		Value
Line of credit — variable rate LIBOR + 1.375		—		—	$	14,000		—		—		—	$	14,000	$	14,000

Notes Payable:
Term note — variable rate LIBOR+1.625%		—		—		—	$	250,000		—		—	$	250,000	$	250,000
Term note — variable rate LIBOR+1.50%		—		—		—		—	$	20,000		—	$	20,000	$	20,000
Term note — fixed rate 6.26%		—		—		—		—	$	80,000		—	$	80,000	$	78,865
Term note — fixed rate 6.38%		—		—		—		—		—	$	150,000	$	150,000	$	147,899

Mortgage note — fixed rate 7.80%	$	587	$	630	$	27,816		—		—		—	$	29,033	$	30,031
Mortgage note — fixed rate 7.19%	$	1,128	$	1,211	$	1,301	$	38,963		—		—	$	42,603	$	44,205
Mortgage note — fixed rate 7.25%	$	141	$	149	$	3,220		—		—		—	$	3,510	$	3,478
Mortgage note — fixed rate 6.76%	$	23	$	25	$	27	$	29	$	896		—	$	1,000	$	1,018
Mortgage note — fixed rate 6.35%	$	26	$	28	$	30	$	31	$	34	$	949	$	1,098	$	1,100
Mortgage notes — fixed rate 5.55%	$	25,930		—		—		—		—		—	$	25,930	$	26,422
Mortgage notes — fixed rate 7.50%	$	208	$	222	$	5,657		—		—		—	$	6,087	$	6,188

Interest rate derivatives — liability		—		—		—		—		—		—		—	$	25,490

INFLATION

We do not believe that inflation has had or will have a direct effect on our operations. Substantially all of the leases at the facilities are on a month-to-month basis which provides us with the opportunity to increase rental rates as each lease matures.

SEASONALITY

Our revenues typically have been higher in the third and fourth quarters, primarily because we increase rental rates on most of our storage units at the beginning of May and 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, we believe that our customer 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, we do not expect seasonality to affect materially distributions to unitholders.

RECENT ACCOUNTING PRONOUNCEMENTS

In September 2006, FASB Statement 157, “Fair Value Measurements” (“SFAS 157”) was issued. SFAS 157 establishes a framework for measuring fair value by providing a standard definition of fair value as it applies to assets and liabilities. SFAS 157, which does not require any new fair value measurements, clarifies the application of other accounting pronouncements that require or permit fair value measurements. The effective date for the Operating Partnership is January 1, 2008 for all financial instruments — see Note 10 to our Consolidated Financial Statements. However, the FASB has delayed the effective date of Statement 157 for all nonfinancial assets and nonfinancial liabilities until fiscal years beginning after November 15, 2008. The Operating Partnership is evaluating the impact of adopting SFAS 157 on its consolidated financial statements for nonfinancial assets and nonfinancial liabilities.

In February 2007, the FASB issued SFAS No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities” (“SFAS 159”). SFAS 159 allows entities to voluntarily choose, at specified election dates, to measure many financial assets and liabilities at fair value. The effective date for the Operating Partnership is

January 1, 2008. The adoption of SFAS 159 did not impact the Operating Partnership’s consolidated financial statements.

In December 2007, FASB issued SFAS No. 160, “Noncontrolling Interests in Consolidated Financial Statements” (SFAS No. 160), which amends Accounting Research Bulletin No. 51, “Consolidated Financial Statements”, to improve the relevance, comparability, and transparency of the financial information that a reporting entity provides in its consolidated financial statements. SFAS No. 160 establishes accounting and reporting standards that require the ownership interests in subsidiaries not held by the parent to be clearly identified, labeled and presented in the consolidated statement of financial position within equity, but separate from the parent’s equity. This statement also requires the amount of consolidated net income attributable to the parent and to the non-controlling interest to be clearly identified and presented on the face of the consolidated statement of income. This Statement applies prospectively to all entities that prepare consolidated financial statements and applies prospectively for fiscal years, and interim periods within those fiscal years, beginning January 1, 2009 for the Operating Partnership. The Operating Partnership is evaluating the impact of SFAS 160 on its consolidated financial statements.

In December 2007, the FASB Statement 141R, “Business Combinations” (“SFAS 141R”) was issued. SFAS 141R replaces SFAS 141. SFAS 141R requires the acquirer of a business to recognize and measure the identifiable assets acquired, the liabilities assumed, and any non-controlling interest in the acquiree at fair value. SFAS 141R also requires transactions costs related to the business combination to be expensed as incurred. SFAS 141R applies prospectively to business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after December 15, 2008. The effective date for the Operating Partnership will be January 1, 2009. We have not yet determined the impact of SFAS 141R related to future acquisitions, if any, on our consolidated financial statements.

In March 2008, the FASB issued SFAS No. 161, “Disclosures About Derivative Instruments and Hedging Activities — an amendment of FASB Statement No. 133” (“SFAS No. 161”). SFAS No. 161 expands quarterly disclosure requirements in SFAS No. 133 about an entity’s derivative instruments and hedging activities. SFAS No. 161 is effective for the Operating Partnership as of January 1, 2009. The Operating Partnership is currently assessing the impact of SFAS No. 161 on our consolidated financial statements.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

The information required is incorporated by reference to the information appearing under the caption “Interest Rate Risk” in Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” above.

Item 8. Financial Statements and Supplementary Data

Report of Independent Registered Public Accounting Firm

The Board of Directors and Partners of Sovran Acquisition Limited Partnership

We have audited the accompanying consolidated balance sheets of Sovran Acquisition Limited Partnership as of December 31, 2008 and 2007, and the related consolidated statements of operations, partners’ capital, and cash flows for each of the three years in the period ended December 31, 2008. Our audits also included the financial statement schedule listed in the Index at Item 15(a). These financial statements and schedule are the responsibility of the Operating Partnership’s management. Our responsibility is to express an opinion on these financial statements and schedule based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (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 consolidated financial position of Sovran Acquisition Limited Partnership at December 31, 2008 and 2007, and the consolidated results of its operations and its cash flows for each of the three years in the period ended December 31, 2008, in conformity with U.S. generally accepted accounting principles. 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.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), Sovran Acquisition Limited Partnership’s internal control over financial reporting as of December 31, 2008, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated February 25, 2009 expressed an unqualified opinion thereon.

/s/ Ernst & Young LLP

Buffalo, New York
February 25, 2009

SOVRAN ACQUISITION LIMTED PARTNERSHIP
CONSOLIDATED BALANCE SHEETS


	December 31,
(dollars in thousands, except unit data)	2008			2007
Assets
Investment in storage facilities:
Land	$	240,525		$	236,349
Building, equipment, and construction in progress		1,148,676			1,086,359

		1,389,201			1,322,708
Less: accumulated depreciation		(216,644	)		(183,679	)

Investment in storage facilities, net		1,172,557			1,139,029
Cash and cash equivalents		4,486			4,010
Accounts receivable		2,971			2,794
Receivable from related parties		14			27
Receivable from unconsolidated joint venture		336			—
Investment in unconsolidated joint venture		20,111			—
Prepaid expenses		4,691			4,771
Other assets		7,460			7,574
Net assets of discontinued operations		—			6,383

Total Assets	$	1,212,626		$	1,164,588


Liabilities
Line of credit	$	14,000		$	100,000
Term notes		500,000			356,000
Accounts payable and accrued liabilities		23,710			23,486
Deferred revenue		5,659			5,602
Fair value of interest rate swap agreements		25,490			1,230
Accrued distributions		14,359			13,922
Mortgages payable		109,261			110,517

Total Liabilities		692,479			610,757

Minority interest — consolidated joint venture		13,082			16,783

Limited partners’ capital interest (419,952 units in 2008 and 422,727 units in 2007)		15,118			16,951

Partners’ Capital
General partner (219,567 units outstanding in 2008 and 2007)		3,650			3,823
Limited partner (21,796,781 and 21,457,019 units outstanding in 2008 and 2007, respectively)		513,459			517,642
Accumulated other comprehensive income		(25,162	)		(1,368	)

Total Partners’ Capital		491,947			520,097

Total Liabilities and Partners’ Capital	$	1,212,626		$	1,164,588

See notes to financial statements.

SOVRAN ACQUISITION LIMITED PARTNERSHIP
CONSOLIDATED STATEMENTS OF OPERATIONS


	Year Ended December 31,
(dollars in thousands, except per unit data)	2008			2007			2006
Revenues
Rental income	$	195,220		$	186,581		$	160,011
Other operating income		7,783			6,276			5,358

Total operating revenues		203,003			192,857			165,369

Expenses
Property operations and maintenance		55,739			52,317			43,833
Real estate taxes		19,004			17,370			15,166
General and administrative		17,279			15,234			14,095
Depreciation and amortization		34,421			33,851			25,163

Total operating expenses		126,443			118,772			98,257


Income from operations		76,560			74,085			67,112

Other income (expenses)
Interest expense		(38,097	)		(33,861	)		(29,494	)
Interest income		322			954			807
Casualty gain		—			114			—
Minority interest — consolidated joint ventures		(1,563	)		(1,848	)		(1,529	)
Equity in income of joint ventures		104			119			172


Income from continuing operations		37,326			39,563			37,068
Income from discontinued operations (including gain on disposal of $716 in 2008)		794			434			447

Net income		38,120			39,997			37,515
Preferred unit distributions		—			(1,256	)		(2,512	)

Net income available to common unitholders	$	38,120		$	38,741		$	35,003


Earnings per common unit — basic
Continuing operations	$	1.68		$	1.79		$	1.87
Discontinued operations		0.04			0.02			0.03

Earning per unit — basic	$	1.72		$	1.81		$	1.90


Earnings per common unit — diluted
Continuing operations	$	1.68		$	1.79		$	1.87
Discontinued operations		0.04			0.02			0.03

Earning per unit — diluted	$	1.72		$	1.81		$	1.90


Distributions declared per common unit	$	2.54		$	2.50		$	2.47

See notes to financial statements.

SOVRAN ACQUISITION LIMITED PARTNERSHIP
CONSOLIDATED STATEMENTS OF PARTNERS’ CAPITAL


										Accumulated
	Sovran			Sovran Self						Other			Total
	Holdings, Inc.			Storage Inc.			Preferred C			Comprehensive			Partners’			Limited Partners’
(Dollars in thousands)	General Partner			Limited Partner			Partners			Income (loss)			Capital			Capital Interest
Balance January 1, 2006	$	4,072		$	347,179		$	30,000		$	1,454		$	382,705		$	22,512

Proceeds from issuance of Partnership Units		—			147,278			—			—			147,278			170
Redemption of Partnership Units		—			(1,830	)		—			—			(1,830	)		(958	)
Exercise of stock options		—			1,142			—			—			1,142			—
Earned portion of non-vested stock		—			876			—			—			876			—
Stock option expense		—			119			—			—			119			—
Deferred compensation		—			181			—			—			181			—
Net income		439			36,171			—			—			36,610			905
Increase in fair value of derivatives		—			—			—			674			674			—

Total comprehensive income		—			—			—			—			37,284			905
Distributions		(573	)		(47,651	)		—			—			(48,224	)		(1,085	)
Adjustment to reflect limited partners’ redeemable capital at balance sheet date		(33	)		(2,998	)		—			—			(3,031	)		3,031

Balance December 31, 2006		3,905			480,467			30,000			2,128			516,500			24,575

Proceeds from issuance of Partnership Units		—			12,759			—			—			12,759			—
Redemption of Partnership Units		—			(117	)		—			—			(117	)		(57	)
Exercise of stock options		—			425			—			—			425			—
Earned portion of non-vested stock		—			1,224			—			—			1,224			—
Stock option expense		—			183			—			—			183			—
Deferred compensation		—			161			—			—			161			—
Conversion of Series C Units to partnership units		—			30,000			(30,000	)		—			—			—
Conversion of partnership units to shares of common stock		—			167			—			—			167			(167	)
Net income		409			38,805			—			—			39,214			783
Change in fair value of derivatives		—			—			—			(3,496	)		(3,496	)		—

Total comprehensive income		—			—			—			—			35,718			783
Distributions		(563	)		(53,479	)		—			—			(54,042	)		(1,064	)
Adjustment to reflect limited partners’ redeemable capital at balance sheet date		72			7,047			—			—			7,119			(7,119	)

Balance December 31, 2007		3,823			517,642			—			(1,368	)		520,097			16,951

Proceeds from issuance of Partnership Units		—			10,658			—			—			10,658			—
Redemption of Partnership Units		—			(69	)		—			—			(69	)		(45	)
Exercise of stock options		—			72			—			—			72			—
Earned portion of non-vested stock		—			1,444			—			—			1,444			—
Stock option expense		—			279			—			—			279			—
Deferred compensation		—			112			—			—			112			—
Net income		375			37,024			—			—			37,399			721
Change in fair value of derivatives		—			—			—			(23,794	)		(23,794	)		—

Total comprehensive income		—			—			—			—			13,605			721
Distributions		(562	)		(55,128	)		—			—			(55,690	)		(1,070	)
Adjustment to reflect limited partners’ redeemable capital at balance sheet date		14			1,425			—			—			1,439			(1,439	)

Balance December 31, 2008	$	3,650		$	513,459		$	—		$	(25,162	)	$	491,947		$	15,118

See notes to financial statements.

SOVRAN ACQUISITION LIMITED PARTNERSHIP
CONSOLIDATED STATEMENTS OF CASH FLOWS


	Year Ended December 31,
(dollars in thousands)	2008			2007			2006
Operating Activities
Net income	$	38,120		$	39,997		$	37,515
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		35,659			34,999			26,340
Gain on sale		(716	)		—			—
Casualty gain		—			(114	)		—
Equity in income of joint ventures		(104	)		(119	)		(172	)
Distributions from unconsolidated joint venture		345			98			123
Minority interest		1,563			1,848			1,529
Non-vested stock earned		1,444			1,224			876
Stock option expense		279			183			119
Changes in assets and liabilities:
Accounts receivable		(171	)		(599	)		(407	)
Prepaid expenses		118			822			(2,029	)
Accounts payable and other liabilities		619			7,082			1,011
Deferred revenue		(24	)		(246	)		(249	)

Net cash provided by operating activities		77,132			85,175			64,656

Investing Activities
Acquisition of storage facilities		(18,547	)		(138,059	)		(130,251	)
Improvements, equipment additions, and construction in progress		(45,709	)		(52,441	)		(37,021	)
Net proceeds from the sale of storage facility		7,002			—			—
Casualty insurance proceeds received		—			1,692			—
Investment in unconsolidated joint venture		(20,287	)		—			—
Additional investment in consolidated joint ventures net of cash acquired		(6,106	)		—			(8,181	)
(Advances to) reimbursement of advances to joint ventures		(336	)		—			17
Reimbursement of (payment of) property deposits		1,259			(1,469	)		(1,169	)
Receipts from related parties		13			10			38

Net cash used in investing activities		(82,711	)		(190,267	)		(176,567	)

Financing Activities
Net proceeds from sale of common stock		10,842			13,345			148,601
Proceeds from line of credit		14,000			112,000			94,000
Repayment of line of credit and term note		(206,000	)		(12,000	)		(184,000	)
Proceeds from term notes		250,000			6,000			150,000
Financing costs		(3,085	)		(316	)		(632	)
Distributions paid		(57,889	)		(55,973	)		(49,165	)
Redemption of operating partnership units		(114	)		(174	)		(2,788	)
Mortgage principal and capital lease payments		(1,699	)		(1,510	)		(1,286	)

Net cash provided by financing activities		6,055			61,372			154,730

Net increase (decrease) in cash		476			(43,720	)		42,819
Cash at beginning of period		4,010			47,730			4,911

Cash at end of period	$	4,486		$	4,010		$	47,730


Supplemental cash flow information
Cash paid for interest, net of interest capitalized	$	37,970		$	32,313		$	26,647

Fair value of net liabilities assumed on the acquisition of storage facilities		107			1,580			65,650

Distributions declared but unpaid at December 31, 2008, 2007 and 2006 were $14,359, $13,922, and $12,941, respectively.

See notes to financial statements.

SOVRAN ACQUISITION LIMITED PARTNERSHIP — DECEMBER 31, 2008
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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. On June 26, 1995, the Company commenced operations, through the Operating Partnership, effective with the completion of its initial public offering. At December 31, 2008, we had an ownership interest in and managed 385 self-storage properties in 24 states under the name Uncle Bob’s Self Storage ^®. Among our 385 self-storage properties are 27 properties that we manage for a consolidated joint venture of which we are a majority owner and 25 properties that we manage for an unconsolidated joint venture of which we are a 20% owner. Over 40% of the Operating Partnership’s revenue is derived from stores in the states of Texas and Florida.

As of December 31, 2008, the Company was a 98.1% 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 pay cash to acquire Units presented for redemption, rather than issuing Common Shares. 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

Basis of Presentation: Our consolidated financial statements include the accounts of the Operating Partnership, Locke Sovran I, LLC, and Locke Sovran II, LLC, which is a majority owned joint venture. All intercompany transactions and balances have been eliminated. We consolidate all wholly owned subsidiaries. Partially owned subsidiaries and joint ventures are consolidated when we control the entity. Investments in joint ventures that we do not control but for which we have significant influence over are reported using the equity method.

In April 2006, the Operating Partnership made additional investments of $8,475,000 in Locke Sovran I, LLC and Locke Sovran II, LLC that increased the Operating Partnership’s ownership from approximately 45% to over 70% in each of these joint ventures. As a result of this transaction, from the date that its controlling interest was acquired, the Operating Partnership has consolidated the accounts of Locke Sovran I, LLC in its financial statements. The accounts of Locke Sovran II, LLC were already being included in the Operating Partnership’s financial statements as it has been a majority controlled joint venture since 2001. In June 2008, the Operating Partnership made an additional investment of $6.1 million in Locke Sovran I, LLC that increased the Operating Partnership’s ownership from approximately 70% to 100%.

Cash and Cash Equivalents: The Operating Partnership considers all highly liquid investments purchased with maturities of three months or less to be cash equivalents. The cash balance includes $3.8 million and $3.2 million, respectively, held in escrow for encumbered properties at December 31, 2008 and 2007.

Revenue and Expense Recognition: Rental income is recognized when earned pursuant to month-to-month leases for storage space. Promotional discounts are recognized as a reduction to rental income over the promotional period, which is generally during the first month of occupancy. Rental income received prior to the start of the rental period is included in deferred revenue. Equity in earnings of real estate joint ventures that we have significant influence over is recognized based on our ownership interest in the earnings of these entities.

Cost of operations, general and administrative expense, interest expense and advertising costs are expensed as incurred. For the years ended December 31, 2008, 2007, and 2006, advertising costs were $1.4 million, $1.4 million, and $1.0 million, respectively. The Operating Partnership accrues property taxes based on estimates and historical trends. If these estimates are incorrect, the timing and amount of expense recognition would be affected.

Other Income: Consists primarily of sales of storage-related merchandise (locks and packing supplies), insurance commissions, incidental truck rentals, and management fees from unconsolidated joint ventures.

Investment in Storage Facilities: Storage facilities are recorded at cost. The purchase price of acquired facilities is allocated to land, building, equipment, and in-place customer leases based on the fair value of each component. 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 that extend the useful life of assets are capitalized. Interest and other costs incurred during the construction period of major expansions are capitalized. Capitalized interest during the years ended December 31, 2008 and 2007 was $0.4 million. No interest was capitalized during 2006. 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 undiscounted 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, 2008 and 2007, 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.

Other Assets: Included in other assets are net loan acquisition costs, a note receivable, property deposits, and the value placed on in-place customer leases at the time of acquisition. The loan acquisition costs were $6.8 million and $6.2 million at December 31, 2008, and 2007, respectively. Accumulated amortization on the loan acquisition costs was approximately $2.5 million and $3.8 million at December 31, 2008, and 2007, respectively. Loan acquisition costs are amortized over the terms of the related debt. The note receivable of $2.8 million represents a note from certain investors of Locke Sovran II, LLC. The note bears interest at LIBOR plus 2.4% and matures upon the dissolution of Locke Sovran II, LLC. Property deposits were $0.1 million and $1.5 million at December 31, 2008 and 2007, respectively.

The Operating Partnership allocates a portion of the purchase price of acquisitions to in-place customer leases. The value of in-place customer leases is based on the Operating Partnership’s experience with customer turnover. The Operating Partnership amortizes in-place customer leases on a straight-line basis over 12 months (the estimated future benefit period). At December 31, 2008, the gross carrying amount of in-place customer leases was $5.4 million and the accumulated amortization was $5.2 million

Amortization expense, including amortization of in-place customer leases, was $1.3 million, $4.8 million and $1.0 million for the periods ended December 31, 2008, 2007 and 2006, respectively.

Accounts Payable and Accrued Liabilities: Accounts payable and accrued liabilities consists primarily of trade payables, accrued interest, and property tax accruals. The Operating Partnership accrues property tax expense based on estimates and historical trends. Actual expense could differ from these estimates.

Minority Interest: The minority interest reflects the outside ownership interest of the joint venture partner’s interest in Locke Sovran II, LLC. Amounts allocated to these interests are reflected as an expense in the income statement and increase the minority interest on the balance sheet. Distributions to these partners reduce these balances. The limited partners’ capital interest reflects the outside ownership interest of the limited partners of the Operating Partnership. At December 31, 2008, Operating Partnership minority interest ownership was 419,952 Units, or 1.9% (at December 31, 2007 422,727 Units, or 1.9%). The redemption value of the Units at December 31, 2008 and 2007 was $15.1 million and $17.0 million, respectively. The Operating Partnership is obligated to redeem each 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, 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.

Income Taxes: The Company qualifies as a REIT under the Internal Revenue Code of 1986, as amended, and will generally not be subject to corporate income taxes to the extent it distributes at least 90% of its taxable income to its shareholders and complies with certain other requirements. Accordingly, no provision has been made for federal income taxes in the accompanying financial statements. On an aggregate basis, the Operating Partnership’s reported amounts of net assets exceeds the tax basis by approximately $74 million and $72 million at December 31, 2008 and 2007, respectively.

Comprehensive Income: Comprehensive income consists of net income and the change in value of derivatives used for hedging purposes and is reported in the consolidated statements of partners’ capital. Comprehensive income was $13.6 million, $35.7 million and $37.3 million for the years ended December 31, 2008, 2007, and 2006, respectively.

Derivative Financial Instruments: The Operating Partnership adopted SFAS No. 133, “Accounting for Derivative Instruments and Hedging Activities,” as amended, which requires companies to carry all derivatives on the balance sheet at fair value. The Operating Partnership determines the fair value of derivatives by reference to quoted market prices. The accounting for changes in the fair value of a derivative instrument depends on whether it has been designated and qualifies as part of a hedging relationship and, if so, the reason for holding it. The Operating Partnership’s use of derivative instruments is limited to cash flow hedges, as defined in SFAS No. 133, of certain interest rate risks.

Recent Accounting Pronouncements: In February 2007, the FASB issued SFAS No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities” (“SFAS 159”). SFAS 159 allows entities to voluntarily choose, at specified election dates, to measure many financial assets and liabilities at fair value. The effective date for the Operating Partnership is January 1, 2008. The adoption of SFAS 159 did not impact the Operating Partnership’s consolidated financial statements.

In December 2007, the FASB issued SFAS No. 160, “Noncontrolling Interests in Consolidated Financial Statements” (“SFAS No. 160”), which amends Accounting Research Bulletin No. 51, “Consolidated Financial Statements”, to improve the relevance, comparability, and transparency of the financial information that a reporting entity provides in its consolidated financial statements. SFAS No. 160 establishes accounting and reporting standards that require the ownership interests in subsidiaries not held by the parent to be clearly identified, labeled and presented in the consolidated statement of financial position within equity, but separate from the parent’s equity. This statement also requires the amount of consolidated net income attributable to the parent and to the non-controlling interest to be clearly identified and presented on the face of the consolidated statement of income. The effective date for the Operating Partnership will be January 1, 2009. The Operating Partnership has not yet determined the impact of SFAS 160 on our consolidated financial statements

141R applies prospectively to business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after December 15, 2008. The effective date for the Operating Partnership will be January 1, 2009. The Operating Partnership has not yet determined the impact of SFAS 141R related to future acquisitions, if any, on our consolidated financial statements.

In March 2008, the FASB issued SFAS No. 161, “Disclosures About Derivative Instruments and Hedging Activities — an amendment of FASB Statement No. 133” (“SFAS No. 161”). SFAS No. 161 expands quarterly disclosure requirements in SFAS No. 133 about an entity’s derivative instruments and hedging activities. The effective date for the Operating Partnership will be January 1, 2009. The Operating Partnership is currently assessing the impact of SFAS No. 161 on our consolidated financial statements.

Stock-Based Compensation: Effective January 1, 2006, the Operating Partnership adopted Statement 123(R) and uses the modified-prospective method. Under the modified-prospective method, the Operating Partnership recognizes compensation cost in the financial statements issued subsequent to January 1, 2006 for all share based payments granted, modified, or settled after the date of adoption as well as for any awards that were granted prior to the adoption date for which the requisite service period has not been completed as of the adoption date.

The Operating Partnership recorded compensation expense (included in general and administrative expense) of $279,000, $183,000 and $119,000 related to stock options under Statement 123(R) and $1.4 million, $1.2 million and $876,000 related to amortization of non-vested stock grants for the years ended December 31, 2008, 2007 and 2006, respectively. The Operating Partnership uses the Black-Scholes Merton option pricing model to estimate the fair value of stock options granted subsequent to the adoption of FAS 123(R). The application of this pricing model involves assumptions that are judgmental and sensitive in the determination of compensation expense. The weighted average for key assumptions used in determining the fair value of options granted during 2008 follows:


	Weighted Average			Range
Expected life (years)		6.53		4.50 - 7.00
Risk free interest rate		3.78	%	2.65 - 3.94%
Expected volatility		22.61	%	22.40% - 24.30%
Expected dividend yield		6.1	%	6.00% - 7.00%
Fair value	$	4.79		$3.21 - $5.10

To determine expected volatility, the Operating Partnership uses historical volatility based on daily closing prices of the Company’s Common Stock over periods that correlate with the expected terms of the options granted. The risk-free rate is based on the United States Treasury yield curve at the time of grant for the expected life of the options granted. Expected dividends are based on the Operating Partnership’s history and expectation of dividend payouts. The expected life of stock options is based on the midpoint between the vesting date and the end of the contractual term.

Use of Estimates: The preparation of financial statements in conformity with U.S. 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.” In computing earnings per unit, the Operating Partnership excludes preferred unit distributions from net income to arrive at net income available to common unitholders. The following table sets forth the computation of basic and diluted earnings per common unit.


(Amounts in thousands,	Year Ended December 31,
except per unit data)	2008		2007		2006
Numerator:
Net income from continuing operations available to common unitholders	$	37,326	$	38,307	$	34,556

Denominator:		22,184		21,381		18,393
Denominator for basic earnings per unit - weighted average units
Effect of Dilutive Securities:
Stock options and warrants and non-vested stock		21		49		70


Denominator for diluted earnings per unit - adjusted weighted average units and assumed conversion		22,205		21,430		18,463

Basic Earnings per Common Unit from continuing operations	$	1.68	$	1.79	$	1.87
Basic Earnings per Common Unit	$	1.72	$	1.81	$	1.90

Diluted Earnings per Common Unit from continuing operations	$	1.68	$	1.79	$	1.87
Diluted Earnings per Common Unit	$	1.72	$	1.81	$	1.90

4. INVESTMENT IN STORAGE FACILITIES

The following summarizes activity in storage facilities during the years ended December 31, 2008 and December 31, 2007.


(Dollars in thousands)	2008			2007
Cost:
Beginning balance	$	1,322,708		$	1,136,052
Acquisition of storage facilities		18,454			136,653
Additional investment in consolidated joint ventures		2,473			—
Improvements and equipment additions		44,998			45,806
Increase in construction in progress		761			6,621
Dispositions		(193	)		(2,424	)

Ending balance	$	1,389,201		$	1,322,708

Accumulated Depreciation:
Beginning balance	$	183,679		$	154,449
Additions during the year		33,100			30,011
Dispositions		(135	)		(781	)

Ending balance	$	216,644		$	183,679

The Operating Partnership allocates purchase price to the tangible and intangible assets and liabilities acquired based on their estimated fair values. The value of land and buildings are determined at replacement cost. Intangible assets, which represent the value of existing customer leases, are recorded at their estimated fair values. During 2008, the Operating Partnership acquired three storage facilities for $18.9 million. Substantially all of the purchase price of these facilities was allocated to land ($3.7 million), building ($14.7 million), equipment ($0.1 million) and in-place customer leases ($0.4 million) and the operating results of the acquired facilities have been included in the Operating Partnership’s operations since the respective acquisition dates. During 2007, the Operating Partnership acquired 31 storage facilities for $141.3 million. Substantially all of the purchase price of these facilities was allocated to land ($27.7 million), building ($110.0 million), equipment ($1.5 million) and in-place customer leases ($2.1 million) and the operating results of the acquired facilities have been included in the Operating Partnership’s operations since the respective acquisition dates.

5. DISCONTINUED OPERATIONS

In April 2008, the Operating Partnership sold one non-strategic storage facility located in Michigan for net cash proceeds of $7.0 million resulting in a gain of $0.7 million. The operations of this facility and the gain on sale are reported as discontinued operations. The amounts in the 2007 and 2006 financial statements related to the operations and the net assets of this property have been reclassified and are presented as discontinued operations and net assets from discontinued operations, respectively. Cash flows of discontinued operations have not been segregated from the cash flows of continuing operations on the accompanying consolidated statement of cash flows for the years ended December 31, 2008, 2007 and 2006. The following is a summary of the amounts reported as discontinued operations:


	Year Ended December 31,
(dollars in thousands)	2008			2007			2006
Total revenue	$	233		$	912		$	927
Property operations and maintenance expense		(76	)		(196	)		(202	)
Real estate tax expense		(33	)		(97	)		(94	)
Depreciation and amortization expense		(46	)		(185	)		(184	)
Net realized gain on sale of property		716			—			—

Total income from discontinued operations	$	794		$	434		$	447

6. PRO FORMA FINANCIAL INFORMATION (UNAUDITED)

The following unaudited pro forma Condensed Statement of Operations is presented as if (i) the 31 storage facilities purchased during 2007, (ii) the 42 storage facilities purchased during 2006, (iii) the additional investment in Locke Sovran I, LLC and Locke Sovran II, LLC in April 2006, and (iv) the related indebtedness incurred and assumed on these transactions had all occurred at January 1, 2006. 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. In management’s opinion, all adjustments necessary to reflect the effects of these transactions have been made. This unaudited pro forma information 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.


	Year Ended December 31,
(dollars in thousands, except unit data)	2007		2006
Pro forma total operating revenues	$	199,569	$	191,505

Pro forma net income	$	42,582	$	34,825

Pro forma earnings per common unit — diluted	$	1.92	$	1.55

7. UNSECURED LINE OF CREDIT AND TERM NOTES

On June 25, 2008, the Operating Partnership entered into agreements relating to new unsecured credit arrangements, and received funds under those arrangements. As part of the agreements, the Operating Partnership entered into a $250 million unsecured term note maturing in June 2012 bearing interest at LIBOR plus 1.625%. The proceeds from this term note were used to repay the Operating Partnership’s previous line of credit that was to mature in September 2008, the Operating Partnership’s term note that was to mature in September 2009, the term note maturing in July 2008, and to provide for working capital. The new agreements also provide for a $125 million (expandable to $150 million) revolving line of credit maturing June 2011 bearing interest at a variable rate equal to LIBOR plus 1.375%, and requires a 0.25% facility fee. The interest rate at December 31, 2008 on the Operating Partnership’s available line of credit was approximately 1.8% (5.5% at December 31, 2007). At December 31, 2008, there was $111 million available on the unsecured line of credit.

The Operating Partnership also maintains an $80 million term note maturing September 2013 bearing interest at a fixed rate of 6.26%, a $20 million term note maturing September 2013 bearing interest at a variable rate equal to LIBOR plus 1.50%, and a $150 million unsecured term note maturing in April 2016 bearing interest at 6.38%.

8. MORTGAGES PAYABLE AND OTHER DEBT DISCLOSURES

Mortgages payable at December 31, 2008 and December 31, 2007 consist of the following:


	December 31,		December 31,
(dollars in thousands)	2008		2007
7.80% mortgage note due December 2011, secured by 11 self-storage facilities (Locke Sovran I) with an aggregate net book value of $43.8 million, principal and interest paid monthly	$	29,033	$	29,084
7.19% mortgage note due March 2012, secured by 27 self-storage facilities (Locke Sovran II) with an aggregate net book value of $81.2 million, principal and interest paid monthly		42,603		43,645
7.25% mortgage note due December 2011, secured by 1 self-storage facility with an aggregate net book value of $5.8 million, principal and interest paid monthly. Estimated market rate at time of acquisition 5.40%		3,510		3,643
6.76% mortgage note due September 2013, secured by 1 self-storage facility with an aggregate net book value of $2.0 million, principal and interest paid monthly		1,000		1,022
6.35% mortgage note due March 2014, secured by 1 self-storage facility with an aggregate net book value of $3.8 million, principal and interest paid monthly		1,098		1,122
5.55% mortgage notes due November 2009, secured by 8 self-storage facilities with an aggregate net book value of $34.9 million, interest only paid monthly. Estimated market rate at time of acquisition 6.44%		25,930		25,719
7.50% mortgage notes due August 2011, secured by 3 self-storage facilities with an aggregate net book value of $14.3 million, principal and interest paid monthly. Estimated market rate at time of acquisition 6.42%		6,087		6,282

Total mortgages payable	$	109,261	$	110,517

The Operating Partnership assumed the 7.25%, 6.76%, 6.35%, 5.55% and 7.50% mortgage notes in connection with the acquisitions of storage facilities in 2005 and 2006. The 7.25%, 5.55%, and 7.50% mortgages were recorded at their estimated fair value based upon the estimated market rates at the time of the acquisitions ranging from 5.40% to 6.44%. The carrying value of these three mortgages approximates the actual principal balance of the mortgages payable. An immaterial premium exists at December 31, 2008, which will be amortized over the remaining term of the mortgages based on the effective interest method.

The table below summarizes the Operating Partnership’s debt obligations and interest rate derivatives at December 31, 2008. The estimated fair value of financial instruments is subjective in nature and is dependent on a

number of important assumptions, including discount rates and relevant comparable market information associated with each financial instrument. The fair value of the fixed rate term note and mortgage note were estimated by discounting the future cash flows using the current rates at which similar loans would be made to borrowers with similar credit ratings and for the same remaining maturities. The use of different market assumptions and estimation methodologies may have a material effect on the reported estimated fair value amounts. Accordingly, the estimates presented below are not necessarily indicative of the amounts the Operating Partnership would realize in a current market exchange.


	Expected Maturity Date Including Discount														Fair
(dollars in thousands)	2009		2010		2011		2012		2013		Thereafter		Total		Value
Line of credit — variable rate LIBOR + 1.375 (1.84% at December 31, 2008)		—		—	$	14,000		—		—		—	$	14,000	$	14,000

Notes Payable:
Term note — variable rate LIBOR+1.625% (2.09% at December 31, 2008)		—		—		—	$	250,000		—		—	$	250,000	$	250,000
Term note — variable rate LIBOR+1.50% (4.62% at December 31, 2008)		—		—		—		—	$	20,000		—	$	20,000	$	20,000
Term note — fixed rate 6.26%		—		—		—		—	$	80,000		—	$	80,000	$	78,865
Term note — fixed rate 6.38%		—		—		—		—		—	$	150,000	$	150,000	$	147,899

Mortgage note — fixed rate 7.80%	$	587	$	630	$	27,816		—		—		—	$	29,033	$	30,031
Mortgage note — fixed rate 7.19%	$	1,128	$	1,211	$	1,301	$	38,963		—		—	$	42,603	$	44,205
Mortgage note — fixed rate 7.25%	$	141	$	149	$	3,220		—		—		—	$	3,510	$	3,478
Mortgage note — fixed rate 6.76%	$	23	$	25	$	27	$	29	$	896		—	$	1,000	$	1,018
Mortgage note — fixed rate 6.35%	$	26	$	28	$	30	$	31	$	34	$	949	$	1,098	$	1,100
Mortgage notes — fixed rate 5.55%	$	25,930		—		—		—		—		—	$	25,930	$	26,422
Mortgage notes — fixed rate 7.50%	$	208	$	222	$	5,657		—		—		—	$	6,087	$	6,188

Interest rate derivatives — liability		—		—		—		—		—		—		—	$	25,490

9. DERIVATIVE FINANCIAL INSTRUMENTS

Interest rate swaps are used to adjust the proportion of total debt that is subject to variable interest rates. The interest rate swaps require the Operating Partnership to pay an amount equal to a specific fixed rate of interest times a notional principal amount and to receive in return an amount equal to a variable rate of interest times the same notional amount. The notional amounts are not exchanged. No other cash payments are made unless the contract is terminated prior to its maturity, in which case the contract would likely be settled for an amount equal to its fair value. The Operating Partnership enters interest rate swaps with a number of major financial institutions to minimize counterparty credit risk.

The interest rate swaps qualify and are designated as hedges of the amount of future cash flows related to interest payments on variable rate debt. Therefore, the interest rate swaps are recorded in the consolidated balance sheet at fair value and the related gains or losses are deferred in partners’ capital as Accumulated Other Comprehensive Income (“AOCI”). These deferred gains and losses are amortized into interest expense during the period or periods in which the related interest payments affect earnings. However, to the extent that the interest rate swaps are not perfectly effective in offsetting the change in value of the interest payments being hedged, the ineffective portion of these contracts is recognized in earnings immediately. Ineffectiveness was immaterial in 2008, 2007, and 2006.

The Operating Partnership has entered into seven interest rate swap agreements as detailed below to effectively convert a total of $270 million of variable-rate debt to fixed-rate debt.

Fixed

Floating Rate

Notional Amount

Effective Date

Expiration Date

Rate Paid

Received

$50 Million

11/14/05

9/1/09

4.3900

1 month LIBOR

$20 Million

9/4/05

9/4/13

4.4350

6 month LIBOR

$50 Million

10/10/06

9/1/09

4.4800

1 month LIBOR

$50 Million

7/1/08

6/25/12

4.2825

1 month LIBOR

$100 Million

7/1/08

6/22/12

4.2965

1 month LIBOR

$75 Million

9/1/09

6/22/12

4.7100

1 month LIBOR

$25 Million

9/1/09

6/22/12

4.2875

1 month LIBOR

The interest rate swap agreements are the only derivative instruments, as defined by SFAS No. 133, held by the Operating Partnership. During 2008, 2007, and 2006, the net reclassification from AOCI to interest expense was $2.6 million, ($1.1) million and ($0.5) million, respectively, based on payments (receipts) made or received under the swap agreements. Based on current interest rates, the Operating Partnership estimates that payments under the interest rate swaps will be approximately $10.6 million in 2009. Receipts made under the interest rate swap agreements will be reclassified to interest expense as settlements occur. The fair value of the swap agreements, including accrued interest, was a liability of $25.5 million and $1.2 million at December 31, 2008, and 2007 respectively.

10. FAIR VALUE MEASUREMENTS

In September 2006, the FASB issued SFAS No. 157, “Fair Value Measurements,” (SFAS 157. This statement defines fair value, establishes a framework for measuring fair value and expands the related disclosure requirements. This statement applies under other accounting pronouncements that require or permit fair value measurements. The statement indicates, among other things, that a fair value measurement assumes that the transaction to sell an asset or transfer a liability occurs in the principal market for the asset or liability or, in the absence of a principal market, the most advantageous market for the asset or liability. SFAS 157 defines fair value based upon an exit price model.

Relative to SFAS 157, the FASB issued FASB Staff Positions (FSP) 157-1, 157-2, and 157-3. FSP 157-1 amends SFAS 157 to exclude SFAS No. 13, “Accounting for Leases,” (SFAS 13) and its related interpretive accounting pronouncements that address leasing transactions, while FSP 157-2 delays the effective date of the application of SFAS 157 to fiscal years beginning after November 15, 2008 for all nonfinancial assets and nonfinancial liabilities that are recognized or disclosed at fair value in the financial statements on a nonrecurring basis. FSP 157-3 addresses considerations in determining the fair value of a financial asset when the market for that asset is not active.

We adopted SFAS 157 as of January 1, 2008, with the exception of the application of the statement to non-recurring nonfinancial assets and nonfinancial liabilities. Non-recurring nonfinancial assets and nonfinancial liabilities for which we have not applied the provisions of SFAS 157 include those measured at fair value in a business combination.

SFAS 157 establishes a valuation hierarchy for disclosure of the inputs to valuation used to measure fair value. This hierarchy prioritizes the inputs into three broad levels as follows. Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities. Level 2 inputs are quoted prices for similar assets and liabilities in active markets or inputs that are observable for the asset or liability, either directly or indirectly through market corroboration, for substantially the full term of the financial instrument. Level 3 inputs are unobservable inputs based on our own assumptions used to measure assets and liabilities at fair value. A financial asset or liability’s classification within the hierarchy is determined based on the lowest level input that is significant to the fair value measurement.

The following table provides the assets and liabilities carried at fair value measured on a recurring basis as of December 31, 2008 (in thousands):


	Asset
	(Liability)			Level 1		Level 2			Level 3
Interest rate swaps		(25,490	)		—		(25,490	)		—

Interest rate swaps are over the counter securities with no quoted readily available Level 1 inputs, and therefore are measured at fair value using inputs that are directly observable in active markets and are classified within Level 2 of the valuation hierarchy, using the income approach.

11. STOCK OPTIONS AND NON-VESTED STOCK

The Company established the 2005 Award and Option Plan (the “Plan”) which replaced the expired 1995 Award and Option Plan for the purpose of attracting and retaining the Company’s executive officers and other key employees. 1,500,000 shares were authorized for issuance under the Plan. The options vest ratably over four and eight 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 of the common shares at the date of grant. As of December 31, 2008, options for 324,688 shares were outstanding under the Plans and options for 1,096,464 shares of common stock were available for future issuance.

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 initial granting of options to purchase 3,500 shares of common stock and for the annual granting of options to purchase 2,000 shares of common stock to each eligible director. Such options vest over a one-year period for initial awards and immediately upon subsequent grants. In addition, effective in 2004 each outside director receives non-vested shares annually equal to 80% of the annual fees paid to them. During the restriction period, the non-vested shares may not be sold, transferred, or otherwise encumbered. The holder of the non-vested shares has all rights of a holder of common shares, including the right to vote and receive dividends. During 2008, 1,820 non-vested shares were issued to outside directors. Such non-vested shares vest over a one-year period. The total shares reserved under the Non-employee Plan is 150,000. The exercise price for options granted under the Non-employee Plan is equal to the fair market value at the date of grant. As of December 31, 2008, options for 36,000 common shares and non-vested shares of 9,160 were outstanding under the Non-employee Plan and options for no shares of common stock were available for future issuance.

A summary of the Company’s stock option activity and related information for the years ended December 31 follows:


	2008					2007					2006
				Weighted					Weighted					Weighted
				average					average					average
				exercise					exercise					exercise
	Options			price		Options			price		Options			price
Outstanding at beginning of year:		168,125		$	42.54		113,225		$	35.77		142,900		$	32.68

Granted		201,163			43.12		74,000			52.49		14,000			51.78
Exercised		(2,600	)		27.78		(13,100	)		32.44		(37,675	)		30.33
Forfeited		(6,000	)		36.86		(6,000	)		59.62		(6,000	)		33.05


Outstanding at end of year		360,688		$	43.06		168,125		$	42.54		113,225		$	35.77

Exercisable at end of year		118,025		$	38.84		82,625		$	34.45		74,225		$	31.14

A summary of the Company’s stock options outstanding at December 31, 2008 follows:


	Outstanding				Exercisable
			Weighted				Weighted
			average				average
			exercise				exercise
Exercise Price Range	Options		price		Options		price
$20.375 - 29.99		31,475	$	21.58		31,475	$	21.58
$30.00 - 39.99		33,050	$	35.35		19,550	$	34.11
$40.00 - 57.79		296,163	$	46.21		67,000	$	48.33

Total		360,688	$	43.06		118,025	$	38.84


Intrinsic value of outstanding stock options at December 31, 2008	$	506,184
Intrinsic value of exercisable stock options at December 31, 2008	$	506,184
Intrinsic value of stock options exercised in 2008	$	37,691

The aggregate intrinsic value is calculated as the difference between the exercise price of the underlying awards and the quoted price of the Company’s common stock at December 31, 2008, or the price on the date of exercise for those exercised during the year. As of December 31, 2008, there was approximately $1.1 million of total unrecognized compensation cost related to non-vested share-based compensation arrangements granted under our stock award plans. That cost is expected to be recognized over a weighted-average period of approximately 5.2 years. The weighted average remaining contractual life of all options is 8.0 years, and for exercisable options is 5.7 years.

Non-vested Stock

The Company has also issued 289,587 shares of non-vested stock to employees which vest over two to nine year periods. During the restriction period, the non-vested shares may not be sold, transferred, or otherwise encumbered. The holder of the non-vested shares has all rights of a holder of common shares, including the right to vote and receive dividends. For the year ended December 31, 2008, the fair market value of the non-vested stock on the date of grant ranged from $20.38 to $59.81. During 2008, 43,893 shares of non-vested stock were issued to employees with an aggregate fair value of $1.8 million. The Company charges additional paid-in capital for the market value of shares as they are issued. The unearned portion is then amortized and charged to expense over the vesting period. The Company uses the average of the high and low price of its common stock on the date the award is granted as the fair value for non-vested stock awards.

A summary of the status of unvested shares of stock issued to employees and directors as of and during the years ended December 31 follows:


	2008					2007					2006
				Weighted					Weighted					Weighted
	Non-			average		Non-			average		Non-			average
	vested			grant date		vested			grant date		vested			grant date
	Shares			fair value		Shares			fair value		Shares			fair value
Unvested at beginning of year:		115,896		$	45.54		96,453		$	40.21		71,411		$	30.39

Granted		45,713			41.50		43,989			53.79		41,719			53.86
Vested		(30,802	)		42.71		(24,546	)		39.39		(16,677	)		32.29
Forfeited		—			—		—			—		—			—


Unvested at end of year		130,807		$	44.79		115,896		$	45.54		96,453		$	40.21

Compensation expense of $1.4 million, $1.2 million and $0.9 million was recognized for the vested portion of non-vested stock grants in 2008, 2007 and 2006, respectively. The fair value of non-vested stock that vested during 2008, 2007 and 2006 was $1.3 million, $1.0 million and $0.5 million, respectively. The total unrecognized compensation cost related to non-vested stock was $4.8 million at December 31, 2008, and the remaining weighted-average period over which this expense will be recognized was 6 years.

12. 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. The Operating Partnership contributes to the Plan at the rate of 50% of the first 4% of gross wages that the employee contributes. Total expense to the Operating Partnership was approximately $284,000, $256,000, and $166,000 for the years ended December 31, 2008, 2007 and 2006, respectively.

13. INVESTMENT IN JOINT VENTURES

The Operating Partnership has a 20% ownership interest in Sovran HHF Storage Holdings LLC (“Sovran HHF”), a joint venture that was formed in May 2008 to acquire self-storage properties that will be managed by the Operating Partnership. The carrying value of the Operating Partnership’s investment at December 31, 2008 was $20.1 million. Twenty five properties were acquired by Sovran HHF as of December 31, 2008 for approximately $171.5 million. The Operating Partnership contributed $18.6 million to the joint venture as its share of capital required to fund the acquisitions. As of December 31, 2008, the carrying value of the Operating Partnership’s investment in Sovran HHF exceeds its share of the underlying equity in net assets of Sovran HHF by approximately $1.7 million as a result of the capitalization of certain acquisition related costs. This difference is not amortized, it is included in the carrying value of the investment, which is assessed for impairment on a periodic basis.

As manager of Sovran HHF, the Operating Partnership earns a management and call center fee of 7% of gross revenues which totaled $0.5 million for 2008. The Operating Partnership also received an acquisition fee of 0.5% of purchase price for securing purchases for the joint venture. During 2008, the Operating Partnership recorded $0.7 million in acquisition fees. The Operating Partnership’s share of Sovran HHF’s income for 2008 was $0.1 million. At December 31, 2008, Sovran HHF owed the Operating Partnership $0.3 million for payments made by the Operating Partnership on behalf of the joint venture.

A summary of the unconsolidated joint ventures’ financial statements as of and for the year ended December 31, 2008 is as follows:


	Sovran HHF
	Storage		Iskalo Office
(dollars in thousands)	Holdings LLC		Holdings, LLC
Balance Sheet Data:
Investment in storage facilities, net	$	170,176	$	—
Investment in office building		—		5,507
Other assets		3,912		568

Total Assets	$	174,088	$	6,075


Due to the Operating Partnership	$	336	$	—
Mortgages payable		79,937		7,169
Other liabilities		1,942		168

Total Liabilities		82,215		7,337

Unaffiliated partners’ equity (deficiency)		73,499		(718	)
Operating Partnership equity (deficiency)		18,374		(544	)

Total Liabilities and Partners’ Equity (deficiency)	$	174,088	$	6,075


Income Statement Data:
Total revenues	$	6,652	$	1,127
Total expenses		6,301		1,139

Net income (loss)	$	351	$	(12	)

The Operating Partnership does not guarantee the debt of Sovran HHF or Iskalo Office Holdings, LLC.

14. PREFERRED STOCK

On July 3, 2002, the Company entered into an agreement providing for the issuance of 2,800,000 shares of 8.375% Series C Convertible Cumulative Preferred Stock (“Series C Preferred”) in a privately negotiated transaction. The Company immediately issued 1,600,000 shares of the Series C Preferred and issued the remaining 1,200,000 shares on November 27, 2002. The offering price was $25.00 per share resulting in net proceeds for the Series C Preferred and related common stock warrants of $67.9 million after expenses. In 2004, the Company issued 306,748 shares of its common stock in connection with the conversion of 400,000 shares of Series C Preferred Stock into common stock. During 2005, the Company issued 920,244 shares of its common stock in connection with a written notice from one of the holders of the Series C Preferred Stock requesting the conversion of 1,200,000 shares of Series C Preferred Stock into common stock. On July 7, 2007, the Company issued 920,244 shares of its common stock to the holder of its Series C Preferred Stock upon the holder’s election to convert the remaining 1,200,000 shares of Series C Preferred Stock into common stock. As a result of the conversion, $30.0 million recorded in preferred partners capital was reclassified to limited partners’ capital in 2007.

15. SUPPLEMENTARY QUARTERLY FINANCIAL DATA (UNAUDITED)

The following is a summary of quarterly results of operations for the years ended December 31, 2008 and 2007 (dollars in thousands, except per unit data).


	2008 Quarter Ended
	March 31		June 30		Sept. 30		Dec. 31
Operating revenue	$	49,619	$	50,120	$	52,497	$	50,767
Income from continuing operations (a)	$	9,045	$	10,033	$	9,711	$	8,537
Income from discontinued operations (a)	$	82	$	712	$	—	$	—
Net Income	$	9,127	$	10,745	$	9,711	$	8,537
Net income available to common unitholders	$	9,127	$	10,745	$	9,711	$	8,537
Net Income Per Common Unit
Basic	$	0.41	$	0.49	$	0.44	$	0.38
Diluted	$	0.41	$	0.48	$	0.44	$	0.38


	2007 Quarter Ended
	March 31		June 30		Sept. 30		Dec. 31
Operating revenue (a)	$	44,371	$	47,872	$	50,765	$	49,849
Income from continuing operations (a)	$	9,636	$	8,117	$	10,972	$	10,838
Income from discontinued operations (a)	$	100	$	114	$	118	$	102
Net Income	$	9,736	$	8,231	$	11,090	$	10,940
Net income available to common unitholders	$	9,108	$	7,603	$	11,090	$	10,940
Net Income Per Common Unit
Basic	$	0.44	$	0.36	$	0.51	$	0.50
Diluted	$	0.44	$	0.36	$	0.51	$	0.50


(a)		Data as presented in this table differ from the amounts as presented in the Operating Partnership’s quarterly reports due to the impact of discontinued operations accounting with respect to the one property sold in 2008 as described in Note 5.

16. 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 that individually or in the aggregate would be material to the Operating Partnership’s overall business, financial condition, or results of operations.

Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure

None.

Item 9A. Controls and Procedures

Conclusion Regarding the Effectiveness of Disclosure Controls and Procedures

Our management conducted an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures, as such term is defined under Rule 13a-15(e) promulgated under the Securities Exchange Act of 1934, as amended (Exchange Act), under the supervision of and with the participation of our management, including the Chief Executive Officer and Chief Financial Officer. Based on that evaluation, our management, including the Chief Executive Officer and Chief Financial Officer, concluded that our disclosure controls and procedures were effective at December 31, 2008. There have not been changes in the Operating Partnership’s internal controls or in other factors that could significantly affect these controls during the quarter ended December 31, 2008.

Management’s Report on Internal Control Over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting, and for performing an assessment of the effectiveness of internal control over financial reporting as of December 31, 2008. Internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. Our system of internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the Operating Partnership; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the Operating Partnership are being made only in accordance with authorizations of management and directors of the Operating Partnership; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the Operating Partnership’s assets that could have a material effect on the financial statements.

Our management performed an assessment of the effectiveness of our internal control over financial reporting as of December 31, 2008 based upon criteria in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (''COSO’’). Based on our assessment, management determined that our internal control over financial reporting was effective as of December 31, 2008 based on the criteria in Internal Control-Integrated Framework issued by COSO.

The effectiveness of the Operating Partnership’s internal control over financial reporting as of December 31, 2008 has been audited by Ernst & Young LLP, an independent registered public accounting firm, as stated in their report which is included in Item 9A herein.


/s/ Robert J. Attea		/s/ David L. Rogers
Chief Executive Officer		Chief Financial Officer

Report of Independent Registered Public Accounting Firm

The Board of Directors and Partners of Sovran Acquisition Limited Partnership

We have audited Sovran Acquisition Limited Partnership’s internal control over financial reporting as of December 31, 2008, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (the COSO criteria). Sovran Acquisition Limited Partnership’s management is responsible for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying Management’s Report on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on the company’s internal control over financial reporting based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

In our opinion, Sovran Acquisition Limited Partnership maintained, in all material respects, effective internal control over financial reporting as of December 31, 2008, based on the COSO criteria.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheets of Sovran Acquisition Limited Partnership as of December 31, 2008 and 2007, and the related consolidated statements of operations, partners’ capital, and cash flows for each of the three years in the period ended December 31, 2008 of Sovran Acquisition Limited Partnership and our report dated February 25, 2009 expressed an unqualified opinion thereon.

/s/ Ernst & Young LLP

Buffalo, New York
February 25, 2009

Part III

Item 10. Directors, Executive Officers and Corporate Governance

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 contained in the Proxy Statement for the Annual Meeting of Shareholders of the Company to be held on May 21, 2009, with respect to directors, executive officers, audit committee, and audit committee financial experts of the Company and Section 16(a) beneficial ownership reporting compliance, is incorporated herein by reference in response to this item.

The Operating Partnership has adopted a code of ethics that applies to all of its directors, officers, and employees. The Operating Partnership has made the Code of Ethics available on its website at http://www.sovranss.com.

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 “Director Compensation” in the Company’s Proxy Statement for the Annual Meeting of Shareholders of the Company to be held on May 21, 2009.


Item 12.		Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

The Operating Partnership has no directors or officers. No director or officer of the Company or Holdings beneficially owns any Units.

At December 31, 2008, the Company beneficially owns 22,016,348 Units which constitute 98.1% of all outstanding Units. No other person holds more than a 5% beneficial ownership in the Operating Partnership.

The information required herein is incorporated by reference to “Stock Ownership By Directors and Executive Officers” and “Security Ownership of Certain Beneficial Owners” in the Proxy Statement for the Annual Meeting of Shareholders of the Company to be held on May 21, 2009.

RECENT SALES OF UNREGISTERED SECURITIES

During 2008, 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 2, 2008, in connection with the Sovran Self Storage, Inc. 2005 Award and Option Plan, the Operating Partnership issued 16,500 Units to the Company.

	-		On January 22, 2008, in connection with the Sovran Self Storage, Inc. Dividend Reinvestment and Stock Purchase Plan, the Company transferred $2,550,829 to the Operating Partnership in exchange for 72,540 Units.

	-		On February 22, 2008, in connection with the Sovran Self Storage, Inc. Dividend Reinvestment and Stock Purchase Plan, the Company transferred $411,761 to the Operating Partnership in exchange for 11,036 Units.

	-		On February 26, 2008, in connection with the Sovran Self Storage, Inc. 2005 Award and Option Plan, the Operating Partnership issued 8,932 Units to the Company.

	-		On February 26, 2008, in connection with the Deferred Compensation Plan for Directors of Sovran Self Storage, Inc., the Operating Partnership issued 6,141 Units to the Company.

	-		On March 19, 2008, the Operating Partnership redeemed 200 Units from a partner for $7,788.

	-		On March 20, 2008, in connection with the Sovran Self Storage, Inc. 1995 Award and Option Plan, the Operating Partnership issued 1,000 Units to the Company for $27,220.

	-		On March 24, 2008, in connection with the Sovran Self Storage, Inc. Dividend Reinvestment and Stock Purchase Plan, the Company transferred $357,504 to the Operating Partnership in exchange for 9,120 Units.

	-		On April 23, 2008, in connection with the Sovran Self Storage, Inc. Dividend Reinvestment and Stock Purchase Plan, the Company transferred $2,094,124 to the Operating Partnership in exchange for 48,975 Units.

	-		On May 21, 2008, in connection with the Company’s director’s compensation plan, the Operating Partnership issued 1,820 Units to the Company.

	-		On May 22, 2008, in connection with the Sovran Self Storage, Inc. Dividend Reinvestment and Stock Purchase Plan, the Company transferred $429,729 to the Operating Partnership in exchange for 9,878 Units.

	-		On June 6, 2008, in connection with the Sovran Self Storage, Inc. 1995 Award and Option Plan, the Operating Partnership issued 200 Units to the Company for $6,929.

	-		On January 17, 2008, in connection with the Sovran Self Storage, Inc. 2005 Award and Option Plan, the Operating Partnership issued 18,461 Units to the Company.

	-		On June 23, 2008, in connection with the Sovran Self Storage, Inc. Dividend Reinvestment and Stock Purchase Plan, the Company transferred $405,838 to the Operating Partnership in exchange for 9,538 Units.

	-		On July 10, 2008, the Operating Partnership redeemed 375 Units from a partner for $15,300.

	-		On July 22, 2008, in connection with the Sovran Self Storage, Inc. Dividend Reinvestment and Stock Purchase Plan, the Company transferred $2,327,769 to the Operating Partnership in exchange for 60,471 Units.

	-		On August 14, 2008, in connection with the Sovran Self Storage, Inc. 1995 Award and Option Plan, the Operating Partnership issued 300 Units to the Company for $10,394.

	-		On August 22, 2008, in connection with the Sovran Self Storage, Inc. Dividend Reinvestment and Stock Purchase Plan, the Company transferred $415,634 to the Operating Partnership in exchange for 10,850 Units.

	-		On September 8, 2008, in connection with the Sovran Self Storage, Inc. 1995 Award and Option Plan, the Operating Partnership issued 1,100 Units to the Company for $27,674.

	-		On September 22, 2008, in connection with the Sovran Self Storage, Inc. Dividend Reinvestment and Stock Purchase Plan, the Company transferred $393,416 to the Operating Partnership in exchange for 9,775 Units.

	-		On September 29, 2008, the Operating Partnership redeemed 2,200 Units from a partner for $91,330.

	-		On October 22, 2008, in connection with the Sovran Self Storage, Inc. Dividend Reinvestment and Stock Purchase Plan, the Company transferred $524,304 to the Operating Partnership in exchange for 15,603 Units.

	-		On November 24, 2008, in connection with the Sovran Self Storage, Inc. Dividend Reinvestment and Stock Purchase Plan, the Company transferred $397,052 to the Operating Partnership in exchange for 15,858 Units.

	-		On December 22, 2008, in connection with the Sovran Self Storage, Inc. Dividend Reinvestment and Stock Purchase Plan, the Company transferred $367,019 to the Operating Partnership in exchange for 11,664 Units.

Item 13. Certain Relationships and Related Transactions, and Director Independence

The information required herein is incorporated by reference to “Certain Transactions” and “Election of Directors—Director Independence” in the Company’s Proxy Statement for the Annual Meeting of Shareholders to be held on May 21, 2009.

Item 14. Principal Accountant Fees and Services

The information required herein is incorporated by reference to “Appointment of Independent Auditor” in the Company’s Proxy Statement for the Annual Meeting of Shareholders to be held on May 21, 2009.

Part IV

Item 15. Exhibits, Financial Statement Schedules

(a)

Documents filed as part of this Annual Report on Form 10-K:

The following consolidated financial statements of Sovran Acquisition Limited Partnership are included in Item 8.

	(i)		Consolidated Balance Sheets as of December 31, 2008 and 2007.

	(ii)		Consolidated Statements of Operations for Years Ended December 31, 2008, 2007, and 2006.

	(iii)		Consolidated Statements of Partners’ Capital for Years Ended December 31, 2008, 2007, and 2006.

	(iv)		Consolidated Statements of Cash Flows for Years Ended December 31, 2008, 2007, and 2006.

	(v)		Notes to Consolidated Financial Statements.

2.		The following financial statement Schedule as of the period ended December 31, 2008 is included in this Annual Report on Form 10-K.

		Schedule III Real Estate and Accumulated Depreciation.

All other Consolidated financial schedules are omitted because they are inapplicable, not required, or the information is included elsewhere in the consolidated financial statements or the notes thereto.

3. Exhibits

The exhibits required to be filed as part of this Annual Report on Form 10-K have been included as follows:


3.1		Agreement of Limited Partnership of Sovran Acquisition Limited Partnership (incorporated by reference to Exhibit 3.1 on Form 10 filed April 22, 1998).

3.2*		Amendments to the Agreement of Limited Partnership of Sovran Acquisition Limited Partnership dated July 30, 1999 and July 3, 2002.

10.1*+		Employment Agreement between the Registrant and Robert J. Attea.

10.2*+		Employment Agreement between the Registrant and Kenneth F. Myszka.

10.3*+		Employment Agreement between the Registrant and David L. Rogers.

10.4		Amended Indemnification Agreements with members of the Board of Directors and Executive Officers (incorporated by reference to Exhibit 10.35 and 10.36 to Registrant’s Current Report on Form 8-K filed July 20, 2006).

10.5		Promissory Note between Locke Sovran II, LLC and PNC Bank, National Association (incorporated by reference to Exhibit 10.22 to Registrant’s Form 10-K filed March 27, 2003).

10.6		Third Amended and Restated Revolving Credit and Term Loan Agreement among Registrant, the Partnership, Manufacturers and Traders Trust Company and other lenders named therein (incorporated by reference to Exhibit 10.1 filed in the Company’s Current Report on Form 8-K, filed June 27, 2008).

10.7		Cornerstone Acquisition Agreement and Amendments to Certain Loan Agreements (incorporated by reference to Exhibits 10.30, 10.31, 10.32, 10.33 and 10.34 of Registrant’s Current Report on Form 8-K filed June 26, 2006).

10.8		$150 million, 6.38% Senior Guaranteed Notes, Series C due April 26, 2016, and Amendments to Second Amendment Restated Revolving Credit and Term Loan Agreement dated December 16, 2004 and Amendment to Note Purchase Agreement dated September 4, 2003 (incorporated by reference to Exhibits 10.27, 10.28, and 10.29 of the Registrant’s Current Report on Form 8-K filed May 1, 2006).

10.9		Promissory Note between Locke Sovran I, LLC and GMAC Commercial Mortgage Corporation (incorporated by reference to Exhibit 10.21 as filed in the Company’s Annual Report on Form 10-K, filed March 1, 2007).

12.1*		Statement Re: Computation of Earnings to Fixed Charges.

21.1*		Subsidiaries of the Company (incorporated by reference to Exhibit 21 as filed in the Company’s Annual Report on Form 10-K, filed March 1, 2007).

24.1*		Powers of Attorney (included on signature pages).

31.1*		Certification of Chief Executive Officer pursuant to Rule 13a-14(a) and Rule 15d-14(a) of the Securities Exchange Act, as amended.

31.2*		Certification of Chief Financial Officer pursuant to Rule 13a-14(a) and Rule 15d-14(a) of the Securities Exchange Act, as amended.

32.1*		Certification of Chief Executive Officer and Chief Financial Officer Pursuant to 18 U.S.C. Section 1350

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant 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

February 27, 2009	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 the Sovran Holdings, Inc., as general partner of the registrant, and in the capacities and on the dates indicated.


Signature	Title	Date

/s/ Robert J. Attea Robert J. Attea	Chairman of the Board of Directors Chief Executive Officer and Director (Principal Executive Officer)	February 27, 2009

/s/ Kenneth F. Myszka Kenneth F. Myszka	President, Chief Operating Officer and Director	February 27, 2009

/s/ David L. Rogers David L. Rogers	Chief Financial Officer (Principal Financial and Accounting Officer)	February 27, 2009

/s/ John Burns John Burns	Director	February 27, 2009

/s/ Michael A. Elia Michael A. Elia	Director	February 27, 2009

/s/ Anthony P. Gammie Anthony P. Gammie	Director	February 27, 2009

/s/ Charles E. Lannon Charles E. Lannon	Director	February 27, 2009

Sovran Acquisition Limited Partnership
Schedule III
Combined Real Estate and Accumulated Depreciation
(in thousands)
December 31, 2008


							Cost Capitalized													Life on
							Subsequent to		Gross Amount at Which											which
			Initial Cost to Company				Acquisition		Carried at Close of Period											depreciation
					Building,		Building,				Building,									in latest
					Equipment		Equipment				Equipment									income
		Encum			and		and				and				Accum.		Date of	Date		statement
Description	ST	brance	Land		Improvements		Improvements		Land		Improvements		Total		Deprec.		Construction	Acquired		is computed

Boston-Metro I	MA		$	363	$	1,679	$	528	$	363		2,207	$	2,570	$	706	1980		6/26/1995	5 to 40 years
Boston-Metro II	MA			680		1,616		361		680		1,977		2,657		699	1986		6/26/1995	5 to 40 years
E. Providence	RI			345		1,268		650		345		1,918		2,263		573	1984		6/26/1995	5 to 40 years
Charleston l	SC			416		1,516		2,029		416		3,545		3,961		768	1985		6/26/1995	5 to 40 years
Lakeland I	FL			397		1,424		1,436		397		2,860		3,257		626	1985		6/26/1995	5 to 40 years
Charlotte	NC			308		1,102		1,076		747		1,739		2,486		563	1986		6/26/1995	5 to 40 years
Tallahassee I	FL			770		2,734		1,869		770		4,603		5,373		1,476	1973		6/26/1995	5 to 40 years
Youngstown	OH			239		1,110		1,298		239		2,408		2,647		628	1980		6/26/1995	5 to 40 years
Cleveland-Metro II	OH			701		1,659		768		701		2,427		3,128		764	1987		6/26/1995	5 to 40 years
Tallahassee II	FL			204		734		903		198		1,643		1,841		508	1975		6/26/1995	5 to 40 years
Pt. St. Lucie	FL			395		1,501		854		779		1,971		2,750		758	1985		6/26/1995	5 to 40 years
Deltona	FL			483		1,752		2,037		483		3,789		4,272		922	1984		6/26/1995	5 to 40 years
Middletown	NY			224		808		796		224		1,604		1,828		526	1988		6/26/1995	5 to 40 years
Buffalo I	NY			423		1,531		1,651		497		3,108		3,605		1,015	1981		6/26/1995	5 to 40 years
Rochester I	NY			395		1,404		485		395		1,889		2,284		613	1981		6/26/1995	5 to 40 years
Salisbury	MD			164		760		451		164		1,211		1,375		408	1979		6/26/1995	5 to 40 years
New Bedford	MA			367		1,325		447		367		1,772		2,139		635	1982		6/26/1995	5 to 40 years
Fayetteville	NC			853		3,057		749		853		3,806		4,659		1,194	1980		6/26/1995	5 to 40 years
Jacksonville I	FL			152		728		961		687		1,154		1,841		416	1985		6/26/1995	5 to 40 years
Columbia I	SC			268		1,248		447		268		1,695		1,963		613	1985		6/26/1995	5 to 40 years
Rochester II	NY			230		847		442		234		1,285		1,519		421	1980		6/26/1995	5 to 40 years
Savannah l	GA			463		1,684		3,791		816		5,122		5,938		1,072	1981		6/26/1995	5 to 40 years
Greensboro	NC			444		1,613		514		444		2,127		2,571		770	1986		6/26/1995	5 to 40 years
Raleigh I	NC			649		2,329		844		649		3,173		3,822		1,029	1985		6/26/1995	5 to 40 years
New Haven	CT			387		1,402		912		387		2,314		2,701		657	1985		6/26/1995	5 to 40 years
Atlanta-Metro I	GA			844		2,021		659		844		2,680		3,524		904	1988		6/26/1995	5 to 40 years
Atlanta-Metro II	GA			302		1,103		349		303		1,451		1,754		541	1988		6/26/1995	5 to 40 years
Buffalo II	NY			315		745		1,638		517		2,181		2,698		530	1984		6/26/1995	5 to 40 years
Raleigh II	NC			321		1,150		654		321		1,804		2,125		548	1985		6/26/1995	5 to 40 years
Columbia II	SC			361		1,331		594		374		1,912		2,286		655	1987		6/26/1995	5 to 40 years
Columbia III	SC			189		719		1,079		189		1,798		1,987		506	1989		6/26/1995	5 to 40 years
Columbia IV	SC			488		1,188		508		488		1,696		2,184		590	1986		6/26/1995	5 to 40 years
Atlanta-Metro III	GA			430		1,579		1,884		602		3,291		3,893		753	1988		6/26/1995	5 to 40 years
Orlando I	FL			513		1,930		446		513		2,376		2,889		864	1988		6/26/1995	5 to 40 years


							Cost Capitalized													Life on
							Subsequent to		Gross Amount at Which											which
			Initial Cost to Company				Acquisition		Carried at Close of Period											depreciation
					Building,		Building,				Building,									in latest
					Equipment		Equipment				Equipment									income
		Encum			and		and				and				Accum.		Date of	Date		statement
Description	ST	brance	Land		Improvements		Improvements		Land		Improvements		Total		Deprec.		Construction	Acquired		is computed

Sharon	PA			194		912		440		194		1,352		1,546		450	1975		6/26/1995	5 to 40 years
Ft. Lauderdale	FL			1,503		3,619		770		1,503		4,389		5,892		1,229	1985		6/26/1995	5 to 40 years
West Palm l	FL			398		1,035		265		398		1,300		1,698		515	1985		6/26/1995	5 to 40 years
Atlanta-Metro IV	GA			423		1,015		364		424		1,378		1,802		515	1989		6/26/1995	5 to 40 years
Atlanta-Metro V	GA			483		1,166		926		483		2,092		2,575		556	1988		6/26/1995	5 to 40 years
Atlanta-Metro VI	GA			308		1,116		497		308		1,613		1,921		620	1986		6/26/1995	5 to 40 years
Atlanta-Metro VII	GA			170		786		529		174		1,311		1,485		463	1981		6/26/1995	5 to 40 years
Atlanta-Metro VIII	GA			413		999		615		413		1,614		2,027		612	1975		6/26/1995	5 to 40 years
Baltimore I	MD			154		555		1,362		306		1,765		2,071		413	1984		6/26/1995	5 to 40 years
Baltimore II	MD			479		1,742		2,783		479		4,525		5,004		870	1988		6/26/1995	5 to 40 years
Augusta I	GA			357		1,296		824		357		2,120		2,477		667	1988		6/26/1995	5 to 40 years
Macon I	GA			231		1,081		467		231		1,548		1,779		524	1989		6/26/1995	5 to 40 years
Melbourne I	FL			883		2,104		1,570		883		3,674		4,557		1,151	1986		6/26/1995	5 to 40 years
Newport News	VA			316		1,471		736		316		2,207		2,523		756	1988		6/26/1995	5 to 40 years
Pensacola I	FL			632		2,962		1,091		651		4,034		4,685		1,422	1983		6/26/1995	5 to 40 years
Augusta II	GA			315		1,139		768		315		1,907		2,222		590	1987		6/26/1995	5 to 40 years
Hartford-Metro I	CT			715		1,695		1,038		715		2,733		3,448		798	1988		6/26/1995	5 to 40 years
Atlanta-Metro IX	GA			304		1,118		2,443		619		3,246		3,865		732	1988		6/26/1995	5 to 40 years
Alexandria	VA			1,375		3,220		1,975		1,376		5,194		6,570		1,445	1984		6/26/1995	5 to 40 years
Pensacola II	FL			244		901		464		244		1,365		1,609		535	1986		6/26/1995	5 to 40 years
Melbourne II	FL			834		2,066		1,124		1,591		2,433		4,024		924	1986		6/26/1995	5 to 40 years
Hartford-Metro II	CT			234		861		1,881		612		2,364		2,976		568	1992		6/26/1995	5 to 40 years
Atlanta-Metro X	GA			256		1,244		1,753		256		2,997		3,253		755	1988		6/26/1995	5 to 40 years
Norfolk I	VA			313		1,462		795		313		2,257		2,570		755	1984		6/26/1995	5 to 40 years
Norfolk II	VA			278		1,004		347		278		1,351		1,629		497	1989		6/26/1995	5 to 40 years
Birmingham I	AL			307		1,415		1,550		384		2,888		3,272		701	1990		6/26/1995	5 to 40 years
Birmingham II	AL			730		1,725		560		730		2,285		3,015		820	1990		6/26/1995	5 to 40 years
Montgomery l	AL			863		2,041		624		863		2,665		3,528		931	1982		6/26/1995	5 to 40 years
Jacksonville II	FL			326		1,515		415		326		1,930		2,256		679	1987		6/26/1995	5 to 40 years
Pensacola III	FL			369		1,358		2,724		369		4,082		4,451		908	1986		6/26/1995	5 to 40 years
Pensacola IV	FL			244		1,128		714		719		1,367		2,086		504	1990		6/26/1995	5 to 40 years
Pensacola V	FL			226		1,046		531		226		1,577		1,803		564	1990		6/26/1995	5 to 40 years
Tampa I	FL			1,088		2,597		951		1,088		3,548		4,636		1,249	1989		6/26/1995	5 to 40 years
Tampa II	FL			526		1,958		742		526		2,700		3,226		952	1985		6/26/1995	5 to 40 years
Tampa III	FL			672		2,439		577		672		3,016		3,688		1,034	1988		6/26/1995	5 to 40 years
Jackson I	MS			343		1,580		2,204		796		3,331		4,127		725	1990		6/26/1995	5 to 40 years
Jackson II	MS			209		964		590		209		1,554		1,763		581	1990		6/26/1995	5 to 40 years
Richmond	VA			443		1,602		720		443		2,322		2,765		777	1987		8/25/1995	5 to 40 years
Orlando II	FL			1,161		2,755		964		1,162		3,718		4,880		1,272	1986		9/29/1995	5 to 40 years


									Cost Capitalized													Life on
									Subsequent to		Gross Amount at Which											which
					Initial Cost to Company				Acquisition		Carried at Close of Period											depreciation
							Building,		Building,				Building,									in latest
							Equipment		Equipment				Equipment									income
		Encum					and		and				and				Accum.		Date of	Date		statement
Description	ST	brance			Land		Improvements		Improvements		Land		Improvements		Total		Deprec.		Construction	Acquired		is computed

Birmingham III	AL					424		1,506		671		424		2,177		2,601		833	1970		1/16/1996	5 to 40 years
Macon II	GA					431		1,567		723		431		2,290		2,721		720	1989/94		12/1/1995	5 to 40 years
Harrisburg I	PA					360		1,641		596		360		2,237		2,597		745	1983		12/29/1995	5 to 40 years
Harrisburg II	PA		(1	)		627		2,224		947		692		3,106		3,798		932	1985		12/29/1995	5 to 40 years
Syracuse I	NY					470		1,712		1,291		472		3,001		3,473		829	1987		12/27/1995	5 to 40 years
Ft. Myers	FL					205		912		305		206		1,216		1,422		530	1988		12/28/1995	5 to 40 years
Ft. Myers II	FL					412		1,703		440		413		2,142		2,555		889	1991/94		12/28/1995	5 to 40 years
Newport News II	VA					442		1,592		1,161		442		2,753		3,195		649	1988/93		1/5/1996	5 to 40 years
Montgomery II	AL					353		1,299		269		353		1,568		1,921		588	1984		1/23/1996	5 to 40 years
Charleston II	SC					237		858		624		232		1,487		1,719		482	1985		3/1/1996	5 to 40 years
Tampa IV	FL					766		1,800		645		766		2,445		3,211		772	1985		3/28/1996	5 to 40 years
Arlington I	TX					442		1,767		282		442		2,049		2,491		675	1987		3/29/1996	5 to 40 years
Arlington II	TX					408		1,662		1,031		408		2,693		3,101		800	1986		3/29/1996	5 to 40 years
Ft. Worth	TX					328		1,324		327		328		1,651		1,979		549	1986		3/29/1996	5 to 40 years
San Antonio I	TX					436		1,759		1,115		436		2,874		3,310		852	1986		3/29/1996	5 to 40 years
San Antonio II	TX					289		1,161		536		289		1,697		1,986		535	1986		3/29/1996	5 to 40 years
Syracuse II	NY					481		1,559		2,364		671		3,733		4,404		904	1983		6/5/1996	5 to 40 years
Montgomery III	AL					279		1,014		989		433		1,849		2,282		526	1988		5/21/1996	5 to 40 years
West Palm II	FL					345		1,262		325		345		1,587		1,932		535	1986		5/29/1996	5 to 40 years
Ft. Myers III	FL					229		884		299		229		1,183		1,412		379	1986		5/29/1996	5 to 40 years
Pittsburgh	PA					545		1,940		1,326		545		3,266		3,811		795	1990		6/19/1996	5 to 40 years
Lakeland II	FL					359		1,287		1,048		359		2,335		2,694		747	1988		6/26/1996	5 to 40 years
Springfield	MA					251		917		2,263		297		3,134		3,431		787	1986		6/28/1996	5 to 40 years
Ft. Myers IV	FL					344		1,254		267		310		1,555		1,865		522	1987		6/28/1996	5 to 40 years
Cincinnati	OH		(2	)		557		1,988		757		688		2,614		3,302		216	1988		7/23/1996	5 to 40 years
Dayton	OH		(2	)		667		2,379		433		683		2,796		3,479		246	1988		7/23/1996	5 to 40 years
Baltimore III	MD					777		2,770		432		777		3,202		3,979		985	1990		7/26/1996	5 to 40 years
Jacksonville III	FL					568		2,028		929		568		2,957		3,525		963	1987		8/23/1996	5 to 40 years
Jacksonville IV	FL					436		1,635		509		436		2,144		2,580		725	1985		8/26/1996	5 to 40 years
Pittsburgh II	PA					627		2,257		1,395		631		3,648		4,279		1,116	1983		8/28/1996	5 to 40 years
Jacksonville V	FL					535		2,033		300		538		2,330		2,868		842	1987/92		8/30/1996	5 to 40 years
Charlotte II	NC					487		1,754		409		487		2,163		2,650		613	1995		9/16/1996	5 to 40 years
Charlotte III	NC					315		1,131		337		315		1,468		1,783		441	1995		9/16/1996	5 to 40 years
Orlando III	FL					314		1,113		919		314		2,032		2,346		633	1975		10/30/1996	5 to 40 years
Rochester III	NY					704		2,496		1,208		707		3,701		4,408		927	1990		12/20/1996	5 to 40 years
Youngstown ll	OH					600		2,142		2,040		693		4,089		4,782		819	1988		1/10/1997	5 to 40 years
Cleveland lll	OH					751		2,676		1,772		751		4,448		5,199		1,166	1986		1/10/1997	5 to 40 years
Cleveland lV	OH					725		2,586		1,350		725		3,936		4,661		1,089	1978		1/10/1997	5 to 40 years
Cleveland V	OH		(1	)		637		2,918		1,602		701		4,456		5,157		1,412	1979		1/10/1997	5 to 40 years


									Cost Capitalized													Life on
									Subsequent to		Gross Amount at Which											which
					Initial Cost to Company				Acquisition		Carried at Close of Period											depreciation
							Building,		Building,				Building,									in latest
							Equipment		Equipment				Equipment									income
		Encum					and		and				and				Accum.		Date of	Date		statement
Description	ST	brance			Land		Improvements		Improvements		Land		Improvements		Total		Deprec.		Construction	Acquired		is computed

Cleveland Vl	OH					495		1,781		875		495		2,656		3,151		773	1979		1/10/1997	5 to 40 years
Cleveland Vll	OH					761		2,714		1,272		761		3,986		4,747		1,152	1977		1/10/1997	5 to 40 years
Cleveland Vlll	OH					418		1,921		1,573		418		3,494		3,912		1,002	1970		1/10/1997	5 to 40 years
Cleveland lX	OH					606		2,164		1,347		606		3,511		4,117		819	1982		1/10/1997	5 to 40 years
Grand Rapids l	MI		(2	)		455		1,631		948		624		2,410		3,034		211	1976		1/17/1997	5 to 40 years
Grand Rapids ll	MI					219		790		833		219		1,623		1,842		480	1983		1/17/1997	5 to 40 years
Kalamazoo	MI		(2	)		516		1,845		1,726		694		3,393		4,087		259	1978		1/17/1997	5 to 40 years
Lansing	MI		(2	)		327		1,332		1,527		542		2,644		3,186		210	1987		1/17/1997	5 to 40 years
Holland	MI					451		1,830		1,888		451		3,718		4,169		1,022	1978		1/17/1997	5 to 40 years
San Antonio lll	TX		(1	)		474		1,686		417		504		2,073		2,577		585	1981		1/30/1997	5 to 40 years
Universal	TX					346		1,236		297		346		1,533		1,879		472	1985		1/30/1997	5 to 40 years
San Antonio lV	TX					432		1,560		1,650		432		3,210		3,642		825	1995		1/30/1997	5 to 40 years
Houston-Eastex	TX					634		2,565		1,255		634		3,820		4,454		1,027	1993/95		3/26/1997	5 to 40 years
Houston-Nederland	TX					566		2,279		343		566		2,622		3,188		762	1995		3/26/1997	5 to 40 years
Houston-College	TX					293		1,357		563		293		1,920		2,213		518	1995		3/26/1997	5 to 40 years
Lynchburg-Lakeside	VA					335		1,342		1,271		335		2,613		2,948		657	1982		3/31/1997	5 to 40 years
Lynchburg-Timberlake	VA					328		1,315		962		328		2,277		2,605		648	1985		3/31/1997	5 to 40 years
Lynchburg-Amherst	VA					155		710		323		152		1,036		1,188		335	1987		3/31/1997	5 to 40 years
Christiansburg	VA					245		1,120		581		245		1,701		1,946		427	1985/90		3/31/1997	5 to 40 years
Chesapeake	VA					260		1,043		1,180		260		2,223		2,483		550	1988/95		3/31/1997	5 to 40 years
Danville	VA					326		1,488		223		326		1,711		2,037		502	1988		3/31/1997	5 to 40 years
Orlando-W 25th St	FL					289		1,160		737		616		1,570		2,186		458	1984		3/31/1997	5 to 40 years
Delray l-Mini	FL					491		1,756		630		491		2,386		2,877		762	1969		4/11/1997	5 to 40 years
Savannah ll	GA					296		1,196		347		296		1,543		1,839		471	1988		5/8/1997	5 to 40 years
Delray ll-Safeway	FL					921		3,282		466		921		3,748		4,669		1,155	1980		5/21/1997	5 to 40 years
Cleveland X-Avon	OH					301		1,214		2,079		304		3,290		3,594		640	1989		6/4/1997	5 to 40 years
Dallas-Skillman	TX					960		3,847		1,127		960		4,974		5,934		1,512	1975		6/30/1997	5 to 40 years
Dallas-Centennial	TX					965		3,864		1,241		943		5,127		6,070		1,498	1977		6/30/1997	5 to 40 years
Dallas-Samuell	TX		(1	)		570		2,285		786		611		3,030		3,641		912	1975		6/30/1997	5 to 40 years
Dallas-Hargrove	TX					370		1,486		515		370		2,001		2,371		649	1975		6/30/1997	5 to 40 years
Houston-Antoine	TX					515		2,074		562		515		2,636		3,151		797	1984		6/30/1997	5 to 40 years
Atlanta-Alpharetta	GA					1,033		3,753		429		1,033		4,182		5,215		1,307	1994		7/24/1997	5 to 40 years
Atlanta-Marietta	GA		(1	)		769		2,788		458		825		3,190		4,015		938	1996		7/24/1997	5 to 40 years
Atlanta-Doraville	GA					735		3,429		306		735		3,735		4,470		1,116	1995		8/21/1997	5 to 40 years
GreensboroHilltop	NC					268		1,097		377		268		1,474		1,742		405	1995		9/25/1997	5 to 40 years
GreensboroStgCch	NC					89		376		1,528		89		1,904		1,993		399	1997		9/25/1997	5 to 40 years
Baton Rouge-Airline	LA		(1	)		396		1,831		908		421		2,714		3,135		710	1982		10/9/1997	5 to 40 years
Baton Rouge-Airline2	LA					282		1,303		311		282		1,614		1,896		496	1985		11/21/1997	5 to 40 years
Harrisburg-Peiffers	PA					635		2,550		533		637		3,081		3,718		833	1984		12/3/1997	5 to 40 years


									Cost Capitalized													Life on
									Subsequent to		Gross Amount at Which											which
					Initial Cost to Company				Acquisition		Carried at Close of Period											depreciation
							Building,		Building,				Building,									in latest
							Equipment		Equipment				Equipment									income
		Encum					and		and				and				Accum.		Date of	Date		statement
Description	ST	brance			Land		Improvements		Improvements		Land		Improvements		Total		Deprec.		Construction	Acquired		is computed

Chesapeake-Military	VA					542		2,210		322		542		2,532		3,074		717	1996		2/5/1998	5 to 40 years
Chesapeake-Volvo	VA					620		2,532		880		620		3,412		4,032		916	1995		2/5/1998	5 to 40 years
Virginia Beach-Shell	VA					540		2,211		229		540		2,440		2,980		723	1991		2/5/1998	5 to 40 years
Virginia Beach-Central	VA					864		3,994		730		864		4,724		5,588		1,331	1993/95		2/5/1998	5 to 40 years
Norfolk-Naval Base	VA					1,243		5,019		729		1,243		5,748		6,991		1,604	1975		2/5/1998	5 to 40 years
Tampa-E.Hillsborough	FL					709		3,235		740		709		3,975		4,684		1,215	1985		2/4/1998	5 to 40 years
Northbridge	MA		(2	)		441		1,788		960		694		2,495		3,189		191	1988		2/9/1998	5 to 40 years
Harriman	NY					843		3,394		469		843		3,863		4,706		1,111	1989/95		2/4/1998	5 to 40 years
Greensboro-High Point	NC					397		1,834		551		397		2,385		2,782		654	1993		2/10/1998	5 to 40 years
Lynchburg-Timberlake	VA					488		1,746		487		488		2,233		2,721		606	1990/96		2/18/1998	5 to 40 years
Titusville	FL		(2	)		492		1,990		934		688		2,728		3,416		203	1986/90		2/25/1998	5 to 40 years
Salem	MA					733		2,941		1,014		733		3,955		4,688		1,120	1979		3/3/1998	5 to 40 years
Chattanooga-Lee Hwy	TN					384		1,371		534		384		1,905		2,289		549	1987		3/27/1998	5 to 40 years
Chattanooga-Hwy 58	TN					296		1,198		2,077		414		3,157		3,571		569	1985		3/27/1998	5 to 40 years
Ft. Oglethorpe	GA					349		1,250		583		349		1,833		2,182		517	1989		3/27/1998	5 to 40 years
Birmingham-Walt	AL					544		1,942		807		544		2,749		3,293		835	1984		3/27/1998	5 to 40 years
East Greenwich	RI					702		2,821		1,069		702		3,890		4,592		1,023	1984/88		3/26/1998	5 to 40 years
Durham-Hillsborough	NC					775		3,103		672		775		3,775		4,550		1,028	1988/91		4/9/1998	5 to 40 years
Durham-Cornwallis	NC					940		3,763		712		940		4,475		5,415		1,203	1990/96		4/9/1998	5 to 40 years
Salem-Policy	NH					742		2,977		464		742		3,441		4,183		891	1980		4/7/1998	5 to 40 years
Warren-Elm	OH		(1	)		522		1,864		1,175		569		2,992		3,561		717	1986		4/22/1998	5 to 40 years
Warren-Youngstown	OH					512		1,829		1,817		675		3,483		4,158		667	1986		4/22/1998	5 to 40 years
Indian Harbor Beach	FL					662		2,654		-619		662		2,035		2,697		612	1985		6/2/1998	5 to 40 years
Jackson 3 - I55	MS					744		3,021		128		744		3,149		3,893		879	1995		5/13/1998	5 to 40 years
Katy-N.Fry	TX					419		1,524		3,268		419		4,792		5,211		572	1994		5/20/1998	5 to 40 years
Hollywood-Sheridan	FL					1,208		4,854		352		1,208		5,206		6,414		1,411	1988		7/1/1998	5 to 40 years
Pompano Beach-Atlantic	FL					944		3,803		315		944		4,118		5,062		1,139	1985		7/1/1998	5 to 40 years
Pompano Beach-Sample	FL					903		3,643		329		903		3,972		4,875		1,051	1988		7/1/1998	5 to 40 years
Boca Raton-18th St	FL					1,503		6,059		705		1,503		6,764		8,267		1,850	1991		7/1/1998	5 to 40 years
Vero Beach	FL					489		1,813		110		489		1,923		2,412		573	1997		6/12/1998	5 to 40 years
Humble	TX					447		1,790		2,199		740		3,696		4,436		721	1986		6/16/1998	5 to 40 years
Houston-Old Katy	TX		(1	)		659		2,680		372		698		3,013		3,711		734	1996		6/19/1998	5 to 40 years
Webster	TX					635		2,302		129		635		2,431		3,066		660	1997		6/19/1998	5 to 40 years
Carrollton	TX					548		1,988		283		548		2,271		2,819		606	1997		6/19/1998	5 to 40 years
Hollywood-N.21st	FL					840		3,373		350		840		3,723		4,563		1,034	1987		8/3/1998	5 to 40 years
San Marcos	TX					324		1,493		629		324		2,122		2,446		585	1994		6/30/1998	5 to 40 years
Austin-McNeil	TX					492		1,995		317		510		2,294		2,804		665	1994		6/30/1998	5 to 40 years
Austin-FM	TX					484		1,951		442		481		2,396		2,877		646	1996		6/30/1998	5 to 40 years
Jacksonville-Center	NC					327		1,329		672		327		2,001		2,328		442	1995		8/6/1998	5 to 40 years


									Cost Capitalized													Life on
									Subsequent to		Gross Amount at Which											which
					Initial Cost to Company				Acquisition		Carried at Close of Period											depreciation
							Building,		Building,				Building,									in latest
							Equipment		Equipment				Equipment									income
		Encum					and		and				and				Accum.		Date of	Date		statement
Description	ST	brance			Land		Improvements		Improvements		Land		Improvements		Total		Deprec.		Construction	Acquired		is computed

Jacksonville-Gum Branch	NC					508		1,815		1,272		508		3,087		3,595		663	1989		8/17/1998	5 to 40 years
Jacksonville-N.Marine	NC					216		782		601		216		1,383		1,599		411	1985		9/24/1998	5 to 40 years
Euless	TX					550		1,998		654		550		2,652		3,202		635	1996		9/29/1998	5 to 40 years
N. Richland Hills	TX					670		2,407		1,362		670		3,769		4,439		801	1996		10/9/1998	5 to 40 years
Batavia	OH					390		1,570		867		390		2,437		2,827		553	1988		11/19/1998	5 to 40 years
Jackson-N.West	MS					460		1,642		462		460		2,104		2,564		642	1984		12/1/1998	5 to 40 years
Katy-Franz	TX					507		2,058		1,595		507		3,653		4,160		634	1993		12/15/1998	5 to 40 years
W.Warwick	RI					447		1,776		793		447		2,569		3,016		632	1986/94		2/2/1999	5 to 40 years
Lafayette-Pinhook 1	LA					556		1,951		926		556		2,877		3,433		877	1980		2/17/1999	5 to 40 years
Lafayette-Pinhook2	LA					708		2,860		267		708		3,127		3,835		807	1992/94		2/17/1999	5 to 40 years
Lafayette-Ambassador	LA					314		1,095		627		314		1,722		2,036		572	1975		2/17/1999	5 to 40 years
Lafayette-Evangeline	LA					188		652		1,414		188		2,066		2,254		558	1977		2/17/1999	5 to 40 years
Lafayette-Guilbeau	LA					963		3,896		767		963		4,663		5,626		1,099	1994		2/17/1999	5 to 40 years
Gilbert-Elliot Rd	AZ					651		2,600		1,097		772		3,576		4,348		767	1995		5/18/1999	5 to 40 years
Glendale-59th Ave	AZ					565		2,596		539		565		3,135		3,700		755	1997		5/18/1999	5 to 40 years
Mesa-Baseline	AZ					330		1,309		719		733		1,625		2,358		397	1986		5/18/1999	5 to 40 years
Mesa-E.Broadway	AZ					339		1,346		583		339		1,929		2,268		433	1986		5/18/1999	5 to 40 years
Mesa-W.Broadway	AZ					291		1,026		583		291		1,609		1,900		359	1976		5/18/1999	5 to 40 years
Mesa-Greenfield	AZ					354		1,405		334		354		1,739		2,093		445	1986		5/18/1999	5 to 40 years
Phoenix-Camelback	AZ					453		1,610		783		453		2,393		2,846		570	1984		5/18/1999	5 to 40 years
Phoenix-Bell	AZ					872		3,476		828		872		4,304		5,176		1,069	1984		5/18/1999	5 to 40 years
Phoenix-35th Ave	AZ					849		3,401		657		849		4,058		4,907		972	1996		5/21/1999	5 to 40 years
Westbrook	ME					410		1,626		1,753		410		3,379		3,789		623	1988		8/2/1999	5 to 40 years
Cocoa	FL					667		2,373		746		667		3,119		3,786		750	1982		9/29/1999	5 to 40 years
Cedar Hill	TX					335		1,521		346		335		1,867		2,202		478	1985		11/9/1999	5 to 40 years
Monroe	NY					276		1,312		1,153		276		2,465		2,741		439	1998		2/2/2000	5 to 40 years
N.Andover	MA					633		2,573		753		633		3,326		3,959		649	1989		2/15/2000	5 to 40 years
Seabrook	TX					633		2,617		315		633		2,932		3,565		683	1996		3/1/2000	5 to 40 years
Plantation	FL					384		1,422		367		384		1,789		2,173		411	1994		5/2/2000	5 to 40 years
Birmingham-Bessemer	AL					254		1,059		1,151		254		2,210		2,464		350	1998		11/15/2000	5 to 40 years
Brewster	NY		(2	)		1,716		6,920		903		1,981		7,558		9,539		577	1991/97		12/27/2000	5 to 40 years
Austin-Lamar	TX		(2	)		837		2,977		486		966		3,334		4,300		285	1996/99		2/22/2001	5 to 40 years
Houston-E.Main	TX		(2	)		733		3,392		568		841		3,852		4,693		308	1993/97		3/2/2001	5 to 40 years
Ft.Myers-Abrams	FL		(2	)		787		3,249		365		902		3,499		4,401		306	1997		3/13/2001	5 to 40 years
Dracut	MA		(1	)		1,035		3,737		590		1,104		4,258		5,362		762	1986		12/1/2001	5 to 40 years
Methuen	MA		(1	)		1,024		3,649		560		1,091		4,142		5,233		736	1984		12/1/2001	5 to 40 years
Columbia 5	SC		(1	)		883		3,139		1,204		942		4,284		5,226		703	1985		12/1/2001	5 to 40 years
Myrtle Beach	SC		(1	)		552		1,970		841		589		2,774		3,363		503	1984		12/1/2001	5 to 40 years
Kingsland	GA		(1	)		470		1,902		2,875		666		4,581		5,247		521	1989		12/1/2001	5 to 40 years


									Cost Capitalized													Life on
									Subsequent to		Gross Amount at Which											which
					Initial Cost to Company				Acquisition		Carried at Close of Period											depreciation
							Building,		Building,				Building,									in latest
							Equipment		Equipment				Equipment									income
		Encum					and		and				and				Accum.		Date of	Date		statement
Description	ST	brance			Land		Improvements		Improvements		Land		Improvements		Total		Deprec.		Construction	Acquired		is computed

Saco	ME		(1	)		534		1,914		278		570		2,156		2,726		388	1988		12/3/2001	5 to 40 years
Plymouth	MA					1,004		4,584		2,261		1,004		6,845		7,849		868	1996		12/19/2001	5 to 40 years
Sandwich	MA		(1	)		670		3,060		400		714		3,416		4,130		625	1984		12/19/2001	5 to 40 years
Syracuse	NY		(1	)		294		1,203		372		327		1,542		1,869		312	1987		2/5/2002	5 to 40 years
Houston-Westward	TX		(1	)		853		3,434		851		912		4,226		5,138		772	1976		2/13/2002	5 to 40 years
Houston-Boone	TX		(1	)		250		1,020		484		268		1,486		1,754		273	1983		2/13/2002	5 to 40 years
Houston-Cook	TX		(1	)		285		1,160		315		306		1,454		1,760		275	1986		2/13/2002	5 to 40 years
Houston-Harwin	TX		(1	)		449		1,816		593		480		2,378		2,858		433	1981		2/13/2002	5 to 40 years
Houston-Hempstead	TX		(1	)		545		2,200		935		583		3,097		3,680		523	1974/78		2/13/2002	5 to 40 years
Houston-Kuykendahl	TX		(1	)		517		2,090		1,179		553		3,233		3,786		509	1979/83		2/13/2002	5 to 40 years
Houston-Hwy 249	TX		(1	)		299		1,216		1,053		320		2,248		2,568		357	1983		2/13/2002	5 to 40 years
Mesquite-Hwy 80	TX		(1	)		463		1,873		620		496		2,460		2,956		414	1985		2/13/2002	5 to 40 years
Mesquite-Franklin	TX		(1	)		734		2,956		678		784		3,584		4,368		594	1984		2/13/2002	5 to 40 years
Dallas-Plantation	TX		(1	)		394		1,595		283		421		1,851		2,272		335	1985		2/13/2002	5 to 40 years
San Antonio-Hunt	TX		(1	)		381		1,545		666		411		2,181		2,592		355	1980		2/13/2002	5 to 40 years
Humble-5250 FM	TX					919		3,696		341		919		4,037		4,956		658	1998/02		6/19/2002	5 to 40 years
Pasadena	TX					612		2,468		231		612		2,699		3,311		439	1999		6/19/2002	5 to 40 years
League City-E.Main	TX					689		3,159		267		689		3,426		4,115		563	1994/97		6/19/2002	5 to 40 years
Montgomery	TX					817		3,286		2,040		1,119		5,024		6,143		602	1998		6/19/2002	5 to 40 years
Texas City	TX					817		3,286		123		817		3,409		4,226		576	1999		6/19/2002	5 to 40 years
Houston-Hwy 6	TX					407		1,650		178		407		1,828		2,235		305	1997		6/19/2002	5 to 40 years
Lumberton	TX					817		3,287		178		817		3,465		4,282		578	1996		6/19/2002	5 to 40 years
The Hamptons l	NY					2,207		8,866		615		2,207		9,481		11,688		1,450	1989/95		12/16/2002	5 to 40 years
The Hamptons 2	NY					1,131		4,564		479		1,131		5,043		6,174		758	1998		12/16/2002	5 to 40 years
The Hamptons 3	NY					635		2,918		322		635		3,240		3,875		480	1997		12/16/2002	5 to 40 years
The Hamptons 4	NY					1,251		5,744		340		1,252		6,083		7,335		919	1994/98		12/16/2002	5 to 40 years
Duncanville	TX					1,039		4,201		41		1,039		4,242		5,281		584	1995/99		8/26/2003	5 to 40 years
Dallas-Harry Hines	TX					827		3,776		297		827		4,073		4,900		531	1998/01		10/1/2003	5 to 40 years
Stamford	CT					2,713		11,013		298		2,713		11,311		14,024		1,408	1998		3/17/2004	5 to 40 years
Houston-Tomball	TX					773		3,170		1,771		773		4,941		5,714		512	2000		5/19/2004	5 to 40 years
Houston-Conroe	TX					1,195		4,877		106		1,195		4,983		6,178		598	2001		5/19/2004	5 to 40 years
Houston-Spring	TX					1,103		4,550		249		1,103		4,799		5,902		585	2001		5/19/2004	5 to 40 years
Houston-Bissonnet	TX					1,061		4,427		2,646		1,061		7,073		8,134		631	2003		5/19/2004	5 to 40 years
Houston-Alvin	TX					388		1,640		849		388		2,489		2,877		227	2003		5/19/2004	5 to 40 years
Clearwater	FL					1,720		6,986		74		1,720		7,060		8,780		837	2001		6/3/2004	5 to 40 years
Houston-Missouri City	TX					1,167		4,744		456		1,566		4,801		6,367		563	1998		6/23/2004	5 to 40 years
Chattanooga-Hixson	TN					1,365		5,569		761		1,365		6,330		7,695		757	1998/02		8/4/2004	5 to 40 years
Austin-Round Rock	TX					2,047		5,857		665		2,051		6,518		8,569		727	2000		8/5/2004	5 to 40 years
East Falmouth	MA					1,479		5,978		153		1,479		6,131		7,610		602	1998		2/23/2005	5 to 40 years


								Cost Capitalized													Life on
								Subsequent to		Gross Amount at Which											which
				Initial Cost to Company				Acquisition		Carried at Close of Period											depreciation
						Building,		Building,				Building,									in latest
						Equipment		Equipment				Equipment									income
		Encum				and		and				and				Accum.		Date of	Date		statement
Description	ST	brance		Land		Improvements		Improvements		Land		Improvements		Total		Deprec.		Construction	Acquired		is computed

Cicero	NY				527		2,121		499		527		2,620		3,147		270	1988/02		3/16/2005	5 to 40 years
Bay Shore	NY				1,131		4,609		57		1,131		4,666		5,797		469	2003		3/15/2005	5 to 40 years
Springfield-Congress	MA				612		2,501		93		612		2,594		3,206		260	1965/75		4/12/2005	5 to 40 years
Stamford-Hope	CT				1,612		6,585		192		1,612		6,777		8,389		666	2002		4/14/2005	5 to 40 years
Houston-Jones	TX		3,510		1,214		4,949		77		1,215		5,025		6,240		470	1997/99		6/6/2005	5 to 40 years
Montgomery-Richard	AL				1,906		7,726		106		1,906		7,832		9,738		737	1997		6/1/2005	5 to 40 years
Oxford	MA				470		1,902		1,577		470		3,479		3,949		191	2002		6/23/2005	5 to 40 years
Austin-290E	TX				537		2,183		160		537		2,343		2,880		218	2003		7/12/2005	5 to 40 years
SanAntonio-Marbach	TX				556		2,265		202		556		2,467		3,023		220	2003		7/12/2005	5 to 40 years
Austin-South 1st	TX				754		3,065		149		754		3,214		3,968		293	2003		7/12/2005	5 to 40 years
Pinehurst	TX				484		1,977		1,357		484		3,334		3,818		211	2002/04		7/12/2005	5 to 40 years
Marietta-Austell	GA				811		3,397		428		811		3,825		4,636		343	2003		9/15/2005	5 to 40 years
Baton Rouge-Florida	LA				719		2,927		1,935		719		4,862		5,581		280	1984/94		11/15/2005	5 to 40 years
Cypress	TX				721		2,994		1,087		721		4,081		4,802		305	2003		1/13/2006	5 to 40 years
Texas City	TX				867		3,499		94		867		3,593		4,460		280	2003		1/10/2006	5 to 40 years
San Marcos-Hwy 35S	TX				628		2,532		449		982		2,627		3,609		205	2001		1/10/2006	5 to 40 years
Baytown	TX				596		2,411		78		596		2,489		3,085		199	2002		1/10/2006	5 to 40 years
Webster	NY				937		3,779		111		937		3,890		4,827		290	2002/06		2/1/2006	5 to 40 years
Houston-Jones Rd 2	TX				707		2,933		2,018		707		4,951		5,658		315	2000		3/9/2006	5 to 40 years
Cameron-Scott	LA		1,000		411		1,621		131		411		1,752		2,163		147	1997		4/13/2006	5 to 40 years
Lafayette-Westgate	LA				463		1,831		73		463		1,904		2,367		140	2001/04		4/13/2006	5 to 40 years
Broussard	LA				601		2,406		1,231		601		3,637		4,238		216	2002		4/13/2006	5 to 40 years
Congress-Lafayette	LA		1,098		542		1,319		2,084		542		3,403		3,945		134	1997/99		4/13/2006	5 to 40 years
Manchester	NH				832		3,268		57		832		3,325		4,157		231	2000		4/26/2006	5 to 40 years
Nashua	NH				617		2,422		373		617		2,795		3,412		175	1989		6/29/2006	5 to 40 years
Largo 2	FL		2,478		1,270		5,037		157		1,270		5,194		6,464		343	1998		6/22/2006	5 to 40 years
Pinellas Park	FL				929		3,676		104		929		3,780		4,709		245	2000		6/22/2006	5 to 40 years
Tarpon Springs	FL		2,301		696		2,739		96		696		2,835		3,531		184	1999		6/22/2006	5 to 40 years
New Orleans	LA		4,196		1,220		4,805		75		1,220		4,880		6,100		320	2000		6/22/2006	5 to 40 years
St Louis-Meramec	MO		4,841		1,113		4,359		176		1,113		4,535		5,648		293	1999		6/22/2006	5 to 40 years
St Louis-Charles Rock	MO				766		3,040		79		766		3,119		3,885		200	1999		6/22/2006	5 to 40 years
St Louis-Shackelford	MO		2,433		828		3,290		124		828		3,414		4,242		222	1999		6/22/2006	5 to 40 years
St Louis-W.Washington	MO		3,873		734		2,867		533		734		3,400		4,134		223	1980/01		6/22/2006	5 to 40 years
St Louis-Howdershell	MO				899		3,596		174		899		3,770		4,669		248	2000		6/22/2006	5 to 40 years
St Louis-Lemay Ferry	MO				890		3,552		167		890		3,719		4,609		239	1999		6/22/2006	5 to 40 years
St Louis-Manchester	MO		3,658		697		2,711		92		697		2,803		3,500		183	2000		6/22/2006	5 to 40 years
Arlington-Little Rd	TX		2,020		1,256		4,946		145		1,256		5,091		6,347		329	1998/03		6/22/2006	5 to 40 years
Dallas-Goldmark	TX				605		2,434		47		605		2,481		3,086		162	2004		6/22/2006	5 to 40 years
Dallas-Manana	TX				607		2,428		107		607		2,535		3,142		165	2004		6/22/2006	5 to 40 years


								Cost Capitalized													Life on
								Subsequent to		Gross Amount at Which											which
				Initial Cost to Company				Acquisition		Carried at Close of Period											depreciation
						Building,		Building,				Building,									in latest
						Equipment		Equipment				Equipment									income
		Encum				and		and				and				Accum.		Date of	Date		statement
Description	ST	brance		Land		Improvements		Improvements		Land		Improvements		Total		Deprec.		Construction	Acquired		is computed

Dallas-Manderville	TX				1,073		4,276		54		1,073		4,330		5,403		284	2003		6/22/2006	5 to 40 years
Ft. Worth-Granbury	TX		1,813		549		2,180		84		549		2,264		2,813		149	1998		6/22/2006	5 to 40 years
Ft. Worth-Grapevine	TX		2,150		644		2,542		49		644		2,591		3,235		169	1999		6/22/2006	5 to 40 years
San Antonio-Blanco	TX				963		3,836		50		963		3,886		4,849		255	2004		6/22/2006	5 to 40 years
San Antonio-Broadway	TX				773		3,060		99		773		3,159		3,932		208	2000		6/22/2006	5 to 40 years
San Antonio-Huebner	TX		2,254		1,175		4,624		98		1,175		4,722		5,897		300	1998		6/22/2006	5 to 40 years
Chattanooga-Lee Hwy II	TN				619		2,471		52		619		2,523		3,142		161	2002		8/7/2006	5 to 40 years
Lafayette-Evangeline	LA				699		2,784		1,862		699		4,646		5,345		186	1995/99		8/1/2006	5 to 40 years
Montgomery-E.S.Blvd	AL				1,158		4,639		234		1,158		4,873		6,031		296	1996/97		9/28/2006	5 to 40 years
Auburn-Pepperell Pkwy	AL				590		2,361		122		590		2,483		3,073		146	1998		9/28/2006	5 to 40 years
Auburn-Gatewood Dr	AL				694		2,758		67		694		2,825		3,519		163	2002/03		9/28/2006	5 to 40 years
Columbus-Williams Rd	GA				736		2,905		118		736		3,023		3,759		180	2002/04/06		9/28/2006	5 to 40 years
Columbus-Miller Rd	GA				975		3,854		85		975		3,939		4,914		229	1995		9/28/2006	5 to 40 years
Columbus-Armour Rd	GA				0		3,680		64		0		3,744		3,744		224	2004/05		9/28/2006	5 to 40 years
Columbus-Amber Dr	GA				439		1,745		58		439		1,803		2,242		106	1998		9/28/2006	5 to 40 years
Concord	NH				813		3,213		1,912		813		5,125		5,938		203	2000		10/31/2006	5 to 40 years
Buffalo-Lagner	NY				532		2,119		210		532		2,329		2,861		102	1993/07		3/30/2007	5 to 40 years
Buffalo-Transit	NY				437		1,794		67		437		1,861		2,298		89	1998		3/30/2007	5 to 40 years
Buffalo-Lake	NY				638		2,531		241		638		2,772		3,410		136	1997		3/30/2007	5 to 40 years
Buffalo-Union	NY				348		1,344		89		348		1,433		1,781		67	1998		3/30/2007	5 to 40 years
Buffalo-Niagara Falls	NY				323		1,331		48		323		1,379		1,702		66	1998		3/30/2007	5 to 40 years
Buffalo-Youngs	NY				315		2,185		84		316		2,268		2,584		84	1999/00		3/30/2007	5 to 40 years
Buffalo-Sheridan	NY				961		3,827		85		961		3,912		4,873		177	1999		3/30/2007	5 to 40 years
Buffalo-Transit	NY				375		1,498		217		375		1,715		2,090		86	1990/95		3/30/2007	5 to 40 years
Rochester-Phillips	NY				1,003		4,002		58		1,003		4,060		5,063		183	1999		3/30/2007	5 to 40 years
Greenville	MS				1,100		4,386		96		1,100		4,482		5,582		239	1994		1/11/2007	5 to 40 years
Port Arthur	TX				929		3,647		119		930		3,765		4,695		178	2002/04		3/8/2007	5 to 40 years
Beaumont	TX				1,537		6,018		195		1,537		6,213		7,750		294	2003/06		3/8/2007	5 to 40 years
Huntsville	AL				1,607		6,338		110		1,607		6,448		8,055		262	1989/06		6/1/2007	5 to 40 years
Huntsville	AL				1,016		4,013		101		1,017		4,113		5,130		168	1993/07		6/1/2007	5 to 40 years
Gulfport	MS				1,423		5,624		18		1,423		5,642		7,065		228	1998/05		6/1/2007	5 to 40 years
Huntsville	AL				1,206		4,775		49		1,206		4,824		6,030		196	1998/06		6/1/2007	5 to 40 years
Mobile	AL				1,216		4,819		106		1,216		4,925		6,141		200	2000/07		6/1/2007	5 to 40 years
Gulfport	MS				1,345		5,325		22		1,345		5,347		6,692		217	2002/04		6/1/2007	5 to 40 years
Huntsville	AL				1,164		4,624		47		1,164		4,671		5,835		190	2002/06		6/1/2007	5 to 40 years
Foley	AL				1,346		5,474		71		1,347		5,544		6,891		230	2003/06		6/1/2007	5 to 40 years
Pensacola	FL				1,029		4,180		86		1,029		4,266		5,295		182	2003/06		6/1/2007	5 to 40 years
Auburn	AL				686		2,732		74		686		2,806		3,492		117	2003		6/1/2007	5 to 40 years
Gulfport	MS				1,811		7,152		23		1,811		7,175		8,986		289	2004/06		6/1/2007	5 to 40 years


							Cost Capitalized													Life on
							Subsequent to		Gross Amount at Which											which
			Initial Cost to Company				Acquisition		Carried at Close of Period											depreciation
					Building,		Building,				Building,									in latest
					Equipment		Equipment				Equipment									income
		Encum			and		and				and				Accum.		Date of	Date		statement
Description	ST	brance	Land		Improvements		Improvements		Land		Improvements		Total		Deprec.		Construction	Acquired		is computed

Pensacola	FL			732		3,015		28		732		3,043		3,775		132	2006		6/1/2007	5 to 40 years
Montgomery	AL			1,075		4,333		23		1,076		4,355		5,431		180	2006		6/1/2007	5 to 40 years
Montgomery	AL			885		3,586		13		885		3,599		4,484		150	2006		6/1/2007	5 to 40 years
San Antonio	TX			676		2,685		124		676		2,809		3,485		116	2003/06		5/21/2007	5 to 40 years
Beaumont	TX			742		3,024		51		742		3,075		3,817		96	2002/05		11/14/2007	5 to 40 years
Hattiesburg	MS			444		1,799		55		444		1,854		2,298		49	1998		12/19/2007	5 to 40 years
Biloxi	MS			384		1,548		39		384		1,587		1,971		42	2000		12/19/2007	5 to 40 years
Foley	AL			437		1,757		33		437		1,790		2,227		46	2000		12/19/2007	5 to 40 years
Ridgeland	MS			1,479		5,965		51		1,479		6,016		7,495		141	1997/00		1/17/2008	5 to 40 years
Jackson-5111	MS			1,337		5,377		48		1,337		5,425		6,762		127	2003		1/17/2008	5 to 40 years
Cincinnati-Robertson	OH			852		3,409		35		852		3,444		4,296		0	2003/04		12/31/2008	5 to 40 years
Construction in progress				0		0		13,967		0		13,967		13,967		0	2006
Corporate Office	NY			0		68		11,075		1,616		9,527		11,143		7,105	2000		5/1/2000	5 to 40 years

			$	228,114	$	884,104	$	276,983	$	240,525	$	1,148,676	$	1,389,201	$	216,644


(1)		These properties are encumbered through one mortgage loan with an outstanding balance of $42.6 million at December 31, 2008.

(2)		These properties are encumbered through one mortgage loan with an outstanding balance of $29.0 million at December 31, 2008.


1st Quarter, 2007		$0.620 per unit
2nd Quarter, 2007		$0.620 per unit
3rd Quarter, 2007		$0.630 per unit
4th Quarter, 2007		$0.630 per unit

1st Quarter, 2008		$0.630 per unit
2nd Quarter, 2008		$0.630 per unit
3rd Quarter, 2008		$0.640 per unit
4th Quarter, 2008		$0.640 per unit


Part I
Item 1. Business			3
Item 1A. Risk Factors			8
Item 1B. Unresolved Staff Comments			12
Item 2. Properties			13
Item 3. Legal Proceedings			14
Item 4. Submission of Matters to a Vote of Security Holders			14

Part II
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities			14
Item 6. Selected Financial Data			16
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations			17
Item 7A. Quantitative and Qualitative Disclosures About Market Risk			29
Item 8. Financial Statements and Supplementary Data			30
Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure			49
Item 9a. Controls and Procedures			49

Part III
Item 10. Directors, Executive Officers and Corporate Governance			51
Item 11. Executive Compensation			51
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters			51
Item 13. Certain Relationships and Related Transactions, and Director Independence			53
Item 14. Principal Accountant Fees and Services			53

Part IV
Item 15. Exhibits, Financial Statement Schedules			53

SIGNATURES			56
EX-3.2
EX-10.1
EX-10.2
EX-10.3
EX-12.1
EX-21.1
EX-31.1
EX-31.2
EX-32.1


Item 5.		Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities


		as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.


*		Filed herewith.

₊		Management contract or compensatory plan or arrangement required to be filed as an exhibit to this Form 10-K.


	December 31, 2008						December 31, 2007						December 31, 2006
Cost:
Balance at beginning of period				$	1,322,708					$	1,136,052					$	886,191
Additions during period:
Acquisitions through foreclosure	$	—					$	—					$	—
Other acquisitions		18,454						136,653						212,957
Improvements, etc.		48,232						52,427						37,003

					66,686						189,080						249,960

Deductions during period:
Cost of real estate sold		(193	)		(193	)		(2,424	)		(2,424	)		(99	)		(99	)

Balance at close of period				$	1,389,201					$	1,322,708					$	1,136,052


Accumulated Depreciation:
Balance at beginning of period				$	183,679					$	154,449					$	129,340
Additions during period:
Depreciation expense	$	33,100					$	30,011					$	25,163

					33,100						30,011						25,163

Deductions during period:
Accumulated depreciation of real estate sold		(135	)		(135	)		(781	)		(781	)		(54	)		(54	)

Balance at close of period				$	216,644					$	183,679					$	154,449