Sovran Self Storage Inc. (SSS)
Q1 2009 Earnings Call
May 07, 2009 09.00 AM ET
Kenneth F. Myszka - President & Chief Operating Officer
David L. Rogers - Chief Financial Officer
Michael Salinsky - RBC Capital Markets
David Tody - Citigroup
Michael Bilerman - Citigroup
Mark Biffert - Oppenheimer & Co.
Todd Thomas - KeyBanc Capital Markets
Jordan Sadler - KeyBanc Capital Markets
Mark Lutenski - BMO Capital Markets
Previous Statements by SSS
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I will now turn the call over to Mr. Myszka. Sir, if you may begin your conference.
Kenneth F. Myszka
Thank you, David. And good morning and welcome to our first quarter conference call. As a reminder, the following discussion will include forward-looking statements. Sovran's actual results may differ materially from projected results. Additional information concerning the factors that may cause such differences is included in our company's SEC filings. Copies of these filings may be obtained by contacting the company or the SEC.
Well, market conditions continue to be extremely challenging. Nonetheless, our results of operations were well within our guidance. Same store revenues and net operating incomes increased ... decreased by 1.35% and 2.1% respectively. Our efforts to control cost is benefiting us with same store operating expenses decreasing by 0.1%. And that decrease would have been nearly 3% except for property tax increases of over 8%.
Due to our aggressive promotions, we had quite a few more movements for the quarter ... for the last quarter than we did in Q1, 2008. Unfortunately, our last quarter also exceeded '08's first quarter. A bright spot, though, is that April resulted in positive net movements, and that's the first time we've experienced this since July of last year.
From an operations standpoint, in mid-January, we introduced our enhanced website to include rates and inventory availability, as well as some other useful features such as space and store bookmarking and a fully automated size estimator. And we're pleased with the results so far with unique business increasing by nearly 20% Q1 over Q1 '08.
During the quarter, we made no acquisitions for our own account or the joint venture, and we also expanded approximately $5 million to complete three expansions that had begun in '08 and further the expansion of five other stores.
If you've read our press release, you're aware that we plan to reduce our dividend by approximately 30% beginning with the dividend payable in July.
Our view is that with the turbulence in the economy and capital markets, it's prudent to err on the side of caution and conserve cash and maintain liquidity. This will increase the strength of our already conservative balance sheet.
And with that, I would like to turn it over to Dave Rogers, our Chief Financial Officer, who will provide details of our quarter's activities.
David L. Rogers
Thank you, Ken. Regarding operations, total revenues decreased by $73,000 or 0.1% from 2008 first quarter, and property expenses increased by $47,000 resulting in an overall NOI decrease of about 40 basis points.
These overall results reflect the positive impact of the one store we've acquired post first quarter of last year, offset by a decline in the same store result I'll get to in a minute, and the sale of one store last summer. Average overall occupancy was 79.3% for the quarter ended March 31st, and average rent per square foot was $10.57.
Same store revenues decreased by 140 basis points over those of the first quarter of 2008. This was the result of same store weighted average occupancy declining from that of 2008's first quarter by 150 basis points to 79.5%. Rental rates were slightly higher at $10.45 per square foot compared to the same store rate of $10.43 last year.
Again, this quarter we treated many of our customers to the first month's rent free. This time, to the tune of $2.7 million on a same store basis, which is a 75% increase over last year's first quarter. The leasing environment remains as tough as we've seen and we are, in effect, buying occupancy.
We've been able to hold the line regarding our rate structure except for some of the Florida markets in-place rent have, for the most part, been maintained. Operating expense on a same store basis decreased by a total of 10 basis points this period, despite the inclusion of a property tax increase of 8.3%. Except for utility, cost and advertising pretty much all other operating expenses declined.
The 140 basis point decline in revenues combined with a slight drop in operating costs resulted in a decrease of same store NOI of 2.1%. G&A cost for the period came in at 4.4 million, pretty much as expected. The 6% increase over that of last year's first quarter is primarily the result of increased costs associated with running the joint venture.
With regard to capital matters, our balance sheet remained pretty much unchanged during the quarter. We funded a little over $5 million of previously committed expansions and enhancements and put another $2 million toward normal recurring CapEx.
There were no acquisitions or further contributions to joint ventures. Our total outstanding debt is 632 million. At March 31st, all but the $23 million drawn on the line as long-term and fixed rate are hedged to maturity. Approximately 17% of our borrowings are secured.