ITEM 1.
BUSINESS
General
Sovran Acquisition Limited Partnership (the "Operating Partnership") is the entity through which Sovran Self Storage, Inc. (the "Company"), a self-administered and self-managed real estate investment trust ("REIT"), conducts substantially all of the Company's business and owns substantially all of the Company's assets. The Operating Partnership is one of the largest owners and operators of self-storage properties in the Eastern United States and Texas. In 1995, the Company was formed under Maryland law and the Operating Partnership was organized as a Delaware limited partnership to continue and to expand the self-storage operations of the Company's privately owned predecessor organizations. The term "Company" 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 and, as the context may require, the Company Predecessors.
At December 31, 2001, the Company is a 94.92% economic owner of the Operating Partnership and controls it through Sovran Holdings, Inc. ("Holdings"), a wholly owned subsidiary of the Company incorporated in Delaware and the sole general partner of the Operating Partnership. This structure is commonly referred to as an umbrella partnership REIT or "UPREIT". The Board of Directors of Holdings, the members of which are the same as the members of the Board of Directors of the Company, manages the affairs of the Operating Partnership by directing the affairs of Holdings. The Company's limited partner and indirect general partner interests in the Operating Partnership entitle it to share in cash distributions from, and in the profits and losses of, the Operating Partnership in proportion to its ownership interest therein and entitle the Company to vote on all matters requiring a vote of the limited partners.
The other limited partners of the Operating Partnership are persons who contributed their direct or indirect interests in certain self-storage properties to the Operating Partnership. The Operating Partnership is obligated to redeem each unit of limited partnership ("Unit") at the request of the holder thereof for cash equal to the fair market value of a share of the Company's common stock, par value $.01 per share ("Common Shares"), at the time of such redemption, provided that the Company at its option may elect to acquire any such Unit presented for redemption for one Common Share or cash. With each such redemption or acquisition by the Company, the Company's percentage ownership interest in the Operating Partnership will increase. In addition, whenever the Company issues Common Shares, the Company is obligated to contribute any net proceeds therefrom to the Operating Partnership and the Operating Partnership is obligated to issue an equivalent number of Units to the Company.
The Operating Partnership may issue additional Units to acquire additional self-storage properties in transactions that in certain circumstances defer some or all of the sellers' tax consequences. The Operating Partnership believes that many potential sellers of self-storage properties have a low tax basis in their properties and would be more willing to sell the properties in transactions that defer Federal income taxes. Offering Units instead of cash for properties may provide potential sellers partial Federal income tax deferral.
At March 15, 2002, the Operating Partnership owned and/or managed 253 Properties consisting of approximately 14.4 million net rentable square feet, situated in 21 states. 11 of the Properties are managed under an agreement with an unconsolidated joint venture that is 45% owned by the Operating Partnership. As of December 31, 2001, the Properties have a weighted average occupancy of 84% and a weighted average annual rent per occupied square foot of $8.59. The Operating Partnership is the 5th largest operator of self-storage properties in the United States based on facilities owned and/or managed.
The Operating Partnership seeks to increase cash flow and enhance unitholder value through aggressive management of the Properties and selective acquisitions of new self-storage properties. Aggressive property management entails increasing rents, increasing occupancy levels, strictly controlling costs, maximizing collections, strategically expanding and improving the Properties and, should economic conditions warrant, developing new properties. The Operating Partnership believes that there continues to be significant opportunities for growth through acquisitions, and constantly seeks to acquire self-storage properties that are susceptible to realization of increased economies of scale and enhanced performance through application of the Operating Partnership 's management expertise.
The Operating Partnership's principal executive offices are located at 6467 Main Street, Buffalo, New York 14221, and its telephone number is (716) 633-1850.
Industry Overview
The Operating Partnership believes that self-storage facilities offer inexpensive storage space to residential and commercial users. In addition to fully enclosed and secure storage space, some operators, including the Operating Partnership, also offer outside storage for automobiles, recreational vehicles and boats. The storage sites are usually fenced and well lighted with gates that are either manually operated or automated. All facilities have a full-time manager/leasing agent. Customers have access to their storage area during business hours and in certain circumstances are provided with 24-hour access. Individual storage units are secured by the customer's lock, which may be purchased from the Operating Partnership, and the customer has control of access to the unit.
The Operating Partnership believes that the self-storage industry is characterized by a trend toward consolidation, continuing increase in demand, relatively slow growth in supply and a targeted market of primarily residential customers.
According to published data, of the approximately 32,000 facilities in the United States, less than 13% are managed by the ten largest operators. The remainder of the industry is characterized by numerous small, local operators. The shortage of skilled operators, the scarcity of equity capital available to small operators for acquisitions and expansions and the potential for savings through economies of scale are factors which are leading to a consolidation in the industry. The Operating Partnership believes that as a result of this trend, significant growth opportunities exist for operators with proven management systems and sufficient capital resources.
Demand for self-storage service has grown as indicated by an increase in industry-wide average rents and in industry average occupancy. It is expected to remain strong because of various factors, including population growth, increased mobility, expansion of condominium, townhouse and apartment living, and increasing consumer awareness, particularly by commercial users. Commercial customers tend to rent larger areas for longer terms, are more reliable payers and are less sensitive to price increases. The Operating Partnership estimates that commercial users account for approximately 30% of its total occupancy, which is substantially higher than the reported industry average of 19%.
Property Management
The Operating Partnership believes that it has developed substantial expertise in managing self-storage facilities. Key elements of the Operating Partnership's management system include:
-
Recruiting, training and retaining capable, aggressive on-site Property Managers;
-
Motivating Property Managers by providing incentive-based compensation;
-
Developing and maintaining an integrated marketing plan for each Property; and
-
Performing regular preventative maintenance to avoid significant repair obligations.
Property Managers attend a thorough orientation program and undergo continuous training, which emphasizes telephone skills, closing techniques, identification of selected marketing opportunities, networking with possible referral sources, and familiarization with the Operating Partnership's customized management information system. In addition to frequent contact with Regional Team Leaders and other Operating Partnership personnel, Property Managers receive periodic newsletters regarding a variety of operational issues, and from time to time attend "roundtable" seminars with other Property Managers.
The Operating Partnership annually develops a written marketing plan for each of its Properties which is highly dependent upon local conditions. The focus of each marketing plan is, in part, determined by occupancy rates. If all storage units of the same size at a Property are at or near 90% occupancy, then the plan will generally include increases in rental rates. If a Property has excess capacity, then the marketing plan will target selected markets such as local military bases, colleges, apartment and condominium complexes, industrial parks, medical centers, retail shopping malls and office suites. The Operating Partnership primarily uses telephone directories to advertise its services, including a map and when possible, listing Properties in the same marketplace in a single advertisement. The Operating Partnership also conducts quarterly surveys of its competitors' practices, which include "shopping" competing facilities.
The Operating Partnership 's customized computer system performs billing, collections and reservation functions for each Property, and also tracks information used in developing marketing plans based on occupancy levels, and tenant demographics and histories. The system generates daily, weekly and monthly financial reports for each Property that are transmitted to the Operating Partnership 's principal office each night. The system also requires a Property Manager to input a descriptive explanation for all debit and credit transactions, paid-to-date changes, and all other discretionary activities, which allows the accounting staff at the Operating Partnership 's principal office to promptly review all such transactions. Late charges are automatically imposed. More sensitive activities such as rental rate changes and unit size or number changes are completed only by Regional Team Leaders. The Operating Partnership's customized management information system permits it to add new facilities to its portfolio with minimal additional overhead expense.
Marketing Initiatives
Responding to the increased customer demand for services, the Operating Partnership has initiated several programs expected to increase occupancy and profitability. These programs include:
-
Flex-a-Space, an innovative construction design that allows the Operating Partnership to easily reconfigure walls by using a track and roller mechanism, enabling customized storage space to fit the individual needs of the customer;
-
A Customer Care Center (call center) that services new and existing customers' inquiries. This allows the capture of sales leads that were previously lost;
-
Internet Marketing, providing access to all of the Operating Partnership's stores via numerous portals and e-mail;
-
Dri-guard, providing humidity-controlled spaces. Through an exclusive agreement, the Operating Partnership 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;
-
Uncle Bob's Trucks, provide customers with convenient, affordable access to vehicles to help move their goods, while serving as moving billboards to help advertise; and
-
Corporate Alliance, national marketing program that attracts commercial customers who have multi-market self-storage needs.
Environmental and Other Regulations
The Operating Partnership is subject to federal, state, and local environmental regulations that apply generally to the ownership of real property and the operation of self-storage facilities. The Operating Partnership has not received notice from any governmental authority or private party of any material environmental noncompliance, claim, or liability in connection with any of the Properties, and is not aware of any environmental condition with respect to any of the Properties that could have a material adverse effect on the Operating Partnership 's financial condition or results of operations.
The Properties are also generally subject to the same types of local regulations governing other real property, including zoning ordinances. The Operating Partnership believes that the Properties are in substantial compliance with all such regulations.
Insurance
Each of the Properties is covered by fire, flood and property insurance, including comprehensive liability, all-risk property insurance, provided by reputable companies and with commercially reasonable terms. In addition, the Operating Partnership maintains a policy insuring against environmental liabilities resulting from tenant storage on terms customary for the industry, and title insurance insuring fee title to the Operating Partnership owned Properties in an aggregate amount believed to be adequate.
Competition
The primary factors upon which competition in the self-storage industry is based are location, rental rates, suitability of the property's design to prospective tenants' needs, and the manner in which the property is operated and marketed. The Operating Partnership believes it competes successfully on these bases. The extent of competition depends in significant part on local market conditions. The Operating Partnership seeks to locate its facilities so as not to cause its Properties to compete with one another for customers, but the number of self-storage facilities in a particular area could have a material adverse effect on the performance of any of the Properties.
Several of the Operating Partnership's competitors, including Public Storage Management, Inc., Shurgard Incorporated, U-Haul International, and Storage USA, Inc., are larger and have substantially greater financial resources than the Operating Partnership. These larger operators may, among other possible advantages, be capable of greater leverage and the payment of higher prices for acquisitions.
Investment Policy
While the Operating Partnership emphasizes equity real estate investments, it may, in its discretion, invest in mortgage and other real estate interests related to self-storage properties consistent with the Company's qualification as a REIT. The Operating Partnership may also retain a purchase money mortgage for a portion of the sale price in connection with the disposition of Properties from time to time. Should investment opportunities become available, the Operating Partnership may look to acquire self-storage properties via a joint-venture partnership or similar entity. The Operating Partnership may or may not have a significant investment in such a venture, but would use such an opportunity to expand its portfolio of branded and managed properties.
Subject to the percentage of ownership limitations and gross income tests necessary for the Company's REIT qualification, the Operating Partnership also may invest in securities of entities engaged in real estate activities or securities of other issuers, including for the purpose of exercising control over such entities.
Disposition Policy
Management periodically reviews the assets comprising the Operating Partnership's portfolio. Any disposition decision will be based on a variety of factors, including, but not limited to, the (i) potential to continue to increase cash flow and value, (ii) sale price, (iii) strategic fit with the rest of the Company's portfolio, (iv) potential for, or existence of, environmental or regulatory issues, (v) alternative uses of capital, and (vi) maintaining of the Company's qualification as a REIT.
As part of an asset management program, the Operating Partnership has begun to "spin-off" non-core, slow-growth properties, into joint ventures. In cases were the Operating Partnership has a less than 50% ownership interest in a joint venture, the Properties of that joint venture are removed from the Operating Partnership's balance sheet and an investment in the joint venture is recorded. The Operating Partnership records only its percentage share of the operating results of unconsolidated joint ventures. These ventures may allow the Operating Partnership to i) increase incremental revenues through management fees, ii) provide strong returns on its equity in the joint venture, and iii) increase liquidity to allow redeployment of equity to repay debt, acquire stock, or buy higher growth properties. In 2000, the Operating Partnership sold seven facilities for approximately $20 million to an unconsolidated joint venture in which the Operating Partnership retained a 45% interest. In cases where the Operating Partnership is deemed to have greater than a 50% ownership interest, the joint venture is consolidated with the Operating Partnership's financial statements and a minority interest is recorded on the balance sheet and statement of operations for the portion of the joint venture not owned by the Operating Partnership.
Borrowing Policy
The Board of Directors of the Company currently limits the amount of debt that may be incurred by the Company to less than 50% of the sum of market value of the issued and outstanding Common and Preferred Stock plus the Company's debt (Market Capitalization). The Company, however, may from time to time re-evaluate and modify its borrowing policy in light of then current economic conditions, relative costs of debt and equity capital, market values of properties, growth and acquisition opportunities and other factors.
The Operating Partnership refinanced a $30 million 1 year term note in 2001 by extending the term until November 2002.
To the extent that the Operating Partnership desires to obtain additional capital to pay distributions, to provide working capital, to pay existing indebtedness or to finance acquisitions, expansions or development of new properties, the Operating Partnership may utilize 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 its Properties, which may be recourse, non-recourse, or cross-collateralized and may contain cross-default provisions. The Operating Partnership has not established any limit on the number or amount of mortgages that may be placed on any single Property or on its portfolio as a whole. For additional information regarding borrowings, see Item 7. "Management's Discussion and Analysis of Financial Condition and Results of Operations - Liquidity and Capital Resources" and Note 5 to the Consolidated Financial Statements filed herewith.
Employees
The Operating Partnership currently employs a total of 669 employees, including 255 Property Managers, 15 Regional Team Leaders, and 320 part-time employees. At the Operating Partnership's headquarters, in addition to its 3 executive officers, the Operating Partnership employs 76 people engaged in various support activities such as accounting and management information systems. None of the Operating Partnership's employees is covered by a collective bargaining agreement. The Operating Partnership considers its employee relations to be excellent.
Item 2.
Item 2.
Properties
At December 31, 2001, the Operating Partnership owned and/or managed a total of 241 Properties situated in twenty-one states in the Eastern and Midwestern United States, Arizona and Texas. 11 of the Properties are managed under an agreement with an unconsolidated joint venture that is 45% owned by the Operating Partnership.
The Operating Partnership's self-storage facilities offer inexpensive, easily accessible, enclosed storage space to residential and commercial users on a month-to-month basis. Most of the Operating Partnership's Properties are fenced with computerized gates and are well lighted. All but twenty-three of the Properties are single-story, thereby providing customers with the convenience of direct vehicle access to their storage units. All Properties have a Property Manager on-site during business hours. Customers have access to their storage areas during business hours, and some commercial customers are provided 24-hour access. Individual storage units are secured by a lock furnished by the customer to provide the customer with control of access to the unit.
All but a few of the Properties conduct business under the user-friendly trade name "Uncle BoB's Self-Storage" and the remainder are operated under various names acquired with the Properties. The Operating Partnership intends to convert all of the Properties to the "Uncle BoB's" trade name.
The table below provides certain information regarding the Properties included in the Operating Partnership's consolidated financial statements:
Location
Year
Built
Sq. Ft.
Uncle
Bob's
Trade
Name
State
Occupancy
at
12/31/01
Acres
Units
Bldgs.
Floors
Mgr.
Apt.
Construction
Alabama
83%
Birmingham I
36,875
Y
2.7
Y
Masonry/Steel Roof
Birmingham II
52,225
Y
4.7
Y
Masonry/Steel Roof
Montgomery I
73,750
Y
5.0
Y
Masonry/Steel Roof
Birmingham III
72,140
Y
4.3
Y
Masonry/Steel Roof
Montgomery II
42,405
Y
2.7
N
Masonry/Steel Roof
Montgomery III
41,550
Y
2.4
Y
Steel Bldg./Steel Roof
Birmingham-Walt
64,580
Y
3.3
Y
Masonry Wall/Metal Roof
Birmingham-Bessemer
44,100
Y
5.6
N
Metal Wall/Metal Roof
Arizona
79%
Gilbert-Elliot Rd.
59,010
Y
3.3
Y
Masonry Wall/Metal Roof
Glendale-59th Ave.
67,076
Y
4.6
Y
Masonry Wall/Metal Roof
Mesa-Baseline
39,100
Y
1.8
Y
Masonry Wall/Metal Roof
Mesa-E. Broadway
38,825
Y
1.8
Y
Masonry Wall/Metal Roof
Mesa-W. Broadway
36,625
Y
1.9
Y
Masonry Wall/Metal Roof
Mesa-Greenfield
48,431
Y
2.1
N
Masonry Wall/Metal Roof
Phoenix-Camelback
43,635
Y
2.0
Y
Masonry Wall/Metal Roof
Phoenix-Bell
96,580
Y
4.6
Y
Metal Wall/Metal Roof
Phoenix-35th Ave.
71,310
Y
4.3
Y
Masonry Wall/Metal Roof
Connecticut
85%
New Haven
47,680
Y
3.9
N
Masonry Wall/Steel Roof
Hartford-Metro I
56,530
Y
10.0
N
Steel Bldg./Steel Roof
Hartford-Metro II
39,235
Y
6.0
N
Steel Bldg./Steel Roof
Florida
85%
Lakeland 1
48,055
Y
3.5
Y
Masonry Wall/Steel Roof
Tallahassee I
142,520
Y
18.7
Y
Masonry Wall/Tar & Gravel Roof
Tallahassee II
45,150
Y
4.0
Y
Masonry Wall/Tar & Gravel Roof
Port St. Lucie
53,845
Y
4.0
N
Steel Bldg./Steel Roof
Deltona
63,896
Y
5.0
Y
Masonry Wall/Shingle Roof
Jacksonville I
39,882
Y
2.7
Y
Masonry Wall/Tar & Gravel Roof
Orlando I
50,520
Y
2.8
Y
Steel Bldg./Steel Roof
Ft. Lauderdale
101,080
Y
7.6
Y
Steel Bldg./Steel Roof
West Palm 1
45,615
Y
3.2
N
Steel Bldg./Steel Roof
Melbourne I
83,458
Y
8.3
Y
Masonry Wall/Shingled Roof
Pensacola I
108,685
Y
7.5
Y
Steel Bldg./Steel Roof
Pensacola II
57,835
Y
3.4
Y
Steel Bldg./Steel Roof
Melbourne II
56,031
Y
3.4
N
Steel Bldg./Steel Roof
Jacksonville II
54,035
Y
4.4
Y
Masonry/Steel Roof
Pensacola III
64,841
Y
6.1
N
Steel Bldg./Steel Roof
Pensacola IV
38,850
Y
2.7
Y
Masonry/Steel Roof
Pensacola V
39,445
Y
2.6
Y
Masonry/Steel Roof
Tampa I
60,399
Y
3.3
N
Masonry/Steel Roof
Tampa II
56,492
Y
2.9
N
Masonry/Steel Roof
Tampa III
47,296
Y
2.2
N
Masonry/Steel Roof
Orlando II
134,834
Y
8.5
1,346
Y
Masonry Wall/Steel Roof
Ft. Myers I
27,704
Y
1.1
Y
Steel Bldg./Steel Roof
Ft. Myers II
1991/94
23,078
Y
1.9
Y
Masonry/Steel Roof
Tampa IV
58,015
Y
4.0
Y
Masonry/Steel Roof
West Palm II
30,981
Y
2.3
Y
Masonry/Steel Roof
Ft. Myers III
36,052
Y
2.4
Y
Masonry/Steel Roof
Lakeland II
60,010
Y
4.0
N
Masonry Wall/Steel Roof
Ft. Myers IV
59,584
Y
4.5
Y
Masonry/Steel Roof
Jacksonville III
102,430
Y
5.9
Y
Masonry Wall/Shingle Roof
Jacksonville IV
37,855
Y
2.7
Y
Steel Bldg./Steel Roof
Jacksonville V
1987/92
53,975
Y
2.9
Y
Steel Bldg./Masonry Wall/Steel Roof
Orlando III
52,688
Y
3.2
N
Masonry Wall/Steel Roof
Orlando IV-W 25th St.
38,426
Y
2.8
Y
Steel Bldg/Steel Roof
Delray I-Mini
52,895
Y
3.5
Y
Masonry Wall/Concrete Roof
Delray II-Safeway
70,200
Y
4.3
Y
Masonry Wall/Concrete Roof
Tampa-E. Hillborough
84,440
Y
5.3
Y
Masonry Wall/Metal Roof
Ft. Myers-Mall
1991/94
20,881
Y
1.3
Y
Masonry/Steel Roof
Indian Harbor-Beach
66,466
Y
4.0
N
Masonry Wall/Metal Roof
Hollywood-Sheridan
130,558
Y
7.0
1,171
Y
Masonry Wall/Concrete Roof
Pompano Beach-Atlantic
77,217
Y
4.0
N
Masonry Wall/Concrete Roof
Pompano Beach-Sample
63,787
Y
3.6
N
Masonry Wall/Metal Roof
Boca Raton-18th St.
89,827
Y
6.2
1,073
N
Masonry Wall/Metal Roof
Vero Beach
34,450
Y
1.9
N
Masonry Wall/Metal Roof
Hollywood-N. 21st
58,917
Y
3.1
Y
Masonry Wall/Metal Roof
Cocoa
75,582
Y
2.5
Y
Masonry Wall/Metal Roof
Plantation
42,331
Y
2.9
1&2
Y
Masonry Wall/Metal Roof
Georgia
83%
Savannah
73,085
Y
5.4
Y
Masonry Wall/Steel Roof
Atlanta-Metro I
69,915
Y
3.9
Y
Steel Bldg./Steel Roof
Atlanta-Metro II
45,300
Y
3.9
Y
Steel Bldg./Steel Roof
Atlanta-Metro III
56,745
Y
5.3
Y
Steel Bldg./Steel Roof
Atlanta-Metro IV
42,615
Y
3.5
Y
Steel Bldg./Steel Roof
Atlanta-Metro V
44,195
Y
4.2
Y
Masonry Wall/Tar & Gravel Roof
Atlanta-Metro VI
50,900
Y
3.6
Y
Steel Bldg./Steel Roof
Atlanta-Metro VII
39,160
Y
2.5
Y
Masonry Wall/Tar & Gravel Roof
Atlanta-Metro VIII
46,743
Y
3.3
Y
Masonry Wall/Tar & Gravel Roof
Augusta I
52,000
Y
4.0
Y
Steel Bldg./Steel Roof
Macon I
40,820
Y
3.2
Y
Steel Bldg./Steel Roof
Augusta II
46,318
Y
3.5
Y
Masonry Wall/Steel Roof
Atlanta-Metro IX
55,956
Y
4.6
Y
Steel Bldg./Steel Roof
Atlanta-Metro X
48,635
Y
6.8
N
Steel Bldg./Steel Roof
Macon II
1989/94
57,950
Y
14.0
Y
Steel Bldg./Steel Roof
Savannah II
49,215
Y
2.6
Y
Masonry Wall/Steel Roof
Atlanta-Alpharetta
80,550
Y
5.8
1&2
Y
Steel Bldg./Steel Roof
Atlanta-Marietta-Roswell
59,450
Y
6.0
1&2
Y
Steel Bldg./Steel Roof
Atlanta-Doraville
68,465
Y
4.9
1&2
Y
Steel & Masonry Bldg./Steel Roof
Ft. Oglethorpe
45,100
Y
3.3
Y
Masonry Wall/Metal Roof
Kingsland
66,837
N
4.1
Y
Masonry Wall/Metal Roof
Louisiana
77%
Baton Rouge-Airline
71,920
Y
2.5
Y
Masonry Wall/Metal Roof
Baton Rouge-Airline 2
44,895
Y
2.8
N
Masonry Wall/Steel Roof
Lafayette-Pinhook 1
56,625
Y
3.2
Y
Masonry Wall/Metal Roof
Lafayette-Pinhook 2
1992/94
47,025
Y
2.4
Y
Metal Wall/Metal Roof
Lafayette-Ambassador
33,835
Y
2.0
Y
Masonry Wall/Shingle Roof
Lafayette-Evangeline
34,630
Y
3.1
Y
Masonry Wall/Metal Roof
Lafayette-Guilbeau
63,685
Y
3.4
N
Metal Wall/Metal Roof
Maine
84%
Westbrook
45,740
Y
5.9
Y
Metal Wall/Metal Roof
Saco
53,750
N
4.2
N
Masonry Wall/Metal Roof
Maryland
89%
Salisbury
33,560
Y
3.0
N
Masonry Wall/Tar & Gravel Roof
Baltimore I-Frederick
21,233
Y
1.9
N
Masonry Wall/Shingled Roof
Baltimore II-Gaithersburg
60,573
Y
2.2
Y
Masonry Wall/Tar & Gravel Roof
Baltimore III-Landover
51,738
Y
3.1
Y
Steel Bldg./Steel Roof
Massachusetts
90%
New Bedford
42,338
Y
3.4
Y
Steel Bldg./Steel Roof
Springfield
41,835
Y
4.7
N
Masonry Wall/Shingle Roof
Salem
53,325
Y
2.0
Y
Steel Wall/Metal Roof
Boston-Metro I
37,905
Y
2.0
Y
Masonry Wall/Tar & Gravel Roof
Boston-Metro II
38,315
Y
3.6
N
Masonry Wall/Tar & Gravel Roof
N. Andover
44,630
Y
3.0
N
Masonry & Metal Wall/Metal Roof
Dracut
45,926
N
5.0
Y
Masonry Wall/Metal Roof
Methuen
50,640
N
3.4
Y
Masonry Wall/Metal Roof
Plymouth
95,225
N
7.7
N
Metal Wall/Metal Roof
Sandwich
39,000
N
4.9
N
Metal Wall/Metal Roof
Michigan
81%
Grand Rapids II
43,600
Y
8.0
N
Masonry & Steel Walls
Holland
58,880
Y
8.3
Y
Masonry Wall/Steel Roof
Holland-Paw Paw
37,628
Y
5.3
Y
Masonry Wall/Steel Roof
Waterford-Highland
136,711
Y
16.6
1,664
Y
Masonry Wall/Metal Roof
Mississippi
90%
Jackson I
42,170
Y
2.0
Y
Masonry/Steel Roof
Jackson II
38,835
Y
2.1
Y
Masonry/Steel Roof
Jackson III-155
61,948
Y
1.3
N
Metal Wall/Metal Roof
Jackson-N. West
57,775
Y
5.2
Y
Masonry Wall/Metal Roof
New Hampshire
93%
Salem-Policy
62,025
Y
8.7
Y
Masonry Wall/Metal Roof
New York
88%
Middletown
33,865
Y
2.8
N
Steel Bldg./Steel Roof
Buffalo I
76,270
Y
5.1
Y
Steel Bldg./Steel Roof
Rochester I
41,834
Y
2.9
Y
Steel Bldg./Steel Roof
Rochester II
29,610
Y
3.5
N
Masonry Wall/Shingle Roof
Buffalo II
54,765
Y
6.2
Y
Steel Bldg./Steel Roof
Syracuse 1
72,120
Y
7.5
N
Steel Bldg./Steel Roof
Syracuse II
67,879
Y
3.6
Y
Steel Bldg./Shingled Roof
Rochester III
66,756
Y
2.7
N
Masonry Wall/Shingle Roof
Harriman
1989/95
66,390
Y
6.1
Y
Metal Wall/Metal Roof
Monroe
36,240
Y
13.3
N
Metal Wall/Metal Roof
North Carolina
76%
Charlotte
37,815
Y
2.9
Y
Steel Bldg./Steel Roof
Fayetteville
88,024
Y
6.2
Y
Steel Bldg./Steel Roof
Greensboro
45,230
Y
3.4
Y
Steel Bldg./Mas. Wall/Steel Roof
Raleigh I
58,410
Y
5.0
Y
Steel Bldg./Steel Roof
Raleigh II
33,125
Y
2.5
Y
Steel Bldg./Steel Roof
Charlotte II
49,107
Y
5.6
Y
Masonry Wall/Steel Roof
Charlotte III
30,920
Y
2.9
Y
Masonry Wall/Steel Roof
Greensboro-Hilltop
32,228
Y
1.0
N
Metal Wall/Metal Roof
Greensboro-StageCoach
9,625
Y
2.5
N
Metal Wall/Metal Roof
Greensboro-High Point
58,120
Y
2.5
N
Steel Wall/Metal Roof
Durham-Hillborough
1988/91
67,911
Y
5.0
Y
Metal Wall/Metal Roof
Durham-Cornwallis
1990/96
78,670
Y
4.7
Y
Masonry Wall/Metal Roof
Jacksonville-Center
51,100
Y
5.0
Y
Metal Wall/Metal Roof
Jacksonville-Gum Branch
62,960
Y
5.0
Y
Metal Wall/Metal Roof
Jacksonville-N. Marine
43,540
Y
8.4
Y
Masonry Wall/Shingle Roof
Ohio
85%
Youngstown
54,830
Y
5.8
Y
Steel Bldg./Steel Roof
Cleveland-Metro I
49,200
Y
6.4
Y
Steel Bldg./Steel Roof
Cleveland-Metro II
60,890
Y
4.8
Y
Steel Bldg./Steel Roof
Youngstown
55,750
Y
3.9
Y
Masonry Wall/Steel Roof
Akron
38,320
Y
3.4
Y
Masonry Wall/Steel Roof
Cleveland III
68,075
Y
3.4
Y
Masonry Wall/Steel Roof
Cleveland IV
65,000
Y
3.5
Y
Masonry Wall/Steel Roof
Cleveland V
74,882
Y
3.1
1&2
Y
Masonry Wall/Steel Roof
Cleveland VI
47,150
Y
2.6
Y
Masonry Wall/Steel Roof
Cleveland VII
70,140
Y
4.3
Y
Masonry Wall/Steel Roof
Cleveland VIII
47,975
Y
5.7
N
Masonry Wall/Steel Roof
Cleveland IX
54,910
Y
4.4
N
Masonry Wall/Steel Roof
Cleveland 10-Avon
46,852
Y
5.8
N
Metal Wall/Metal Roof
Warren-Elm
60,200
Y
7.3
Y
Masonry Wall/Metal Roof
Warren-Youngstown
58,987
Y
5.0
N
Masonry Wall/Metal Roof
Batavia
61,818
Y
5.5
N
Metal Wall/Steel Roof
Pennsylvania
91%
Allentown
40,800
Y
6.3
Y
Masonry Wall/Shingle Roof
Sharon
38,270
Y
3.0
Y
Steel Bldg./Steel Roof
Harrisburg I
48,850
Y
4.1
Y
Masonry Wall/Steel Roof
Harrisburg II
59,450
Y
9.2
Y
Masonry Wall/Steel Roof
Pittsburgh
57,365
Y
3.4
Y
Steel Bldg./Steel Roof
Pittsburgh II
102,500
Y
4.8
Y
Masonry Wall/Shingled Roof
Harrisburg-Peiffers
63,740
Y
4.1
Y
Masonry Wall/Metal Roof
Rhode Island
92%
East Greenwich
45,770
Y
2.9
Y
Metal Wall/Metal Roof
Frenchtown
25,405
Y
2.0
Y
Metal Wall/Metal Roof
W. Warwick
1986/94
52,551
Y
2.3
N
Metal Wall/Steel Roof
Providence
38,610
Y
3.7
Y
Masonry Wall/Tar & Gravel Roof
South Carolina
76%
Charleston I
49,584
Y
3.3
Y
Steel Bldg./Mas. Wall/Steel Roof
Columbia I
47,710
Y
3.3
Y
Steel Bldg./Steel Roof
Columbia II
58,730
Y
6.0
N
Steel Bldg./Steel Roof
Columbia III
40,890
Y
3.5
Y
Steel Bldg./Steel Roof
Columbia IV
57,770
Y
5.6
Y
Steel Bldg./Steel Roof
Spartanburg
40,450
Y
3.6
Y
Steel Bldg./Steel Roof
Charlestown II
40,318
Y
2.2
Y
Masonry Wall/Steel Roof
Columbia
72,950
N
5.0
Y
Masonry Wall/Steel Roof
Myrtle Beach
61,510
N
4.8
Y
Masonry Wall/Steel Roof
Tennessee
85%
Chattanooga-Lee Hwy
37,877
Y
3.3
Y
Masonry Wall/Metal Roof
Chattanooga-Hwy 58
35,750
Y
2.4
Y
Masonry Wall/Metal Roof
Hendersonville
1986/97
93,955
Y
5.7
Y
Masonry Wall/Metal Roof
Texas
85%
Arlington I
45,815
Y
2.3
Y
Masonry Wall/Steel Roof
Arlington II
67,220
Y
3.8
Y
Masonry Wall/Steel Roof
Ft. Worth
40,875
Y
2.4
Y
Masonry Wall/Asphalt Roof
San Antonio I
49,570
Y
3.9
Y
Masonry Wall/Steel Roof
San Antonio II
39,870
Y
1.9
Y
Masonry Wall/Steel Roof
San Antonio III
48,782
Y
2.6
Y
Masonry Wall/Steel Roof
Universal
35,160
Y
2.4
Y
Masonry Wall/Steel Roof
San Antonio IV
54,720
Y
5.4
Y
Steel Bldg./Steel Roof
Houston-Eastex
1993/95
70,180
Y
6.4
Y
Metal Wall/Steel Roof
Houston-Nederland
61,971
Y
6.3
Y
Metal Wall/Steel Roof
Houston-College
35,650
Y
1.8
Y
Metal Wall/Steel Roof
Dallas-Skillman
121,053
Y
5.9
1,101
1&2
Y
Masonry Wall/Steel Roof
Dallas-Centennial
103,171
Y
6.7
1,065
1&2
N
Masonry Wall/Steel Roof
Dallas-Samuell
79,046
Y
3.8
1&2
Y
Masonry Wall/Steel Roof
Dallas-Hargrove
71,934
Y
3.1
1&2
Y
Masonry Wall/Steel Roof
Houston-Antoine
75,720
Y
4.1
Y
Metal Wall/Metal Roof
Katy
43,995
Y
8.6
Y
Metal Wall/Metal Roof
Humble
63,789
Y
2.3
Y
Masonry Wall/Metal Roof
Houston-Old Katy
52,860
Y
3.0
Y
Masonry Wall/Shingle Roof
Webster-Hwy 3
55,350
Y
3.3
Y
Masonry Wall/Metal Roof
Carrollton
51,780
Y
3.2
Y
Masonry Wall/Metal Roof
San Marcos
61,690
Y
5.0
N
Metal Wall/Metal Roof
Austin-McNeil
72,465
Y
7.0
Y
Metal Wall/Metal Roof
Austin-FM
59,910
Y
4.9
Y
Metal Wall/Metal Roof
Euless
93,120
Y
7.5
Y
Metal Wall/Metal Roof
N. Richland Hills
76,625
Y
7.4
Y
Metal Wall/Metal Roof
Katy-Franz
67,135
Y
7.2
Y
Metal Wall/Metal Roof
Cedar Hill
52,735
Y
3.0
Y
Metal Wall/Metal Roof
Seabrook
61,645
Y
4.3
Y
Metal Wall/Metal Roof
Virginia
84%
Newport News I
58,275
Y
3.2
Y
Steel Bldg./Steel Roof
Alexandria
76,597
Y
3.2
1,137
Y
Masonry Wall/Tar & Gravel Roof
Norfolk I
50,520
Y
2.7
Y
Steel Bldg./Steel Roof
Norfolk II
45,275
Y
2.1
Y
Masonry Wall/Steel Roof
Richmond
51,985
Y
2.7
Y
Masonry Wall/Steel Roof
Newport News II
1988/93
63,655
Y
4.7
Y
Steel Bldg./Steel Roof
Lynchburg-Lakeside
47,628
Y
5.3
Y
Masonry Wall/Steel Roof
Lynchburg-Timberlake
43,830
Y
2.3
Y
Masonry Wall/Steel Roof
Lynchburg-Amherst
23,438
Y
1.5
N
Masonry Wall/Metal Roof
Christiansburg
1985/90
37,598
Y
3.2
Y
Masonry Wall/Metal Roof
Chesapeake
1988/95
37,200
Y
12.0
Y
Metal Wall/Steel Roof
Danville
49,792
Y
3.2
N
Steel Wall/Metal Roof
Chesapeake-Military
58,450
Y
3.0
N
Masonry Wall/Metal Roof
Chesapeake-Volvo
63,955
Y
4.0
N
Masonry Wall/Metal Roof
Virginia Beach-Shell
52,626
Y
2.5
N
Masonry Wall/Metal Roof
Virginia Beach-Central
1993/95
95,991
Y
5.0
N
Masonry Wall/Metal Roof
Norfolk-Naval Base
126,918
Y
5.2
1,251
N
Masonry Wall/Metal Roof
Lynchburg-Timberlake
1990/96
50,289
Y
5.2
N
Masonry Wall/Metal Roof
Total for all Properties 12,966,805 84% 993 113,775 1,877
Item 3.
Item 3.
Legal Proceedings
A former business associate (the "Plaintiff") of certain officers and directors of the Company, including Robert J. Attea, Kenneth F. Myszka, David L. Rogers and Charles E. Lannon (the "Founding Shareholders"), commenced a lawsuit against the Company on June 13, 1995 in the United States District Court for the Northern District of Ohio. The Plaintiff subsequently amended the complaint in the lawsuit alleging breach of fiduciary duty, breach of contract, breach of general partnership/joint venture arrangement, breach of duty of good faith, fraud and deceit, and other causes of action including declaratory judgment as to the Plaintiff's continuing interest in the Company. The Plaintiff sought money damages in excess of $15 million, as well as punitive damages and declaratory and injunctive relief (including the imposition of a constructive trust on assets of the Company in which the Plaintiff claimed to have a continuing interest) and an accounting. The amended complaint also added the Founding Shareholders as additional defendants. In April 2000, following trial, the jury rendered a verdict adverse to the Company with respect to the Plaintiff's claims for breach of contract and breach of general partnership/joint venture arrangement and found total compensatory damages in the amount of $6,462,068. The Company filed a post-trial motion for judgment as a matter of law and a motion for a new trial. Although the motion for judgment as a matter of law was denied, the motion for a new trial was granted and a new trial was scheduled. Prior to the commencement of the new trial, the parties agreed to settle the lawsuit and the Company paid $2,359,174 to the Plaintiff in settlement of all claims. In addition, legal fees and related expenses totaling $1,686,000 were paid by the Company in connection with the lawsuit, and $781,000 was paid in connection with its own counterclaim against the Plaintiff. Pursuant to their agreement with the Company to pay certain costs and losses arising from the lawsuit, the Founding Shareholders made payment to the Company in April 2001 of $1,785,000 and in November 2001 by the redemption of 46,528 shares of the Company's common stock owned by them having a market value of approximately $1,360,000. The cost to the Operating Partnership, after indemnification by the Founding Shareholders, was $1.7 million.
Item 4.
Item 4.
Submission of Matters to a Vote of Security Holders
No matters were submitted during the fourth quarter of the fiscal year covered by this report to a vote of security holders, through the solicitation of proxies or otherwise.
Part II
Item 5.
Item 5.
Market for Registrant's Common Equity and Related Stockholder Matters
	There is no established public trading market for Units. As of March 15, 2002, there were 14 holders of record of Units.
	The following table sets forth the quarterly distributions per Unit paid by the Operating Partnership to holders of its Units with respect to each such period.
History of Distributions Declared on Units
1st Quarter, 2000
$0.570 per unit
2nd Quarter, 2000
$0.570 per unit
3rd Quarter, 2000
$0.580 per unit
4th Quarter, 2000
$0.580 per unit
1st Quarter, 2001
$0.580 per unit
2nd Quarter, 2001
$0.580 per unit
3rd Quarter, 2001
$0.590 per unit
4th Quarter, 2001
$0.590 per unit
	The partnership agreement of the Operating Partnership (the "Partnership Agreement") provides that the Operating Partnership will distribute all available cash (as defined in the Partnership Agreement) on at least a quarterly basis, in amounts determined by the general partner in its sole discretion, to the partners in accordance with their respective percentage interest in the Operating Partnership. Distributions are declared at the discretion of the Board of Directors of Holdings, the general partner of the Operating Partnership and a wholly-owned subsidiary of the Company, and will depend on actual funds from operations of the Operating Partnership, its financial condition, capital requirements, the annual distribution requirements under the REIT provisions of the Internal Revenue Code of 1986, as amended, and such other factors as the Board of Directors may deem relevant. The Board of Directors of Holdings may modify the Operating Partnership's distribution policy from time to time, subject to the terms of the Partnership Agreement.
	The Operating Partnership's line of credit contains customary representations, covenants and events of default, including covenants which restrict the ability of the Operating Partnership to make distributions in excess of stated amounts. In general, during any four consecutive fiscal quarters the Operating Partnership may only distribute up to 105% of the Operating Partnership's funds from operations (as defined in the related agreement). The line of credit contains exceptions to these limitations to allow the Operating Partnership to make any distributions necessary to allow the Company to maintain its status as a REIT. The Operating Partnership does not anticipate that this provision will adversely affect the ability of the Operating Partnership to make distributions, as currently anticipated.
Item 6.
Item 6.
Selected Financial Data
(a)
Funds from operations ("FFO") means income (loss) before extraordinary item (computed in accordance with GAAP) adjusted as follows: (i) less gain on sale of property, (ii) plus depreciation of real estate assets and amortization of intangible assets exclusive of deferred financing costs, (iii) plus significant non-recurring events (lawsuit settlement in 2001 and unsuccessful debt offering costs in 1998), and (iv) less FFO attributable to minority interest. FFO is a supplemental performance measure for REITs as defined by the National Association of Real Estate Investment Trusts, Inc. FFO is presented because analysts consider FFO to be one measure of the performance of the Operating Partnership. FFO does not take into consideration scheduled principal payments on debt, capital improvements and other obligations of the Operating Partnership. Accordingly, FFO is not a substitute for the Operating Partnership's cash flow or net income as a measure of the Operating Partnership's liquidity or operating performance or ability to pay distributions.
Item 7.
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.
	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 21F of Securities Exchange Act of 1934. Such forward-looking statements involve known and unknown risks, uncertainties and other factors, which may cause the actual results, performance or achievements of the Operating Partnership to be materially different from those expressed or implied by such forward-looking statements. Such factors include, but are not limited to, the effect of competition from new self-storage facilities, which would cause rents and occupancy rates to decline; the Operating Partnership's ability to evaluate, finance and integrate acquired businesses into the Operating Partnership's existing business and operations; the Operating Partnership's ability to form joint ventures and sell existing properties to those joint ventures; 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 ability to successfully implement its Uncle Bob's Flex-a-Space strategy; the Operating Partnership's cash flow may be insufficient to meet required payments of principal and interest; and tax law changes which may change the taxability of future income.
Significant Accounting Policies And Estimates
The Operating Partnership's discussion and analysis of its financial condition and results of operations are based upon the Operating Partnership's consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of these financial statements requires the Operating Partnership to make estimates and judgments that affect the amounts reported in the financial statements and the accompanying notes. On an on-going basis, the Operating Partnership evaluates its estimates and judgments, including those related to carrying values of storage facilities, bad debts, and contingencies and litigation. The Operating Partnership bases its estimates on experience and on various other assumptions that are believed 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.
The Operating Partnership believes its judgment regarding the impairment of the carrying value of its storage facilities is a significant accounting policy. The Operating Partnership's policy is to assess any impairment of value whenever events or circumstances indicate that the carrying value of the storage facility may not be recoverable. 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 the Operating Partnership's operating results and financial position. At December 31, 2001 and 2000, 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.
RESULTS OF OPERATIONS
YEAR ENDED DECEMBER 31, 2001 COMPARED TO YEAR ENDED
DECEMBER 31, 2000
The Operating Partnership recorded rental revenues of $89.1 million for the year ended December 31, 2001, an increase of $0.9 million or 1% when compared to 2000 rental revenues of $88.2 million. Of this, $3.3 million resulted from a 4% increase in revenues at the 217 core properties considered in same store sales. $0.5 million resulted from the acquisition of 8 stores during 2001 and from having the 2000 acquisitions included for a full year of operations. These increases were offset by a $2.9 million decrease from the sale of 7 stores to a joint venture in 2000. Interest and other income increased to $2.3 million in 2001 from $2.1 million in 2000, due to increases in ancillary income from management fees, truck rental and cell towers.
Property operating and real estate tax expense increased $1.5 million or 5% during the period. Of this, $1.4 million resulted from increased expenses at the 217 core properties considered as same stores. $0.7 million was incurred by the facilities acquired in 2001 and from having the 2000 acquisitions included for a full year of operations. These increases were offset by a reduction of $0.6 million from the sale of 7 stores to a joint venture in 2000.
General and administrative expenses increased $2.2 million in 2001. The increase was primarily a result of a $1.7 million expense in connection with a lawsuit settlement - see discussion in "Legal Proceedings".
In 2001, interest expense decreased to $13.9 million from $17.5 million as a result of significant decreases in interest rates.
Depreciation and amortization expense increased to $15.0 million from $14.3 million, primarily as a result of the additional depreciation taken on the real estate assets acquired in 2001 and a full year of depreciation on 2000 acquisitions.
The Operating Partnership recorded a $0.1 million loss in 2001 from its ownership interest in two real estate joint ventures.
Earnings before interest, depreciation and amortization, minority interest and extraordinary loss decreased 7.9% from $59.5 million in 2000 to $54.8 million in 2001 as a result of the aforementioned items.
YEAR ENDED DECEMBER 31, 2000 COMPARED TO YEAR ENDED DECEMBER 31, 1999
The Operating Partnership recorded rental revenues of $88.2 million for the year ended December 31, 2000, an increase of $5.8 million or 7% when compared to 1999 rental revenues of $82.4 million. Of this, $3.2 million resulted from the acquisition of 5 stores during 2000 and from having the 1999 acquisitions included for a full year of operations. The additional $2.6 million increase resulted from increased revenues at the 204 core properties considered in same store sales. For this core group, total revenues increased 3.7%, primarily as the result of rental rate increases. Interest and other income increased to $2.1 million in 2000 from $1.2 million in 1999, due to increases in ancillary income from management fees, truck rental and cell towers. A $2.2 million gain was recorded on the sale of 7 stores to a joint venture that is 45% owned by the Operating Partnership. In 1999, the Operating Partnership sold 1 store to an unaffiliated entity resulting in a $0.65 million gain.
Property operating and real estate tax expense increased $2.8 million or 11.4% during the period. Of this, $1 million was incurred by the facilities acquired in 2000 and from having the 1999 acquisitions included for a full year of operations. The remaining $1.8 million increase was incurred in the operation of the 204 core properties, including additional advertising of $1 million related to the Operating Partnership's Flex-a-Space concept in 2000.
General and administrative expenses increased $0.2 million in 2000. The increase was primarily a result of increased supervisory and accounting costs associated with the operation of an increased number of properties.
In 2000, interest expense increased to $17.5 million from $13.9 million as a result of significant increases in interest rates.
Depreciation and amortization expense increased to $14.3 million from $13.1 million, primarily as a result of the additional depreciation taken on the real estate assets acquired in 2000 and a full year of depreciation on 1999 acquisitions.
The Operating Partnership recorded a $0.2 million loss in 2000 from its ownership interest in two real estate joint ventures.
Earnings before interest, depreciation and amortization, minority interest and extraordinary loss increased 9.4% from $54.4 million in 1999 to $59.5 million in 2000 as a result of the aforementioned items.
A $0.2 million extraordinary loss was recorded in 2000 when the Operating Partnership's credit facility and term note were replaced with a new agreement in November 2000.
PRO FORMA YEAR ENDED DECEMBER 31, 2001 COMPARED TO PRO FORMA YEAR ENDED DECEMBER 31, 2000
The following unaudited pro forma information shows the results of operations as though the acquisitions and sales of storage facilities in 2001 and 2000 had all occurred as of the beginning of 2000.
Total revenues of $94.7 million in 2001 increased by 4.1% over 2000's revenues of $90.9 million, primarily as a result of rate increases at the stores and increases in other income.
Operating expenses and real estate taxes in 2001 were $29.4 million, as compared to $27.3 million in 2000, an increase of 7.7%. The increase was due to increased personnel and property tax costs.
General and administrative costs were determined by the Operating Partnership's historical costs incurred in the management of properties and increased due to a $1.7 million expense in connection with a lawsuit settlement in 2001.
Interest expense in both years was determined by adjusting the 2001 expense for borrowings made for acquisitions.
Such unaudited pro forma information is based upon the historical consolidated statements of operations of the Operating Partnership. It should be read in conjunction with the financial statements of the Operating Partnership and notes thereto. In management's opinion, all adjustments necessary to reflect the effects of these transactions have been made. This unaudited pro forma statement does not purport to represent what the actual results of operations of the Operating Partnership would have been assuming such transactions had been completed as set forth above, nor does it purport to represent the results of operations for future periods.
LIQUIDITY AND CAPITAL RESOURCES
CAPITAL RESOURCES, UNSECURED LINE OF CREDIT AND TERM NOTE
The Operating Partnership's unsecured credit facility provides availability up to $150 million, of which $134 million was drawn on December 31, 2001. The facility matures in November 2003 and bears interest at LIBOR plus 1.375%.
In addition to the credit facility, the Operating Partnership has two unsecured term notes; one in the amount of $30 million due November 2002 bearing interest at LIBOR plus 1.375% and the other in the a	mount of $75 million bearing interest at LIBOR plus 1.75%. The $75 million note has a maturity date of November 2003, but can be extended through November 2005 at the Operating Partnership's option.
The credit facility and term notes currently have investment grade ratings from Standard and Poor's (BBB-), Moody's (Baa3), and Fitch (BBB-).
In July 1999 the Company issued 1,200,000 shares of 9.85% Series B Cumulative Redeemable Preferred Stock. The net proceeds of $28.6 million were used to repay a portion of the outstanding balance on the credit facility. The Series B Preferred Stock is currently rated by Standard and Poor's (BB+), Moody's (Ba2) and Fitch (BB+).
In 2001, the Company acquired 66,753 shares of its common stock via the Share Repurchase Program authorized by the Board of Directors in 1998. Through December 31, 2001 the Company has reacquired 839,453 shares pursuant to this program. From time to time, subject to market price and certain loan covenants, the Company expects to continue reacquiring shares.
The Operating Partnership believes that its internally generated cash flows and borrowing capacity under the credit facility will be sufficient to fund ongoing operations, capital improvements, distributions, and share repurchases for the year 2002. The Operating Partnership expects to fund its maturing $30 million term note with the availability on its unsecured credit facility and the proceeds received from the sale of 8 properties to Locke Sovran II, LLC (see "Disposition of Properties"). Future growth is expected to be funded through issuance of secured or unsecured term notes, issuance of common or preferred stock, sale of Properties, private placement solicitation of joint venture equity and other sources of capital. The Operating Partnership's outstanding debt as of December 31, 2001, assuming available extensions, matures as follows:
	2002:	$30 million
	2003:	$134 million
	2005:	$75 million
ACQUISITION OF PROPERTIES
During 2001 the Operating Partnership used borrowings pursuant to the line of credit to acquire 3 Properties in Massachusetts and Maine comprising 0.2 million square feet from unaffiliated storage operators. An unaffiliated company also contributed 5 properties to a consolidated joint venture, Locke Sovran II, LLC, in exchange for an ownership interest in that joint venture. These Properties are located in Georgia, Massachusetts, and South Carolina. In 2000, 5 facilities totaling 0.2 million square feet were acquired. At December 31, 2001, the Operating Partnership owned and/or operated 241 self-storage facilities in 21 states. Of these facilities, 11 are managed by the Operating Partnership for Locke Sovran I, LLC, an unconsolidated joint venture.
DISPOSITION OF PROPERTIES
	During 2001, the Operating Partnership sold 8 Properties for approximately $24.5 million to Locke Sovran II, LLC. Because Locke Sovran II, LLC is a consolidated joint venture, no gain was recognized on the sale.
In 2000, the Operating Partnership sold 7 Properties for approximately $20 million, recognizing a gain of $2.1 million. The gain recognized represents the proportion of the total gain not related to the Operating Partnership's ongoing ownership interest. The Properties were sold to a joint venture in which the Operating Partnership retained a 45% interest and whose properties the Operating Partnership will manage for an ongoing fee. The Operating Partnership invested $5 million of the proceeds to fund its 45% interest in the venture and received a short-term promissory note of approximately $15 million. The note was repaid in 2001 and the Operating Partnership used the proceeds to pay down its outstanding line of credit, freeing up working capital for acquisitions and expansions done in 2001.
The Operating Partnership may seek to sell additional Properties to similar joint venture programs in 2002.
INVESTMENT IN JOINT VENTURES
Investment in joint ventures includes an ownership interest in Locke Sovran I, LLC, which operates 11 self storage facilities throughout the United States, and an ownership interest in Iskalo Office Holdings, LLC, which owns the building that houses the Operating Partnership's headquarters and other tenants.
In December 2000, the Operating Partnership contributed 7 self-storage properties to Locke Sovran I, LLC with a fair market value of $19.8 million, in exchange for a $15 million 1 year note receivable bearing interest at LIBOR plus 1.75% that was repaid in 2001, and a 45% interest in Locke Sovran I, LLC. For the year ended December 31, 2001, the Operating Partnership's share of Locke Sovran I, LLC's income was $163,000, which is recorded as equity in losses of joint ventures on the consolidated statements of income.
The Operating Partnership also has a 49% ownership interest in Iskalo Office Holdings, LLC at December 31, 2001. The majority of the $800,000 investment relates to interest bearing loans made by the Operating Partnership to the joint venture. For the year ended December 31, 2001, the Operating Partnership's share of Iskalo Office Holdings, LLC's loss was $305,000. The Operating Partnership paid rent to Iskalo Office Holdings, LLC of $225,000 and $164,000 in 2001 and 2000, respectively.
A summary of the unconsolidated joint ventures financial statements as of and for the year ended December 31, 2001 is as follows:
(dollars in thousands)
Locke Sovran I,
LLC
Iskalo Office Holdings, LLC
Balance Sheet Data:
Investment in storage facilities, net
$ 40,426
$ -
Investment in office building
-
6,341
Other assets
1,957
Total Assets
$ 42,383
$ 6,501
Due to the Operating Partnership
$ 679
$ 800
Mortgage payable
30,500
6,440
Other liabilities
Total Liabilities
31,734
7,407
Unaffiliated partners' equity (deficiency)
5,465
(482)
Operating Partnership equity (deficiency)
5,184
(424
)
Total Liabilities and Partners' Equity (Deficiency)
$ 42,383
$ 6,501
Income Statement Data:
Total revenues
$ 5,511
$ 474
Total expenses
5,150
1,097
Net income (loss)
$ 361
$ (623)
The Operating Partnership does not guarantee the debt of either joint venture.
FUTURE ACQUISITION AND DEVELOPMENT PLANS
The Operating Partnership's external growth strategy is to increase the number of facilities it owns by acquiring suitable facilities in markets in which it already has operations, or to expand in new markets by acquiring several facilities at once in those new markets.
At December 31, 2001, the Operating Partnership had no contracts to acquire additional properties. The Operating Partnership's consolidated joint venture, Locke Sovran II, LLC had 12 properties under contract at December 31, 2001. All of these properties were purchased by Locke Sovran II, LLC in February 2002 for $25.9 million.
The Operating Partnership also intends to expand and enhance certain of its existing facilities by building additional storage buildings on presently vacant land and by installing climate control and enhanced security systems at selected sites.
DISTRIBUTION REQUIREMENTS OF THE COMPANY AND IMPACT ON THE OPERATING PARTNERSHIP
As a REIT, the Company is not required to pay federal income tax on income that it distributes to its shareholders, provided that the amount distributed is equal to at least 90% of taxable income. These distributions must be made in the year to which they relate, or in the following year if declared before the Company files its federal income tax return, and if it is paid before the first regular dividend of the following year. The first distribution of 2002 may be applied toward the Company's 2001 distribution requirement. The Company's source of funds for such distributions are solely and directly from the Operating Partnership.
As a REIT, the Company must derive at least 95% of its total gross income from income related to real property, interest and dividends. In 2001, the Company's percentage of revenue from such sources exceeded 97%, thereby passing the 95% test, and no special measures are expected to be required to enable the Company to maintain its REIT designation.
INTEREST RATE RISK
At December 31, 2001, the Operating Partnership has three outstanding interest rate swap agreements. The first, entered in March 2001, effectively fixes the LIBOR base rate at 5.36% through November 2005 on $50 million notional amount. The second, entered in September 2001, effectively fixes the LIBOR base rate at 4.485% through October 2006 on another $50 million notional amount. The third, also entered in September 2001, effectively fixes the LIBOR base rate at 4.805% through September 2008 on $30 million notional amount. The Operating Partnership has an unsecured credit facility in place through November 2003 enabling the Operating Partnership to borrow funds at rates of LIBOR plus 1.375% and 1.75%. Accordingly, as a result of the above described interest rate swap agreements, the Operating Partnership has fixed its interest rate through November 2003 on $50 million at 6.735%, on another $50 million at 5.86%, and on $30 million at 6.555%. Upon renewal or replacement of the credit facility, the Operating Partnership's total interest may change dependent on the terms it negotiates with its lenders; however, the LIBOR base rates have been contractually fixed on $130 million of the Operating Partnership's debt through the interest rate swap termination dates.
Because all but $130 million of the Operating Partnership's outstanding debt of $241 million is on a floating rate basis, changes in short term interest rates could have a significant impact on the Operating Partnership's earnings and funds from operations. Should the Operating Partnership enter into further rate swap agreements, earnings could be negatively affected, as short-term rates are presently significantly below the five and seven year cost of funds.
Based upon the Operating Partnership's indebtedness at December 31, 2001, and taking the interest rate swap agreements into account, a 1% increase in interest rates would result in an increase to interest expense of approximately $1.1 million.
INFLATION
The Operating Partnership does not believe that inflation has had or will have a direct effect on its operations. Substantially all of the leases at the facilities allow for monthly rent increases, which provide the Operating Partnership with the opportunity to achieve increases in rental income as each lease matures.
SEASONALITY
The Operating Partnership's revenues typically have been higher in the third and fourth quarter, primarily because the Operating Partnership increases its rental rates on most of its storage units at the beginning of May and because self-storage facilities tend to experience greater occupancy during the late spring, summer and early fall months due to the greater incidence of residential moves during these periods. However, the Operating Partnership believes that its tenant mix, diverse geographic locations, rental structure and expense structure provide adequate protection against undue fluctuations in cash flows and net revenues during off-peak seasons. Thus, the Operating Partnership does not expect seasonality to affect materially distributions to unitholders.
Recent Accounting Pronouncement
In August 2001, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets (SFAS 144). SFAS 144 supersedes SFAS No. 121, Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed of, but retains its fundamental provisions for recognition and measurement of the impairment of long-lived assets to be held and used and those to be disposed of by sale. The Operating Partnership must adopt this standard in 2002. The Operating Partnership does not expect the adoption of this standard to have a material effect on its results of operations and financial condition.
UNITHOLDER INFORMATION
CORPORATE HEADQUARTERS
6467 Main Street
Buffalo, New York 14221
716-633-1850
SOVRAN'S WEBSITE
http://www.sovranss.com
FORM 10-K REPORT
A copy of the Operating Partnership's Annual Report on Form 10-K for the year ended December 31, 2001, filed with the Securities Exchange Commission, will be furnished to unitholders without charge upon written request. Please contact Christine M. Aguglia, 716-633-1850
INVESTOR RELATIONS
For more information or to receive Sovran's quarterly reports, please contact Diane M. Piegza, 716-633-1850
INDEPENDENT AUDITORS
Ernst & Young LLP
1400 Key Tower
Buffalo, New York 14202
Item 7A.
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.
Item 8.
Financial Statements and Supplementary Data
SOVRAN ACQUISITION LIMITED PARTNERSHIP CONSOLIDATED BALANCE SHEETS
SOVRAN ACQUISITION LIMITED PARTNERSHIP CONSOLIDATED STATEMENTS OF OPERATIONS
See notes to financial statements.
Sovran Acquisition Limited Partnership
Statements of Partners' Capital
(Dollars in thousands)
Sovran
Holdings, Inc.
General Partner
Sovran Self
Storage Inc.
Limited Partner
Preferred
Partners
Accumulated
Other Comprehensive
Income
Total
Partners'
Capital
Limited Partners'
Capital Interest
Balance January 1, 1999
$ 5,284
$ 259,718
$ -
$ -
$ 265,002
$ 21,683
Proceeds from issuance of Partnership Units
-
6,435
-
-
6,435
-
Redemption of Partnership Units
-
-
-
-
-
(261)
Issuance of 9.85% Series B Preferred Units
-
(1,415)
30,000
-
28,585
-
Exercise of stock options
-
-
-
-
Earned portion of restricted stock
-
-
-
-
Purchase of treasury shares
-
(6,454)
-
-
(6,454)
-
Deferred compensation
-
-
-
-
Net income
25,158
-
-
25,585
1,762
Distributions
(517)
(28,736)
-
-
(29,253)
(1,939)
Adjustment to reflect limited partners'
redeemable capital at balance sheet date
5,268
-
-
5,357
(5,357)
Balance December 31, 1999
5,283
260,267
30,000
-
295,550
15,888
Proceeds from issuance of Partnership Units
-
2,064
-
-
2,064
-
Earned portion of restricted stock
-
-
-
-
Purchase of treasury shares
-
(7,784)
-
-
(7,784)
-
Deferred compensation
-
-
-
-
Net income
25,238
-
-
25,707
1,812
Distributions
(559)
(30,073)
-
-
(30,632)
(1,962)
Adjustment to reflect limited partners'
redeemable capital at balance sheet date
(22)
(1,194)
-
-
(1,216)
1,216
Balance December 31, 2000
5,171
248,705
30,000
-
283,876
16,954
Proceeds from issuance of Partnership Units
-
5,209
-
-
5,209
-
Redemption of Partnership Units
-
1,868
-
-
1,868
(5,646)
Exercise of stock options
-
1,096
-
-
1,096
-
Earned portion of restricted stock
-
-
-
-
Purchase of treasury shares
-
(1,809)
-
-
(1,809)
-
Deferred compensation
-
-
-
-
Net income
23,760
-
-
24,189
1,532
Increase in fair value of derivatives
-
-
-
-
Total comprehensive income
-
-
-
-
24,562
1,532
Distributions
(560)
(31,093)
-
-
(31,653)
(1,728)
Adjustment to reflect limited partners'
redeemable capital at balance sheet date
(167)
(9,305)
-
-
(9,472)
9,472
Balance December 31, 2001
$ 4,873
$ 238,924
$ 30,000
$ 373
$ 274,170
$ 20,584
See notes to financial statements.
SOVRAN ACQUISITION LIMITED PARTNERSHIP CONSOLIDATED STATEMENTS OF CASH FLOWS
Distributions declared but unpaid at December 31, 2001, 2000 and 1999 were $7,683, $7,472, and $7,496, respectively.
See notes to financial statements.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Sovran Acquisition Limited Partnership - December 31, 2001
1. ORGANIZATION
Sovran Acquisition Limited Partnership (the "Operating Partnership") is the entity through which Sovran Self Storage, Inc. (the "Company"), a self-administered and self-managed real estate investment trust ("REIT"), conducts substantially all of its business and owns substantially all of its assets. In 1995, the Company was formed under Maryland law and the Operating Partnership was organized as a Delaware limited partnership to continue and to expand the self-storage operations of the Company's privately owned predecessor organizations. On June 26, 1995, the Company commenced operations, through the Operating Partnership, effective with the completion of its initial public offering of 5,890,000 shares. At December 31, 2001, the Operating Partnership owned and/or managed 241 self-storage properties under the "Uncle Bob's Self Storage" ® trade name in 21 states.
As of December 31, 2001, the Company was a 94.92% economic owner of the Operating Partnership and controls it through Sovran Holdings, Inc. ("Holdings"), a wholly owned subsidiary of the Company incorporated in Delaware and the sole general partner of the Operating Partnership (this structure is commonly referred to as an umbrella partnership REIT or "UPREIT"). The board of directors of Holdings, the members of which are also members of the Board of Directors of the Company, manages the affairs of the Operating Partnership by directing the affairs of Holdings. The Company's limited partner and indirect general partner interests in the Operating Partnership entitle it to share in cash distributions from, and in the profits and losses of, the Operating Partnership in proportion to its ownership interest therein and entitle the Company to vote on all matters requiring a vote of the limited partners.
The other limited partners of the Operating Partnership are persons who contributed their direct or indirect interests in certain self-storage properties to the Operating Partnership. The Operating Partnership is obligated to redeem each unit of limited partnership ("Unit") at the request of the holder thereof for cash equal to the fair market value of a share of the Company's common stock ("Common Shares") at the time of such redemption, provided that the Company at its option may elect to acquire any Unit presented for redemption for one Common Share or cash. The Company presently anticipates that it will elect to issue Common Shares to acquire Units presented for redemption, rather than paying cash. With each such redemption the Company's percentage ownership interest in the Operating Partnership will increase. In addition, whenever the Company issues Common Shares, the Company is obligated to contribute any net proceeds therefrom to the Operating Partnership and the Operating Partnership is obligated to issue an equivalent number of Units to the Company. Such limited partners' redemption rights are reflected in "limited partners' capital interest" in the accompanying balance sheets at the cash redemption amount at the balance sheet date. Capital activity with regard to such limited partners' redemption rights is reflected in the accompanying statements of partners' capital.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation: The consolidated financial statements of the Operating Partnership include the accounts of the Operating Partnership and Locke Sovran II, LLC, a majority owned joint venture. All intercompany transactions and balances have been eliminated. Investments in joint ventures which are not majority owned are reported using the equity method.
Cash and Cash Equivalents: The Operating Partnership considers all highly liquid debt instruments purchased with maturities of three months or less to be cash equivalents.
Revenue and Expense Recognition: Rental income is recorded when earned. Rental income received prior to the start of the rental period is included in deferred revenue. Advertising costs are expensed as incurred and for the years ended December 31, 2001, 2000, and 1999 were $0.4 million, $1.4 million and $0.4 million, respectively.
Interest and Other Income: Consists primarily of interest income, sales of storage-related merchandise (locks and packing supplies), management fees, and commissions from truck rentals.
Investment in Storage Facilities: Storage facilities are recorded at cost. Depreciation is computed using the straight-line method over estimated useful lives of forty years for buildings and improvements, and five to twenty years for furniture, fixtures and equipment. Expenditures for significant renovations or improvements which extend the useful life of assets are capitalized. Repair and maintenance costs are expensed as incurred.
Whenever events or changes in circumstances indicate that the basis of the Operating Partnership's property may not be recoverable, the Operating Partnership's policy is to assess any impairment of value. Impairment is evaluated based upon comparing the sum of the expected undiscounted future cash flows to the carrying value of the property; on a property by property basis. If the sum of the 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, 2001 and 2000, 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 intangible assets and a note receivable of $2.8 million. The intangible assets at December 31, 2001, consist primarily of loan acquisition costs of approximately $3.6 million, net of accumulated amortization of approximately $1.1 million; and covenants not to compete of $0.8 million, net of accumulated amortization of $0.8 million. Loan acquisition costs are amortized over the terms of the related debt; and the covenants are amortized over the contract periods. Amortization expense was $1.1 million, $0.9 million and $0.9 million for the periods ended December 31, 2001, 2000 and 1999, respectively. 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.
Minority Interest: The minority interest reflects the joint venture partner's interest in Locke Sovran II, LLC. Amounts allocated to the joint venture partners are reflected as an expense in the income statement and increase the minority interest in the balance sheet. Distributions to these partners reduce this balance.
Income Taxes: No provision has been made for income taxes in the accompanying financial statements since the Operating Partnership qualifies as a partnership for federal and state income tax purposes and its partners are required to include their respective shares of profits and losses in their income tax returns.
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 partner's capital.
Derivative Financial Instruments: On January 1, 2001, 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 Pronouncement: In August 2001, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets (SFAS 144). SFAS 144 supersedes SFAS No. 121, Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed of, but retains its fundamental provisions for recognition and measurement of the impairment of long-lived assets to be held and used and those to be disposed of by sale. The Operating Partnership must adopt this standard in 2002. The Operating Partnership does not expect the adoption of this standard to have a material effect on its results of operations and financial condition.
Reclassification: Certain amounts from the 2000 financial statements have been reclassified to conform with the current year presentation.
Use of Estimates: The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates.
3. EARNINGS PER UNIT
The Operating Partnership reports earnings per unit data in accordance with Statement of Financial Accounting Standards No. 128, "Earnings Per Share." 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,
except per unit data)
Year Ended
December 31,
Year Ended
December 31,
Year Ended
December 31,
Numerator:
Net income available to common unitholders
$ 22,766
$ 24,564
$ 26,108
Denominator
Denominator for basic earnings per unit -
weighted average units
12,991
12,920
13,267
Effect of Dilutive Securities:
Options for Company stock
Denominator for diluted earnings per unit -
adjusted weighted - average units and assumed conversion
13,092
12,921
13,270
Basic Earnings per Common Unit
$ 1.75
$ 1.90
$ 1.97
Diluted Earnings per Common Unit
$ 1.74
$ 1.90
$ 1.97
4. INVESTMENT IN STORAGE FACILITIES
The following summarizes activity in storage facilities during the years ended December 31, 2001 and December 31, 2000.
(Dollars in thousands)
Cost:
Beginning balance
$562,721
$556,473
Property acquisitions
30,269
11,239
Improvements and equipment additions
18,527
12,228
Dispositions
(228)
(17,219)
Ending balance
$611,289
$562,721
Accumulated Depreciation:
Beginning balance
$ 45,253
$ 33,453
Additions during the year
13,918
13,352
Dispositions
(80)
(1,552)
Ending balance
$ 59,091
$ 45,253
5. UNSECURED LINE OF CREDIT AND TERM NOTE
The Operating Partnership has a $150 million revolving line of credit due November 2003 at LIBOR plus 1.375%, a $75 million term loan due November 2003 (extendable, at the Operating Partnership's option to November 2005) at LIBOR plus 1.75%, and a $30 million term loan due November 2002 at LIBOR plus 1.375%. The weighted average interest rate at December 31, 2001 on the Operating Partnership's credit facility before the effect of interest rate swaps was approximately 3.5% (8.2% at December 31, 2000). At December 31, 2001, there was $16 million available on the line of credit.
The Operating Partnership recorded an extraordinary loss on the extinguishment of debt of $211,000 in 2000, representing the unamortized financing costs of credit facilities that were refinanced during 2000.
The net carrying amount of the Operating Partnership's debt instruments approximates fair value.
6. DERIVATIVE FINANCIAL INSTRUMENTS
Interest rate swaps are used to adjust the proportion of total debt that is subject to variable and fixed 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 changed. 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 net present 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 2001.
The Operating Partnership has entered into three interest rate swap agreements, one in March 2001 for $50 million and two in September 2001 for $50 million and $30 million, to effectively convert a total of $130 million of variable-rate debt to fixed-rate debt. One of the $50 million interest rate swap agreements matures in November 2005, the other matures in October 2006, and the $30 million swap agreement matures in September 2008.
The 2001 interest rate swap agreements are the only derivative instruments, as defined by SFAS No. 133, held by the Operating Partnership; as such there was no impact upon adoption of SFAS No. 133 at January 1, 2001. During 2001, the net reclassification from AOCI to interest expense was $1.1 million based on payments made under the swap agreements. Based on current interest rates, the Operating Partnership estimates that payments under the interest rate swaps will be approximately $3.9 million in 2002. Payments made under the interest rate swap agreements will be reclassified to interest expense as settlements occur. The fair value of the swap agreements at December 31, 2001 was a $373,000 asset.
7. PRO FORMA FINANCIAL INFORMATION (UNAUDITED)
The following unaudited pro forma information shows the results of operations as though the acquisitions and dispositions of storage facilities in 2001 and 2000 had all occurred as of the beginning of 2000.
Such unaudited pro forma information is based upon the historical consolidated statements of operations of the Operating Partnership and the acquired entities. It should be read in conjunction with the financial statements of the Operating Partnership and notes thereto. In management's opinion, all adjustments necessary to reflect the effects of these transactions have been made. This unaudited pro forma statement does not purport to represent what the actual results of operations of the Operating Partnership would have been assuming such transactions had been completed as set forth above, nor does it purport to represent the results of operations for future periods.
8. STOCK OPTIONS
The Operating Partnership accounts for stock-based compensation using the measurement prescribed by APB Opinion No. 25 which does not recognize compensation expense because the number of stock options is fixed and the exercise price of the stock options equals the market price of the underlying stock on the date of grant. Statement of Financial Accounting Standards No. 123, "Accounting for Stock-Based Compensation," requires companies that choose not to adopt the new fair value accounting rules to disclose pro forma net income and earnings per unit under the new method.
The Company established the 1995 Award and Option Plan (the 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 five years, and must be exercised within ten years from the date of grant. The exercise price for qualified incentive stock options must be at least equal to the fair market value at the date of grant. As of December 31, 2001, options for 829,050 shares were outstanding under the Plan and 394,610 shares of common stock are 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 annual granting of options to purchase 3,000 shares of common stock to each eligible director. Such options vest over a one-year period for initial awards and immediately upon subsequent grants. The total shares reserved under the Non-employee Plan is 100,000. The exercise price for options granted under the Non-employee Plan is equal to fair market value at date of grant. As of December 31, 2001, options for 73,500 shares were outstanding under the Non-employee Plan.
The fair value for the stock options was estimated at the date of grant using a Black-Scholes option pricing model with the following weighted-average assumptions: risk-free interest rate of 5.0% for 2001, 6.5% for 2000, and 7.0% for 1999; dividend yield of 10.7% for 2001, 11% for 2000, and 10% for 1999; volatility factor of the expected market price of the Company's common stock of .23 for 2001, and .21 for 2000 and 1999. The average fair value of options granted was $.93 in 2001, $.90 in 2000, and $1.76 in 1999.
The Black-Scholes options valuation model was developed for use in estimating the fair value of traded options which have no vesting restrictions and are fully transferable. In addition, option valuation models require the input of highly subjective assumptions including the expected stock price volatility. Because the Company's employee stock options have characteristics significantly different from those of traded options, and because changes in the subjective input assumptions can materially affect the fair value estimate, in management's opinion, the existing models do not necessarily provide a reliable single measure of the fair value of its employee stock options.
For purposes of pro forma disclosures, the estimated fair value of the options is amortized to expense over the options' vesting period. The Operating Partnership's pro forma information for the years ended December 31, 2001, 2000 and 1999 follows (in thousands, except for earnings per unit information).
Pro forma net income available to common
unitholders
$ 22,578
$ 24,454
$ 26,001
Pro forma earnings per common unit - Basic
- Diluted
$ 1.74
$ 1.72
$ 1.89
$ 1.89
$ 1.96
$ 1.96
The Company has also issued 113,840 shares of restricted stock to employees which vest over four and five year periods. The fair market value of the restricted stock on the date of grant ranged from $20.38 to $30.36. The Company charges unearned restricted stock, a component of shareholders' equity, for the market value of shares as they are issued. The unearned portion is then amortized and charged to expense over the vesting period.
A summary of the Company's stock option activity and related information for the years ended December 31 follows:
Exercise prices for options outstanding as of December 31, 2001 ranged from $19.07 to $29.66. The weighted average remaining contractual life of those options is 6.97 years.
9. RETIREMENT PLAN
Employees of the Operating Partnership qualifying under certain age and service requirements are eligible to be a participant in a 401(k) Plan which was effective September 1, 1997. The Operating Partnership contributes to the Plan at the rate of 50% of the first 4% of gross wages that the employee contributes. Total expense to the Operating Partnership was approximately $63,000, $60,000 and $56,000 for the years ended December 31, 2001, 2000 and 1999, respectively.
10. SHAREHOLDER RIGHTS PLAN
In November 1996, the Company adopted a Shareholder Rights Plan and declared a dividend distribution of one Right for each outstanding share of common stock. Under certain conditions, each Right may be exercised to purchase one one-thousandth of a share of Series A Junior Participating Preferred Stock at a purchase price of $75, subject to adjustment. The Rights will be exercisable only if a person or group has acquired 10% or more of the outstanding shares of common stock, or following the commencement of a tender or exchange offer for 10% or more of such outstanding shares of common stock. If a person or group acquires more than 10% of the then outstanding shares of common stock, each Right will entitle its holder to receive, upon exercise, common stock having a value equal to two times the exercise price of the Right. In addition, if the Company is acquired in a merger or other business combination transaction, each Right will entitle its holder to purchase that number of the acquiring Company's common shares having a market value of twice the Right's exercise price. The Company will be entitled to redeem the Rights at $.01 per Right at any time prior to the earlier of the expiration of the Rights in November 2006 or the time that a person has acquired a 10% position. The Rights do not have voting or dividend rights, and until they become exercisable, have no dilutive effect on the Operating Partnership's earnings.
11. INVESTMENT IN JOINT VENTURES
Investment in joint ventures includes an ownership interest in Locke Sovran I, LLC, which operates 11 self storage facilities throughout the United States, and an ownership interest in Iskalo Office Holdings, LLC, which owns the building that houses the Operating Partnership's headquarters and other tenants.
In December 2000, the Operating Partnership contributed seven self-storage properties to Locke Sovran I, LLC with a fair market value of $19.8 million, in exchange for a $15 million 1 year note receivable bearing interest at LIBOR plus 1.75% that was repaid in 2001, and a 45% interest in Locke Sovran I, LLC. This transaction resulted in a gain on the disposal of the properties of approximately $4.3 million; $1.9 million of this gain was deferred as a result of the Operating Partnership's continuing ownership interest in Locke Sovran I, LLC, as such the initial investment, including cash funding, was recorded at $3.1 million. The deferred gain is being amortized over the life of the properties, consistent with the depreciation expense recorded by Locke Sovran I, LLC. For the year ended December 31, 2001, the Operating Partnership's share of Locke Sovran I, LLC's income was $163,000 and the amortization of the deferred gain was $40,000, both of which are recorded as equity in losses of joint ventures on the consolidated statements of income.
The Operating Partnership also has a 49% ownership interest in Iskalo Office Holdings, LLC at December 31, 2001. The majority of the $800,000 investment relates to interest bearing loans made by the Operating Partnership to the joint venture. For the year ended December 31, 2001, the Operating Partnership's share of Iskalo Office Holdings, LLC's loss was $305,000. The Operating Partnership paid rent to Iskalo Office Holdings, LLC of $255,000 and $164,000 in 2001 and 2000, respectively.
A summary of the unconsolidated joint ventures financial statements as of and for the year ended December 31, 2001 is as follows:
(dollars in thousands)
Locke Sovran I,
LLC
Iskalo Office Holdings, LLC
Balance Sheet Data:
Investment in storage facilities, net
$ 40,426
$ -
Investment in office building
-
6,341
Other assets
1,957
Total Assets
$ 42,383
$ 6,501
Due to the Operating Partnership
$ 679
$ 800
Mortgage payable
30,500
6,440
Other liabilities
Total Liabilities
31,734
7,407
Unaffiliated partners' equity (deficiency)
5,465
(482)
Operating Partnership equity (deficiency)
5,184
(424
)
Total Liabilities and Partners' Equity (Deficiency)
$ 42,383
$ 6,501
Income Statement Data:
Total revenue
$ 5,511
$ 474
Total expenses
5,150
1,097
Net income (loss)
$ 361
$ (623)
12. PREFERRED STOCK
On July 30, 1999, the Company issued 1,200,000 shares of 9.85% Series B Cumulative Redeemable Preferred Stock. The offering price was $25 per share resulting in net proceeds of $28.8 million after expenses. The Series B Preferred Stock is not redeemable until on, or after July 30, 2004, at which time the Company may redeem the shares at $25.00 per share ($30,000,000 aggregate), plus any accrued and unpaid dividends. The shares may be redeemed only with the proceeds of certain sales of equity securities. Dividends on the Series B Preferred Stock are cumulative from the date of original issue and are payable quarterly in arrears on the last day of each March, June, September, and December at a rate of $2.4625 per annum per share.
Holders of the Series B Preferred Stock generally have no voting rights. However, if the Company does not pay dividends on the Series B shares for six or more quarterly periods (whether or not consecutive), the holders of the shares, voting as a class with the holders of any other class or series of stock with similar voting rights, will be entitled to vote for the election of two additional directors to serve on the Board of Directors until all Series B dividends are paid.
	The Series B Cumulative Redeemable Preferred Stock is recorded as Preferred Partners' Units in the Operating Partnership's balance sheet.
13. SUPPLEMENTARY QUARTERLY FINANCIAL DATA (UNAUDITED)
The following is a summary of quarterly results of operations for the years ended December 31, 2001 and 2000 (dollars in thousands, except per unit data).
The Operating Partnership's net income in the fourth quarter of 2001 was impacted by a $1.7 million expense in connection with a lawsuit settlement described in Note 15.
14. COMMITMENTS AND CONTINGENCIES
The Operating Partnership's current practice is to conduct environmental investigations in connection with property acquisitions. At this time, the Operating Partnership is not aware of any environmental contamination of any of its facilities which individually or in the aggregate would be material to the Operating Partnership's overall business, financial condition, or results of operations.
15. LEGAL PROCEEDINGS
A former business associate (the "Plaintiff") of certain officers and directors of the Company, including Robert J. Attea, Kenneth F. Myszka, David L. Rogers and Charles E. Lannon (the "Founding Shareholders"), commenced a lawsuit against the Company on June 13, 1995 in the United States District Court for the Northern District of Ohio. The Plaintiff subsequently amended the complaint in the lawsuit alleging breach of fiduciary duty, breach of contract, breach of general partnership/joint venture arrangement, breach of duty of good faith, fraud and deceit, and other causes of action including declaratory judgment as to the Plaintiff's continuing interest in the Company. The Plaintiff sought money damages in excess of $15 million, as well as punitive damages and declaratory and injunctive relief (including the imposition of a constructive trust on assets of the Company in which the Plaintiff claimed to have a continuing interest) and an accounting. The amended complaint also added the Founding Shareholders as additional defendants. In April 2000, following trial, the jury rendered a verdict adverse to the Company with respect to the Plaintiff's claims for breach of contract and breach of general partnership/joint venture arrangement and found total compensatory damages in the amount of $6,462,068. The Company filed a post-trial motion for judgment as a matter of law and a motion for a new trial. Although the motion for judgment as a matter of law was denied, the motion for a new trial was granted and a new trial was scheduled. Prior to the commencement of the new trial, the parties agreed to settle the lawsuit and the Company paid $2,359,174 to the Plaintiff in settlement of all claims. In addition, legal fees and related expenses totaling $1,686,000 were paid by the Company in connection with the lawsuit, and $781,000 was paid in connection with its own counterclaim against the Plaintiff. Pursuant to their agreement with the Company to pay certain costs and losses arising from the lawsuit, the Founding Shareholders made payment to the Company in April 2001 of $1,785,000 and in November 2001 by the redemption of 46,528 shares of the Company's common stock owned by them having a market value of approximately $1,360,000. The cost to the Operating Partnership, after indemnification by the Founding Shareholders, was $1.7 million.
Report of Independent Auditors
The Board of Directors and Partners
Sovran Acquisition Limited Partnership
We have audited the accompanying consolidated balance sheets of Sovran Acquisition Limited Partnership as of December 31, 2001 and 2000 and the related consolidated statements of operations, partners' capital and cash flows for each of the three years in the period ended December 31, 2001. Our audit also included the financial statement schedule listed in the index at Item 14(a). These financial statements and schedule are the responsibility of the management of Sovran Acquisition Limited Partnership. Our responsibility is to express an opinion on these financial statements and schedule based on our audits.
We conducted our audits in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of Sovran Acquisition Limited Partnership as of December 31, 2001 and 2000, and the consolidated results of its operations and its cash flows for each of the three years in the period ended December 31, 2001, in conformity with accounting principles generally accepted in the United States. Also in our opinion, the related financial statement schedule, when considered in relation to the basic consolidated financial statements taken as a whole, presents fairly in all material respects the information set forth therein.
Ernst & Young LLP
Buffalo, New York
January 30, 2002
Item 9.
Item 9.
Changes in and Disagreements With Accountants on Accounting and Financial Disclosure
None.
Part III
Item 10.
Item 10.
Directors and Executive Officers of the Registrant
Through Holdings, a wholly-owned subsidiary of the Company and the sole general partner of the Operating Partnership, the Company controls the Operating Partnership. The Board of Directors of Holdings, the members of which are the same as the members of the Board of Directors of the Company, manages the affairs of the Operating Partnership by directing the affairs of the general partner of the Operating Partnership. The Operating Partnership has no directors, or executive officers. Consequently, this information incorporated by reference reflects information with respect to the directors and executive officers of the Company and Holdings.
The information required is incorporated by reference to "Election of Directors", including "Executive Officers of the Company" and "Section 16(a) Beneficial Ownership Reporting Compliance" in the Company's Proxy Statement for the Annual Meeting of Shareholders of the Company to be held on May 16, 2002.
Item 11.
Item 11.
Executive Compensation
Through Holdings, a wholly-owned subsidiary of the Company and the sole general partner of the Operating Partnership, the Company controls the Operating Partnership. The Board of Directors of Holdings, the members of which are the same as the members of the Board of Directors of the Company, manages the affairs of the Operating Partnership by directing the affairs of the general partner of the Operating Partnership. The Directors and Officers of Holdings receive their compensation from the Company and are not separately compensated by Holdings. Consequently, the information incorporated by reference reflects compensation paid to the Directors and executive officers of the Company.
The information required is incorporated by reference to "Executive Compensation" and "Compensation of Directors" in the Company's Proxy Statement for Annual Meeting of Shareholders of the Company to be held May 16, 2002.
Item 12.
Item 12.
Security Ownership of Certain Beneficial Owners and Management
The Operating Partnership has no directors or officers. No director or officer of the Company or Holdings beneficially owns any Units.
At December 31, 2001, the Company beneficially owns 12,354,961 Units which constitute 94.92% of all outstanding Units. No other person holds more than a 5% beneficial ownership in the Operating Partnership.
The information required herein for the Company is incorporated by reference to "Security Ownership of Certain Beneficial Owners and Management" in the Proxy Statement for Annual Meeting of Shareholders of the Company to be held on May 16, 2002.
RECENT SALES OF UNREGISTERED SECURITIES
During 2001, the Operating Partnership issued Units in private placements in reliance on the exemption from registration under Section 4(2) of the Securities Act of 1933, as amended, in the amounts and for the consideration set forth below:
-
On January 22, 2001, in connection with the Sovran Self Storage, Inc. Dividend Reinvestment and Stock Purchase Plan, the Company transferred $900,901 to the Operating Partnership in exchange for 44,410 Units.
-
On February 9, 2001, in connection with the Sovran Self Storage, Inc. 1995 Award and Option Plan, the Operating Partnership issued 60,220 Units to the Company.
-
On February 22, 2001, in connection with the Sovran Self Storage, Inc. Dividend Reinvestment and Stock Purchase Plan, the Company transferred $283,027 to the Operating Partnership in exchange for 13,555 Units.
-
On March 1, 2001, the Operating Partnership redeemed 58,538 Units from a partner.
-
On March 22, 2001, in connection with the Sovran Self Storage, Inc. Dividend Reinvestment and Stock Purchase Plan, the Company transferred $333,310 to the Operating Partnership in exchange for 15,148 Units.
-
On April 20, 2001, in connection with the Sovran Self Storage, Inc. Dividend Reinvestment and Stock Purchase Plan, the Company transferred $1,136,918 to the Operating Partnership in exchange for 49,827 Units.
-
On May 22, 2001, in connection with the Sovran Self Storage, Inc. Dividend Reinvestment and Stock Purchase Plan, the Company transferred $530,061 to the Operating Partnership in exchange for 21,576 Units.
-
On May 30, 2001, in connection with the Sovran Self Storage, Inc. 1995 Award and Option Plan, the Operating Partnership issued 7,150 Units to the Company.
-
On June 23, 2001, in connection with the Sovran Self Storage, Inc. Dividend Reinvestment and Stock Purchase Plan, the Company transferred $20,748 to the Operating Partnership in exchange for 817 Units.
-
On June 29, 2001, in connection with the Sovran Self Storage, Inc. 1995 Award and Option Plan, the Operating Partnership issued 35,350 Units to the Company.
-
On July 20, 2001, in connection with the Sovran Self Storage, Inc. Dividend Reinvestment and Stock Purchase Plan, the Company transferred $616,548 to the Operating Partnership in exchange for 24,237 Units.
-
On July 30, 2001, in connection with the Sovran Self Storage, Inc. 1995 Award and Option Plan, the Operating Partnership issued 2,521 Units to the Company.
-
On August 22, 2001, in connection with the Sovran Self Storage, Inc. Dividend Reinvestment and Stock Purchase Plan, the Company transferred $116,553 to the Operating Partnership in exchange for 4,515 Units.
-
On September 24, 2001, in connection with the Sovran Self Storage, Inc. Dividend Reinvestment and Stock Purchase Plan, the Company transferred $81,762 to the Operating Partnership in exchange for 3,141 Units.
-
On September 25, 2001, the Operating Partnership redeemed 88,525 Units from a partner.
-
On October 10, 2001, in connection with the Sovran Self Storage, Inc. 1995 Award and Option Plan, the Operating Partnership issued 3,500 Units to the Company.
-
On October 22, 2001, in connection with the Sovran Self Storage, Inc. Dividend Reinvestment and Stock Purchase Plan, the Company transferred $951,230 to the Operating Partnership in exchange for 34,212 Units.
-
On November 19, 2001, in connection with the Sovran Self Storage, Inc. 1995 Award and Option Plan, the Operating Partnership issued 4,000 Units to the Company.
-
On November 23, 2001, in connection with the Sovran Self Storage, Inc. Dividend Reinvestment and Stock Purchase Plan, the Company transferred $34,285 to the Operating Partnership in exchange for 1,193 Units.
-
On December 17, 2001, the Operating Partnership redeemed 4,300 Units from a partner.
-
On December 20, 2001, in connection with the Company's incentive compensation plan, the Operating Partnership issued 18,165 Units to the Company.
-
On December 24, 2001, in connection with the Sovran Self Storage, Inc. Dividend Reinvestment and Stock Purchase Plan, the Company transferred $255,293 to the Operating Partnership in exchange for 8,631 Units.
Item 13.
Item 13.
Certain Relationships and Related Transactions
The information required herein is incorporated by reference to "Certain Transactions" in the Company's Proxy Statement for the Annual Meeting of Shareholders to be held on May 16, 2002.
Part IV
Item 14.
Item 14.
Exhibits, Financial Statement Schedules, and Reports on Form 8-K
(a)
Documents filed as part of this Annual Report on Form 10-K:
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.
Sovran Acquisition Limited Partnership
Schedule III
Combined Real Estate and Accumulated Depreciation
(in thousands)
December 31, 2001
Exhibits
Exhibit Index
Exhibit No.
Description
3.1
Agreement of Limited Partnership of the Operating Partnership, as amended. (Incorporated by reference to Exhibit 3.1 of the General Form for Registration of Securities of the Operating Partnership on Form 10.)
3.2*
Amended and Restated Articles of Incorporation of the Company
3.3*
By-laws of the Company
3.4
Articles Supplementary to the Amended and Restated Articles of Incorporation of the Company classifying and designating the Company's Series A Junior Participating Preferred Stock (Incorporated by reference to Exhibit 3.1 to the Company's Form 8A filed December 3, 1996)
3.5
Articles Supplementary to the Amended and Restated Articles of Incorporation of the Company classifying and designating the 9.85% Series B Cumulative Redeemable Preferred Stock. (Incorporated by reference to Exhibit 1.6 to the Company's Form 8-A filed July 29, 1999)
10.1
Revolving Credit and Term Loan Agreement among the Company, the Operating Partnership, Fleet National Bank and other lenders named therein. (Incorporated by reference to Exhibit 10.16 to the Company's Annual Report on Form 10-K for the year ended December 31, 2000.)
10.2*
Form of Non-competition Agreement between the Company and Charles E. Lannon
10.3*
Form of Non-competition Agreement between the Company and Robert J. Attea
10.4*
Form of Non-competition Agreement between the Company and Kenneth F. Myszka
10.5*
Form of Non-competition Agreement between the Company and David L. Rogers
10.6
Sovran Self Storage, Inc. 1995 Award and Option Plan, as Amended (Incorporated by reference to Exhibit 10.6 to the Company's Annual Report on Form 10-K for the year ended December 31, 2001.)
10.7
Sovran Self Storage, Inc. 1995 Outside Directors' Option Plan, as Amended (Incorporated by reference to Exhibit 10.6 to the Company's Annual Report on Form 10-K for the year ended December 31, 2001.)
10.8*
Sovran Self Storage Incentive Compensation Plan for Executive Officer
10.9*
Restricted Stock Agreement between the Company and David L. Rogers
10.10*
Form of Supplemental Representations, Warranties and Indemnification Agreement among the Company and Robert J. Attea, Charles E. Lannon, Kenneth F. Myszka and David L. Rogers
10.11*
Form of Pledge Agreement among the Company and Robert J. Attea, Charles E. Lannon, Kenneth F. Myszka and David L. Rogers
10.12*
Form of Indemnification Agreement between the Company and certain Officers and Directors of the Company
10.13*
Form of Subscription Agreement (including Registration Rights Statement) among the Company and subscribers for 422,171 Common Shares
10.14*
Form of Registration Rights and Lock-Up Agreement among the Company and Robert J. Attea, Charles E. Lannon, Kenneth F. Myszka and David L. Rogers
10.15*
Form of Facilities Services Agreement between the Company and Williamsville Properties, Inc.
10.16
Sovran Self Storage, Inc. Deferred Compensation Plan for Directors (Incorporated by reference to Appendix A to the Company's Proxy Statement for the 1999 Annual Meeting of Shareholders)
10.17
First Amendment to Revolving Credit and Term Loan Agreement among the Company, the Operating Partnership, Fleet National Bank and other lenders named therein. (Incorporated by reference to Exhibit 10.18 to the Company's Annual Report on From 10-K for the year ended December 31, 2001.)
12.1
Statement Re: Computation of Earnings to Fixed Charges
Consent of Independent Auditors
_________________
*	Incorporated by reference to the exhibits as filed with the Company's Registration Statement on Form S-11 (File No. 33-91422) filed June 19, 1995.
SIGNATURE
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, Sovran Holdings Inc., as general partner of registrant, certifies that it has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
Sovran Acquisition Limited Partnership
Exhibit (12.1) Statement
Re: Computation of Earnings to Combined Fixed Charges and Preferred Stock Dividends
Amounts in thousands
Exhibit 23
Consent of Independent Auditors
We consent to the incorporation by reference in the Registration Statement (Form S-3, No. 333-51169) of Sovran Self Storage, Inc. and Sovran Acquisition Limited Partnership and in the related Prospectus of our report dated January 30, 2002, with respect to the financial statements and schedule of Sovran Acquisition Limited Partnership included in this Annual Report (Form 10-K) for the year ended December 31, 2001.
/s/ Ernst & Young LLP
Buffalo, New York
March 27, 2002