Sovran’s 3rd-quarter earnings drop 13%
Lower occupancy rates and the cost of sweetened incentives to lure new customers to its self-storage facilities led to a 13 percent drop in Sovran Self Storage’s third-quarter earnings.
Sovran’s earnings still topped analyst forecasts by 2 cents per share, and the Amherst-based company repeated its earlier prediction that its earnings during the current quarter would range between 26 cents and 28 cents per share.
Kenneth Myszka, Sovran’s president and chief executive officer, said Wednesday that the company continues to face “a very challenging environment,” which has forced it to nearly triple the discounts offered to new customers in an effort to keep occupancy levels up.
While those discounts cost Sovran more than $4.5 million in revenues, the incentives weren’t enough to keep the company’s occupancy levels from slipping to 82.3 percent during the summer, down from 83.3 percent a year ago. The main incentive being offered at the 383 Uncle Bob’s self-storage facilities that Sovran owns or operates gives customers their first month rent-free.
The cost of that promotion, however, was partly offset by lower operating expenses, which fell by 5.3 percent, despite higher taxes and rising marketing and advertising expenses.
As a result, Sovran’s funds from operations fell to $15.8 million, or 68 cents per share, from $18.2 million, or 84 cents per share, a year ago.
Sovran executives said they expect consumer demand to continue to be soft and conditions to remain competitive in many of its markets. That is expected to reduce Sovran’s same-store revenues and same-store operating profits by 2 percent to 4 percent this year.
With its markets tight, Sovran said it does not expect to actively pursue any acquisitions until the capital and real estate markets rebound.
The company also sold three stores in the third quarter, including two in Massachusetts and one in Fayetteville,
N. C., for a total of $10.9 million and is negotiating to sell other stores during the current quarter or early next year. The company also opened a new facility in Richmond, Va., during the quarter.
Sovran also has deferred indefinitely most of the $50 million in facility upgrades it had planned for this year.
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