Sovran Self Storage’s units are filling up fast, and company executives said Thursday they expect them to be fuller than ever before the end of summer.
That spike in demand, which is allowing Sovran to charge higher rents, pushed the company’s second-quarter earnings up by 12 percent and prompted the company to predict its earnings for all of this year would be about 2 percent higher than they previously forecast.
“Times are good and we expect that to continue,” said David Rogers, Sovran’s chief executive officer, during a conference call.
“This year’s busy season is for real,” Rogers said. “This second quarter has positioned us to have our best year ever.”
Sovran’s improved second quarter earnings were bolstered by a 4 percent increase in rents at stores that have been open for at least a year and occupancy levels that strengthened to 91 percent during the quarter, up from 88.3 percent a year ago. Occupancy at the end of July was 92.3 percent.
As a result, Sovran’s funds from operations, the main measure of a real estate investment trust’s earnings, grew to $33.1 million, or $1 per share, compared with $29.5 million, or 94 cents per share, a year ago.
Excluding the $2.5 million in acquisition-related expenses that reduced its second-quarter earnings by 8 cents per share, Sovran’s earnings of $1.08 per share topped the $1.04 that analysts were expecting.
With demand strong, Sovran executives said the company has been able to charge higher rates, especially at stores that are nearly full. And the company has reduced its discounts it offers to new customers by 40 percent – or $580,000 – over the past year.
Sovran executives also said they expect the company’s earnings to rise even faster than they initially projected this year, predicting that the company’s funds from operations this year will rise to between $4.32 and $4.36 per share, up about 17 percent from $3.72 per share last year and about 7 cents per share more than the firm’s guidance in late April.
The company’s stock slipped 31 cents to $76.72 on Thursday, a day most stocks swooned.
Sovran, which runs its self-storage properties under the Uncle Bob’s name, said it acquired 19 additional facilities during the second quarter for a combined price of $130 million. The properties, which have a total of 1.3 million square feet of space, are located in markets, mainly in New Jersey and St. Louis, where Sovran already has a presence. The company runs 502 self-storage facilities in 25 states, mainly in the eastern half of the United States.
Rogers said the company is currently in negotiations for several other stores.