Revenue at Sovran Self Storage surged 20 percent during the spring rental season, and the self-storage REIT is on track to notch all-time records this summer for occupancy and rental rates.
The publicly traded operator of Uncle Bob’s Self Storage reported total revenue of $80.4 million during the second quarter, which ended June 30. That compares with $67.6 million during the second quarter of 2013.
“This spring’s leasing season has proved to be a good one, and we’ve been able to achieve strong rate growth across all of our markets,” Sovran CEO David Rogers said. He said the second quarter “has positioned us to have far and away our best year ever.”
Even better news is on the horizon. Rogers said Sovran is on pace to beat its “all-time high for occupancy and rental rates later this summer.”
Increased occupancy combined with increased rents helped propel Sovran during the second quarter. After expenses, the REIT posted net operating income of $20.7 million, up 15 percent from the second quarter of 2013.
For all facilities, occupancy climbed to an average occupancy rate of 90.7 percent, up from 88.3 percent a year ago. At same-store facilities, those on Sovran’s books for at least a year, the company ended the quarter with an occupancy rate of 91.8 percent, up from 89.8 percent a year ago.
I expect at the end of the summer, we’ll see some better-quality and even maybe some bigger portfolios come into market.
— David Rogers, CEO, Sovran Self Storage
Andrew Gregoire, chief financial officer at Sovran, said the storage operator has had to turn away more customers this year than last year because of high occupancy levels.
“We didn’t have the space available for them, and sometimes they said our price was too high,” Gregoire said during a July 30 conference call with Wall Street analysts.
“That’s OK when you have one [unit] left. We want to get that next call that’s going to pay us that extra 9 percent [in rent],” Gregoire said. “It does cause some people to turn away … but that is by design and to maximize revenue.”
Sovran Self Storage operates 502 facilities in 25 states under the Uncle Bob’s banner. During the second quarter, the company’s strongest markets were in Texas, Florida, New York, Illinois and Georgia.
Texas, the company’s largest market, is home to 94 same-store facilities. Those stores racked up average occupancy of 92.7 percent during the quarter and a revenue bump of 8.8 percent. Uncle Bob’s locations in Texas contributed about 27 percent of same-store revenue during the second quarter.
Also during the second quarter, Sovran bought 19 facilities for $130 million. Three of those facilities are part of a joint venture with another company.
In 2014, Sovran is far outpacing the number of acquisitions it made in 2013. The company spent $94.9 million last year to buy 11 facilities.
Among Sovran’s biggest deals this spring was the purchase of a seven-facility portfolio in the St. Louis area for $35 million. The company also bought seven facilities in New Jersey in two separate deals.
Since the second quarter ended, the company bought a 78,000-square-foot facility in New Jersey for $11.8 million, bringing the company’s year-to-date spending on acquisitions to more than $236 million.
Rogers expects Sovran to spend another $100 million on acquisitions before the end of 2014. The company has $63 million worth of deals in its current pipeline.
“I expect at the end of the summer, we’ll see some better-quality and even maybe some bigger portfolios come into market,” Rogers said.