Higher rents offset rising vacancy rates in most of its Florida markets, helping Sovran Self Storage boost its third-quarter earnings by 24 percent, the Williamsville-based real estate investment trust said Wednesday.
Sovran's earnings matched analysts' expectations, as a 3.6 percent increase in average rents was partly offset by a 1.4 percentage point drop in average occupancy rates as customers who rented storage space after the 2005 Gulf Coast hurricanes continued to move out.
At the same time, operating expenses fell by less than 1 percent as property insurance costs declined.
Sovran's funds from operations rose to $19.1 million, or 89 cents per share, from $15.4 million, or 85 cents per share, a year earlier.
Sovran did not purchase any new properties during the quarter, but the company did sign agreements to buy three facilities in unidentified locations at a cost of $10.6 million.
The company also has spent $15.6 million this year to add 275,000 square feet of storage space to 15 of its stores, while upgrading 50,000 square feet to premium space at four others. Sovran plans to spend $20 million to add 350,000 square feet of space to 25 other stores.
Sovran said it expects its earnings during the fourth quarter to be between 88 cents and 90 cents per share, which is at the high end of analyst forecasts, according to Thomson Financial/First Call.
Sovran's operating profits grew by 5.7 percent at the 317 Uncle Bob's stores that have been open for at least a year. Revenues at those stores rose by 3.5 percent as the higher rental rates offset the drop in occupancy rates. Occupancy slid to 85.4 percent at stores that have been open at least a year, down from 86.8 percent a year ago.
Sovran said its markets in Texas, North Carolina and New England turned in strong performances during the quarter, as did its Atlanta and Buffalo markets. Company officials said its Florida, South Carolina and Washington, D.C., markets grew slower than expected.