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Sovran Self Storage has formed a joint venture with another self-storage company in Williamsville that will operate 11 facilities in five states.

The $40 million venture with Locke Preferred Equity will give Sovran access to about $15 million in cash that it hopes to use to acquire additional self-storage facilities in fast-growing markets, said David Rogers, the company's chief financial officer.

The venture also allows Sovran and Locke to contribute stable, yet slower-growing facilities to the new entity, Locke Sovran I, in return for steady cash flow and the chance to free up some of the capital locked into those properties.

"This is going to be a real good tool to lure property owners into our pool," Rogers said.

Under the venture, Sovran contributed seven of its slower-growing self-storage facilities valued at $20 million in return for $15 million in cash and a $5 million stake in the joint venture.

Sovran will manage all of the properties, which are located in New York, Texas, Florida, Ohio and Michigan, under its Uncle Bob's brand name. Sovran also plans to install its Flex-a-Space feature that allows renters to vary the size of a particular unit, as well as its Dri-Guard climate-control system, in the facilities.

Locke contributed property worth $8.5 million and will receive a majority ownership stake in the venture.

With the real estate investment trust industry facing a cash crunch as the stocks of many REITs are trading for less than the value of their underlying assets, the firms have found it unappealing to raise cash by selling additional stock. And there are limits to how much a REIT can borrow, Rogers said.

By forming a joint venture, the partners can unlock the value in those properties, said Joseph Biondolillo, the chairman of the Locke Group, a self-storage industry broker. Many of the properties were purchased long ago and would trigger sizable capital gains taxes if they were sold outright, Rogers said.

Sovran, which owns or operates 230 facilities in 21 states, plans to use the proceeds from the joint venture to acquire new properties with faster growth rates, Rogers said. In the interim, the company could use the money to pay down some of its debt or buy back stock.

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