Sovran Self Storage chief executive Kenneth F. Myszka says he's more optimistic about the Amherst company's Uncle Bob's stores than he has been in several years.
Occupancy rates are rising. More people are moving in than are moving out. Rents are inching higher, and the improved demand means that Sovran doesn't have to offer deep discounts to get customers to move in.
"We've got better people coming in. They need storage. They're staying, and they're absorbing rent increase as we go along, as well," Myszka said Thursday in a conference call.
The result is a sharp improvement in Sovran's earnings and the expectation that the improvement will continue throughout this year.
The self-storage facility operator said that its earnings jumped by 21 percent during the fourth quarter, and company executives predicted that its profits would grow by almost 12 percent this year.
The improved economy has helped Sovran pare back the discounts that it offers new customers, Myszka said, and the company is focusing on attracting clients who are likely to stay longer, rather than cashing in on the incentives and then moving out when the discounted rate disappears.
That allowed Sovran to reduce its overall discounts to $10 million last year, a third less than the $15 million in incentives that it offered in 2010. While that's still more than the $8.7 million in free rent it offered in 2009, David L. Rogers, chief financial officer, said he doubted that the company would ever get much lower than the $10 million mark because of the growth in its number of stores.
Sovran said that its earnings rose to $20.5 million, or 73 cents per share, from $17 million, or 62 cents per share, a year ago.
The improvement stemmed from improved occupancy rates, which rose to 81.6 percent at stores open at least a year, from 81 percent a year earlier. Average rents also rose by 1.5 percent, to $10.48 per square foot, from $10.33 a year ago.
Sovran, which adjusts its rents depending on demand and availability at each individual facility, reduced its quoted "street rates" at many of its stores last year. The company still has a little more than 40 percent of its customers paying rent that is at or below that level, Myszka said.
Sovran said that it expects its earnings to rise to between $3.05 and $3.09 per share this year, up from $2.75 per share in 2011 after adjusting for nonrecurring expenses. During the current quarter, the company said that it expects to earn 70 to 72 cents per share, up from 62 cents per share, a year ago.
Sovran said that it bought a store in Pensacola, Fla., during the fourth quarter for $4.6 million. It also acquired a store for one of its joint ventures in Philadelphia for $5.7 million. The joint venture also purchased 10 properties in the Dallas-Fort Worth market in early February for an undisclosed price.
Sovran is trying to sell 13 stores -- nine in the Houston market and its four remaining properties in Michigan. Rogers said the company is in final negotiations on a sale for the Houston stores. Sovran hopes to be paid more than $40 million for all 13 properties, Rogers said.