Sovran thinks expansively with 'size and scale'
May 24, 2012 (The Buffalo News - McClatchy-Tribune Information Services via COMTEX) --
Sovran Self Storage executives are thinking big.
They're thinking big because the Amherst-based self-storage facility operator has been on a buying binge -- adding 75 new stores since the last week of 2010 -- and it expects to keep buying more this year.
Sovran executives are thinking big because they're pushing to sign up more mom-and-pop operators for its program in which Sovran will manage their facilities for a fee.
And they're thinking big because the more self-storage stores the company runs or manages, the better it is for the company's operations, which can spread its fixed costs over a larger base of facilities.
"Size and scale are everything in this market," Sovran CEO David L. Rogers said during the company's annual shareholders meeting Wednesday. "We're taking these advantages out to the field."
Sovran, which went three years without buying any new stores after the recession hit and credit markets tightened, dived back into the acquisition market headfirst, acquiring 56 new facilities from late 2010 through the end of last year. The company added 19 more stores to its Uncle Bob's stable during the first quarter, giving it 445 stores in 26 states, mainly in the eastern half of the country.
"Last year was a boom year for acquisitions," Rogers said.
"We're not forecasting another year like that, by any means, but we're in the market heavily," he said. "We're concentrating on markets where we already have a presence."
Sovran executives also are warming to the idea of expanding in the western half of the country, said Robert J. Attea, the company's chairman, who in the past admittedly has been reluctant to pursue a westward expansion.
Sovran is hoping its facilities management program will open the door to other properties that could turn into acquisition targets down the road. "We won't take on a property unless we'd want to own it," Rogers said.
That already happened with a group of 22 self-storage facilities that Sovran acquired in Texas. The initial contact between Sovran and the Texas group's owners was about setting up a property management arrangement, but the talks soon veered into discussions of an outright purchase.
"It's become more of an inroad to acquisition," Rogers said. "We just didn't expect it to happen so quickly."
The growth spurt also has given Sovran better economies of scale, which has helped drive its profits higher. The company's earnings grew by 12 percent last year, excluding onetime expenses, and Sovran is forecasting a 13 percent increase this year.
Sovran's headquarters and call center staff has grown as the company has brought more stores under the Uncle Bob's brand. It added 27 jobs locally over the last year and now employs 147 at its Main Street office. Sovran also has an additional 40 local workers in the field, Rogers said.
Sovran has stepped up its presence on the Internet in recent years, vastly scaling back on the Yellow Pages advertising that once was the backbone of its marketing efforts, said Kenneth
F. Myszka, Sovran's president and
chief operating officer.
Instead, the company has focused on Internet search advertising, and 65 percent of its 25,000 to 30,000 calls it receives at its Amherst call center now originate from its online listings and ads. More than 40 percent of its reservations now are made online, and a quarter of the visitors to its website now come from consumers using smartphones and other mobile devices, Myszka said.
Even so, up to 40 percent of the customers who move in to Sovran's facilities are walk-ins. Myszka said that underscores the importance of maintaining attractive facilities with well-trained staff. "You've got to have stores that have good visibility and good accessibility. They have to look good when you walk in," Myszka said.
But Sovran also is looking to do some pruning in its portfolio. It's trying to sell its store in the Salisbury, Md., market, along with its Michigan properties and some of its older stores in the Houston market. Rogers estimated that those stores could bring in $45 million to $48 million in proceeds that Sovran could use for acquisitions.
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