LIFE STORAGE, INC. - Annual Report: 2009 (Form 10-K)

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UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2009
Commission File Number: 1-13820

SOVRAN SELF STORAGE, INC.

(Exact name of Registrant as specified in its charter)


Maryland		16-1194043

(State of incorporation or organization)		(I.R.S. Employer Identification No.)

6467 Main Street
Williamsville, NY 14221
(Address of principal executive offices) (Zip code)

(716) 633-1850
(Registrant’s telephone number including area code)

Securities registered pursuant to Section 12(b) of the Act:


Title of Securities		Exchanges on which Registered

Common Stock, $.01 Par Value		New York Stock Exchange

Securities registered pursuant to section 12(g) of the Act: None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes o No þ

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Exchange Act.

Yes o No þ

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes þ No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes o No o

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):


Large accelerated filer þ		Accelerated filer o		Non-accelerated filer o (Do not check if a smaller reporting company)		Smaller reporting company o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No þ

As of June 30, 2009, 23,391,184 shares of Common Stock, $.01 par value per share, were outstanding, and the aggregate market value of the Common Stock held by non-affiliates was approximately $558,480,713 (based on the closing price of the Common Stock on the New York Stock Exchange on June 30, 2009).

As of February 15, 2010, 27,547,027 shares of Common Stock, $.01 par value per share, were outstanding.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the Definitive Proxy Statement for the Annual Meeting of Shareholders of the Registrant to be held on May 26, 2010 (Part III).

TABLE OF CONTENTS


Part I
Item 1. Business			3
Item 1A. Risk Factors			8
Item 1B. Unresolved Staff Comments			13
Item 2. Properties			14
Item 3. Legal Proceedings			15
Item 4. Submission of Matters to a Vote of Security Holders			15

Part II
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities			15
Item 6. Selected Financial Data			18
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations			19
Item 7A. Quantitative and Qualitative Disclosures About Market Risk			31
Item 8. Financial Statements and Supplementary Data			32
Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure			55
Item 9A. Controls and Procedures			55

Part III
Item 10. Directors, Executive Officers and Corporate Governance			57
Item 11. Executive Compensation			57
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters			57
Item 13. Certain Relationships and Related Transactions, and Director Independence			57
Item 14. Principal Accountant Fees and Services			57

Part IV			57
Item 15. Exhibits, Financial Statement Schedules

SIGNATURES
EX-3.4
EX-10.1
EX-10.2
EX-10.14
EX-12.1
EX-21.1
EX-23.1
EX-31.1
EX-31.2
EX-32.1

Part I

When used in this discussion and elsewhere in this document, the words “intends,” “believes,” “expects,” “anticipates,” and similar expressions are intended to identify “forward-looking statements” within the meaning of that term in Section 27A of the Securities Act of 1933 and in Section 21E of the Securities Exchange Act of 1934. Such forward-looking statements involve known and unknown risks, uncertainties and other factors, which may cause the actual results, performance or achievements of the Company to be materially different from those expressed or implied by such forward-looking statements. Such factors include, but are not limited to, the effect of competition from new self-storage facilities, which would cause rents and occupancy rates to decline; the Company’s ability to evaluate, finance and integrate acquired businesses into the Company’s existing business and operations; the Company’s ability to effectively compete in the industry in which it does business; the Company’s existing indebtedness may mature in an unfavorable credit environment, preventing refinancing or forcing refinancing of the indebtedness on terms that are not as favorable as the existing terms; interest rates may fluctuate, impacting costs associated with the Company’s outstanding floating rate debt; the Company’s ability to comply with debt covenants; any future ratings on the Company’s debt instruments; the Company’s reliance on its call center; the Company’s cash flow may be insufficient to meet required payments of principal, interest and dividends; and tax law changes that may change the taxability of future income.

Item 1. Business

Sovran Self Storage, Inc. together with its direct and indirect subsidiaries and the consolidated joint ventures, to the extent appropriate in the applicable context, (the “Company,” “We,” “Our,” or “Sovran”) is a self-administered and self-managed real estate investment trust (“REIT”) that acquires, owns and manages self-storage properties. We refer to the self-storage properties in which we have an ownership interest and are managed by us as “Properties.” We began operations on June 26, 1995. We were formed to continue the business of our predecessor company, which had engaged in the self-storage business since 1985. At February 15, 2010, we held ownership interests in and managed 381 Properties consisting of approximately 24.7 million net rentable square feet, situated in 24 states. Among our 381 Properties are 27 Properties that we manage for a consolidated joint venture of which we are a majority owner and 25 Properties that we manage for a joint venture of which we are a 20% owner. We believe we are the fourth largest operator of self-storage properties in the United States based on facilities owned and managed. Our Properties conduct business under the user-friendly name Uncle Bob’s Self-Storage ^®.

We own an indirect interest in each of the Properties through a limited partnership (the “Partnership”). In total, we own a 98.5% economic interest in the Partnership and unaffiliated third parties own collectively a 1.5% limited partnership interest at December 31, 2009. We believe that this structure, commonly known as an umbrella partnership real estate investment trust (“UPREIT”), facilitates our ability to acquire properties by using units of the Partnership as currency. By utilizing interests in the Partnership as currency in facility acquisitions, we may partially defer the seller’s income tax liability which in turn may allow us to obtain more favorable pricing.

We were incorporated on April 19, 1995 under Maryland law. Our principal executive offices are located at 6467 Main Street, Williamsville, New York 14221, our telephone number is (716) 633-1850 and our web site is www.sovranss.com .

We seek to enhance shareholder value through internal growth and acquisition of additional storage properties. Internal growth is achieved through aggressive property management: increasing rents, increasing occupancy levels, controlling costs, maximizing collections and strategically expanding and improving the Properties. Should economic conditions warrant, we may develop new properties. We believe that there continue to be opportunities for growth through acquisitions, and constantly seek to acquire self-storage properties that are susceptible to realization of increased economies of scale and enhanced performance through application of our expertise.

Industry Overview

We believe that self-storage facilities offer inexpensive storage space to residential and commercial users. In addition to fully enclosed and secure storage space, many facilities also offer outside storage for automobiles, recreational vehicles and boats. Better facilities, such as those managed by the Company, are usually fenced and

well lighted with gates that are either manually operated or automated and have a full-time manager. Our customers rent space on a month-to-month basis and have access to their storage area during business hours and in certain circumstances are provided with 24-hour access. Individual storage units are secured by the customer’s lock, and the customer has sole control of access to the unit.

According to the 2010 Self-Storage Almanac, of the approximately 48,700 facilities in the United States, less than 11% are managed by the ten largest operators. The remainder of the industry is characterized by numerous small, local operators. The shortage of skilled operators, the scarcity of capital available to small operators for acquisitions and expansions, and the potential for savings through economies of scale are factors that are leading to consolidation in the industry. We believe that, as a result of this trend, significant growth opportunities exist for operators with proven management systems and sufficient capital resources.

Property Management

We believe that we have developed substantial expertise in managing self-storage facilities. Key elements of our management system include the following:

Personnel:

Property managers undergo continuous training that emphasizes closing techniques, identification of selected marketing opportunities, networking with possible referral sources, and familiarization with our customized management information system. In addition to frequent contact with Area Managers and other Company personnel, property managers receive periodic newsletters via our intranet regarding a variety of operational issues, and from time to time attend “roundtable” seminars with other property managers.

Marketing and Sales:

Responding to the increased customer demand for services, we have implemented several programs expected to increase profitability. These programs include:


		-		A Customer Care Center (call center) that services new and existing customers’ inquiries and facilitates the capture of sales leads that were previously lost;

		-		Internet marketing, which provides customers information about all of our stores via numerous portals and e-mail;

		-		A rate management system, that matches product availability with market demand for each type of storage unit at each store, and determines appropriate pricing. The Company credits this program in achieving higher yields and controlling discounting;

		-		Dri-guard, that provides humidity-controlled spaces. We became the first self-storage operator to utilize this humidity protection technology. These environmental control systems are a premium storage feature intended to protect metal, electronics, furniture, fabrics and paper from moisture; and

		-		Uncle Bob’s trucks, that provide customers with convenient, affordable access to vehicles to help move their goods into storage, and which also serve as moving billboards to help advertise our storage facilities.

Ancillary Income:

Our stores are essentially retail operations and we have in excess of 160,000 customers. As a convenience to those customers, we sell items such as locks, boxes, tarps, etc. to make their storage experience easier. We also make available renters insurance through a third party carrier, on which we earn a commission. Income from incidental truck rentals, billboards and cell towers is also earned by our Company.

Information Systems:

Our customized computer system performs billing, collections and reservation functions for each Property. It also tracks information used in developing marketing plans based on occupancy levels and customer demographics and histories. The system generates daily, weekly and monthly financial reports for each Property that are transmitted to our principal office each night. The system also requires a property manager to input a descriptive explanation for all debit and credit transactions, paid-to-date changes, and all other discretionary activities, which allows the accounting staff at our principal office to promptly review all such transactions. Late charges are automatically imposed. More sensitive activities, such as rental rate changes and unit size or number

changes, are completed only by Area Managers. Our customized management information system permits us to add new facilities to our portfolio with minimal additional overhead expense.

Property Maintenance:

All of our Properties are subject to regular and routine maintenance procedures, which are designed to maintain the structure and appearance of our buildings and grounds. A staff headquartered in our principal office is responsible for the upkeep of the Properties, and all maintenance service is contracted through local providers, such as lawn service, snowplowing, pest control, gate maintenance, HVAC repairs, paving, painting, roofing, etc. A codified set of specifications has been designed and is applied to all work performed on our Uncle Bob’s stores. As with many other aspects of our Company, our size has allowed us to enjoy relatively low maintenance costs because we have the benefit of economies of scale in purchasing, travel and overhead absorption.

Environmental and Other Regulations

We are subject to federal, state, and local environmental regulations that apply generally to the ownership of real property. We have not received notice from any governmental authority or private party of any material environmental noncompliance, claim, or liability in connection with any of the Properties, and are not aware of any environmental condition with respect to any of the Properties that could have a material adverse effect on our financial condition or results of operations.

The Properties are also generally subject to the same types of local regulations governing other real property, including zoning ordinances. We believe that the Properties are in substantial compliance with all such regulations.

Insurance

Each of the Properties is covered by fire and property insurance (including comprehensive liability), and all-risk property insurance policies, which are provided by reputable companies and on commercially reasonable terms. In addition, we maintain a policy insuring against environmental liabilities resulting from tenant storage on terms customary for the industry, and title insurance insuring fee title to the Company-owned Properties in an amount that we believe to be adequate.

Federal Income Tax

We operate, and intend to continue to operate, in such a manner as to continue to qualify as a REIT under the Internal Revenue Code of 1986 (the “Code”), but no assurance can be given that we will at all times so qualify. To the extent that we continue to qualify as a REIT, we will not be taxed, with certain limited exceptions, on the taxable income that is distributed to our shareholders. See Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Liquidity and Capital Resources — REIT Qualification and Distribution Requirements.”

Competition

The primary factors upon which competition in the self-storage industry is based are location, rental rates, suitability of the property’s design to prospective customers’ needs, and the manner in which the property is operated and marketed. We believe we compete successfully on these bases. The extent of competition depends significantly on local market conditions. We seek to locate facilities so as not to cause our Properties to compete with one another for customers, but the number of self-storage facilities in a particular area could have a material adverse effect on the performance of any of the Properties.

Several of our competitors, including Public Storage, U-Haul, and Extra Space Storage, are larger and have substantially greater financial resources than we do. These larger operators may, among other possible advantages, be capable of greater leverage and the payment of higher prices for acquisitions.

Investment Policy

While we emphasize equity real estate investments, we may, at our discretion, invest in mortgage and other real estate interests related to self-storage properties in a manner consistent with our qualification as a REIT. We may also retain a purchase money mortgage for a portion of the sale price in connection with the disposition of Properties from time to time. Should investment opportunities become available, we may look to acquire self-storage properties via a joint-venture partnership or similar entity. We may or may not elect to have a significant investment in such a venture, but would use such an opportunity to expand our portfolio of branded and managed properties.

Subject to the percentage of ownership limitations and gross income tests necessary for REIT qualification, we also may invest in securities of entities engaged in real estate activities or securities of other issuers, including for the purpose of exercising control over such entities.

Disposition Policy

Any disposition decision of our Properties is based on a variety of factors, including, but not limited to, the (i) potential to continue to increase cash flow and value, (ii) sale price, (iii) strategic fit with the rest of our portfolio, (iv) potential for, or existence of, environmental or regulatory issues, (v) alternative uses of capital, and (vi) maintaining qualification as a REIT.

During 2009 we sold five non-strategic storage facilities located in Massachusetts, North Carolina and Pennsylvania for net cash proceeds of $16.3 million resulting in a loss of $1.6 million. During 2008 we sold one non-strategic storage facility located in Michigan for net cash proceeds of $7.0 million resulting in a gain of $0.7 million. No storage facilities were sold in 2007.

Distribution Policy

We intend to pay regular quarterly distributions to our shareholders. However, future distributions by us will be at the discretion of the Board of Directors and will depend on the actual cash available for distribution, our financial condition and capital requirements, the annual distribution requirements under the REIT provisions of the Code and such other factors as the Board of Directors deems relevant. In order to maintain our qualification as a REIT, we must make annual distributions to shareholders of at least 90% of our REIT taxable income (which does not include capital gains). Under certain circumstances, we may be required to make distributions in excess of cash available for distribution in order to meet this requirement.

On May 6, 2009, recognizing the need to maintain maximum financial flexibility in light of the current state of the capital markets, our Board of Directors reduced the quarterly common stock dividend from $0.64 per share to $0.45 per share, for an annual rate of $1.80 per share.

Borrowing Policy

Our Board of Directors currently limits the amount of debt that may be incurred by us to less than 50% of the sum of the market value of our issued and outstanding Common and Preferred Stock plus our debt. We, however, may from time to time re-evaluate and modify our borrowing policy in light of then current economic conditions, relative costs of debt and equity capital, market values of properties, growth and acquisition opportunities and other factors.

On June 25, 2008, we entered into agreements relating to new unsecured credit arrangements, and received funds under those arrangements. As part of the agreements, we entered into a $250 million unsecured term note maturing in June 2012 bearing interest at LIBOR plus 1.625%. The proceeds from this term note were used to repay the Company’s previous line of credit that was to mature in September 2008, the Company’s term note that was to mature in September 2009, the term note maturing in July 2008, and to provide for working capital. In October 2009, the Company repaid $100 million of the term note entered into in June 2008. The 2008 agreements also provide for a $125 million (expandable to $175 million) revolving line of credit maturing June 2011 bearing interest at a variable rate equal to LIBOR plus 1.375%, and requires a 0.25% facility fee. At December 31, 2009, there was

$125 million available on the unsecured line of credit.

We also maintain an $80 million term note maturing September 2013 bearing interest at a fixed rate of 6.26%, a $20 million term note maturing September 2013 bearing interest at a variable rate equal to LIBOR plus 1.50%, and a $150 million unsecured term note maturing in April 2016 bearing interest at 6.38%.

To the extent that we desire to obtain additional capital to pay distributions, to provide working capital, to pay existing indebtedness or to finance acquisitions, expansions or development of new properties, we may utilize amounts available under the expanded line of credit, common or preferred stock offerings, floating or fixed rate debt financing, retention of cash flow (subject to satisfying our distribution requirements under the REIT rules) or a combination of these methods. Additional debt financing may also be obtained through mortgages on our Properties, which may be recourse, non-recourse, or cross-collateralized and may contain cross-default provisions. We have not established any limit on the number or amount of mortgages that may be placed on any single Property or on our portfolio as a whole, although certain of our existing term loans contain limits on overall mortgage indebtedness. For additional information regarding borrowings, see Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations - Liquidity and Capital Resources” and Note 7 to the Consolidated Financial Statements filed herewith.

Employees

We currently employ a total of 1,051 employees, including 381 property managers, 24 area managers, and 511 assistant managers and part-time employees. At our headquarters, in addition to our three senior executive officers, we employ 132 people engaged in various support activities, including accounting, human resources, customer care, and management information systems. None of our employees are covered by a collective bargaining agreement. We consider our employee relations to be excellent.

Available Information

We file with the U.S. Securities and Exchange Commission quarterly and annual reports on Forms 10-Q and 10-K, respectively, current reports on Form 8-K, and proxy statements pursuant to the Securities Exchange Act of 1934, in addition to other information as required. The public may read and copy any materials that we file with the SEC at the SEC’s Public Reference Room at 100 F Street, NE, Washington, D.C. 20549. The public may obtain information on the operation of the Public Reference Room by calling the SEC at 1 (800) SEC-0330. We file this information with the SEC electronically, and the SEC maintains an Internet site that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC at http://www.sec.gov. Our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and all amendments to those reports are available free of charge on our web site at http://www.sovranss.com as soon as reasonably practicable after such material is electronically filed with or furnished to the SEC. In addition, our codes of ethics and Charters of our Governance, Audit Committee, and Compensation Committee are available free of charge on our website at http://www.sovranss.com.

Also, copies of our annual report and Charters of our Governance, Audit Committee, and Compensation Committee will be made available, free of charge, upon written request to Sovran Self Storage, Inc., Attn: Investor Relations, 6467 Main Street, Williamsville, NY 14221.

Item 1A. Risk Factors

You should carefully consider the risks described below, together with all of the other information included in or incorporated by reference into our Form 10-K, as part of your evaluation of the Company. If any of the following risks actually occur, our business could be harmed. In such case, the trading price of our securities could decline, and you may lose all or part of your investment.

Our Acquisitions May Not Perform as Anticipated

We have completed many acquisitions of self-storage facilities since our initial public offering of common stock in June 1995. Our strategy is to continue to grow by acquiring additional self-storage facilities. Acquisitions entail risks that investments will fail to perform in accordance with our expectations and that our judgments with respect to the prices paid for acquired self-storage facilities and the costs of any improvements required to bring an acquired property up to standards established for the market position intended for that property will prove inaccurate. Acquisitions also involve general investment risks associated with any new real estate investment.

We May Incur Problems with Our Real Estate Financing

Unsecured Credit Facility and Term Notes. We have a line of credit and term note agreements with a syndicate of financial institutions and other lenders. This unsecured credit facility and the term notes are recourse to us and the required payments are not reduced if the economic performance of any of the properties declines. The unsecured credit facility limits our ability to make distributions to our shareholders, except in limited circumstances.

Rising Interest Rates. Indebtedness that we incur under the unsecured credit facility and bank term notes bear interest at a variable rate. Accordingly, increases in interest rates could increase our interest expense, which would reduce our cash available for distribution and our ability to pay expected distributions to our shareholders. We manage our exposure to rising interest rates using interest rate swaps and other available mechanisms. If the amount of our indebtedness bearing interest at a variable rate increases, our unsecured credit facility may require us to enter into additional interest rate swaps.

Refinancing May Not Be Available. It may be necessary for us to refinance our unsecured credit facility through additional debt financing or equity offerings. If we were unable to refinance this indebtedness on acceptable terms, we might be forced to dispose of some of our self-storage facilities upon disadvantageous terms, which might result in losses to us and might adversely affect the cash available for distribution. If prevailing interest rates or other factors at the time of refinancing result in higher interest rates on refinancings, our interest expense would increase, which would adversely affect our cash available for distribution and our ability to pay expected distributions to shareholders.

Recent turmoil in the credit markets could affect our ability to obtain debt financing on reasonable terms and have other adverse effects on us. The United States credit markets have recently experienced significant dislocations and liquidity disruptions which have caused the spreads on available debt financings to widen considerably. These circumstances have materially impacted liquidity in the debt markets, making financing terms for borrowers less attractive. A prolonged downturn in the credit markets could cause us to seek alternative sources of potentially less attractive financing, and may require us to adjust our business plan accordingly. Continued uncertainty in the credit markets may negatively impact our ability to make acquisitions.

Covenants and Risk of Default. Our unsecured credit facility and term notes require us to operate within certain covenants, including financial covenants with respect to leverage, fixed charge coverage, minimum net worth, limitations on additional indebtedness and dividend limitations. If we violate any of these covenants or otherwise default under our unsecured credit facility or term notes, then our lenders could declare all indebtedness under these facilities to be immediately due and payable which would have a material adverse effect on our business and could require us to sell self-storage facilities under distress conditions and seek replacement financing on substantially more expensive terms.

Our Debt Levels May Increase

Our Board of Directors currently has a policy of limiting the amount of our debt at the time of incurrence to less than 50% of the sum of the market value of our issued and outstanding common stock and preferred stock plus the amount of our debt at the time that debt is incurred. However, our organizational documents do not contain any limitation on the amount of indebtedness we might incur. Accordingly, our Board of Directors could alter or eliminate the current policy limitation on borrowing without a vote of our shareholders. We could become highly leveraged if this policy were changed. However, our ability to incur debt is limited by covenants in our bank credit arrangements.

We Are Subject to the Risks Posed by Fluctuating Demand and Significant Competition in the Self-Storage Industry

Our self-storage facilities are subject to all operating risks common to the self-storage industry. These risks include but are not limited to the following:

	•		Decreases in demand for rental spaces in a particular locale;

	•		Changes in supply of similar or competing self-storage facilities in an area;

	•		Changes in market rental rates; and

	•		Inability to collect rents from customers.

Our current strategy is to acquire interests only in self-storage facilities. Consequently, we are subject to risks inherent in investments in a single industry. Our self-storage facilities compete with other self-storage facilities in their geographic markets. As a result of competition, the self-storage facilities could experience a decrease in occupancy levels and rental rates, which would decrease our cash available for distribution. We compete in operations and for acquisition opportunities with companies that have substantial financial resources. Competition may reduce the number of suitable acquisition opportunities offered to us and increase the bargaining power of property owners seeking to sell. The self-storage industry has at times experienced overbuilding in response to perceived increases in demand. A recurrence of overbuilding might cause us to experience a decrease in occupancy levels, limit our ability to increase rents and compel us to offer discounted rents.

Our Real Estate Investments Are Illiquid and Are Subject to Uninsurable Risks and Government Regulation

General Risks. Our investments are subject to varying degrees of risk generally related to the ownership of real property. The underlying value of our real estate investments and our income and ability to make distributions to our shareholders are dependent upon our ability to operate the self-storage facilities in a manner sufficient to maintain or increase cash available for distribution. Income from our self-storage facilities may be adversely affected by the following factors:

	•		Changes in national economic conditions;

	•		Changes in general or local economic conditions and neighborhood characteristics;

	•		Competition from other self-storage facilities;

	•		Changes in interest rates and in the availability, cost and terms of financing;

	•		The impact of present or future environmental legislation and compliance with environmental laws;

	•		The ongoing need for capital improvements, particularly in older facilities;

	•		Changes in real estate tax rates and other operating expenses;

	•		Adverse changes in governmental rules and fiscal policies;

	•		Uninsured losses resulting from casualties associated with civil unrest, acts of God, including natural disasters, and acts of war;

	•		Adverse changes in zoning laws; and

	•		Other factors that are beyond our control.

Illiquidity of Real Estate May Limit its Value. Real estate investments are relatively illiquid. Our ability to vary our portfolio of self-storage facilities in response to changes in economic and other conditions is limited. In addition, provisions of the Code may limit our ability to profit on the sale of self-storage facilities held for fewer than two years. We may be unable to dispose of a facility when we find disposition advantageous or necessary and the sale price of any disposition may not equal or exceed the amount of our investment.

Uninsured and Underinsured Losses Could Reduce the Value of our Self Storage Facilities. Some losses, generally of a catastrophic nature, that we potentially face with respect to our self-storage facilities may be uninsurable or not insurable at an acceptable cost. Our management uses its discretion in determining amounts, coverage limits and deductibility provisions of insurance, with a view to acquiring appropriate insurance on our investments at a reasonable cost and on suitable terms. These decisions may result in insurance coverage that, in the event of a substantial loss, would not be sufficient to pay the full current market value or current replacement cost of our lost investment. Inflation, changes in building codes and ordinances, environmental considerations, and other factors also might make it infeasible to use insurance proceeds to replace a property after it has been damaged or destroyed. Under those circumstances, the insurance proceeds received by us might not be adequate to restore our economic position with respect to a particular property.

Possible Liability Relating to Environmental Matters. Under various federal, state and local environmental laws, ordinances and regulations, a current or previous owner or operator of real property may be liable for the costs of removal or remediation of hazardous or toxic substances on, under or in that property. Those laws often impose liability even if the owner or operator did not cause or know of the presence of hazardous or toxic substances and even if the storage of those substances was in violation of a customer’s lease. In addition, the presence of hazardous or toxic substances, or the failure of the owner to address their presence on the property, may adversely affect the owner’s ability to borrow using that real property as collateral. In connection with the ownership of the self-storage facilities, we may be potentially liable for any of those costs.

Americans with Disabilities Act. The Americans with Disabilities Act of 1990, or ADA, generally requires that buildings be made accessible to persons with disabilities. A determination that we are not in compliance with the ADA could result in imposition of fines or an award of damages to private litigants. If we were required to make modifications to comply with the ADA, our results of operations and ability to make expected distributions to our shareholders could be adversely affected.

There Are Limitations on the Ability to Change Control of Sovran

Limitation on Ownership and Transfer of Shares. To maintain our qualification as a REIT, not more than 50% in value of our outstanding shares of stock may be owned, directly or indirectly, by five or fewer individuals, as defined in the Code. To limit the possibility that we will fail to qualify as a REIT under this test, our Amended and Restated Articles of Incorporation include ownership limits and transfer restrictions on shares of our stock. Our Articles of Incorporation limit ownership of our issued and outstanding stock by any single shareholder to 9.8% of the aggregate value of our outstanding stock, except that the ownership by some of our shareholders is limited to 15%.

These ownership limits may:

•

Have the effect of precluding an acquisition of control of Sovran by a third party without consent of our Board of Directors even if the change in control would be in the interest of shareholders; and

•

Limit the opportunity for shareholders to receive a premium for shares of our common stock they hold that might otherwise exist if an investor were attempting to assemble a block of common stock in excess of 9.8% or 15%, as the case may be, of the outstanding shares of our stock or to otherwise effect a change in control of Sovran.

Our Board of Directors may waive the ownership limits if it is satisfied that ownership by those shareholders in excess of those limits will not jeopardize our status as a REIT under the Code or in the event it determines that it is no longer in our best interests to be a REIT. Waivers have been granted to the former holders of our Series C preferred stock, FMR Corporation and Cohen & Steers, Inc. A transfer of our common stock and/or preferred stock to a person who, as a result of the transfer, violates the ownership limits may not be effective under some circumstances.

Other Limitations. Other limitations could have the effect of discouraging a takeover or other transaction in which holders of some, or a majority, of our outstanding common stock might receive a premium for their shares of our common stock that exceeds the then prevailing market price or that those holders might believe to be otherwise in their best interest. The issuance of additional shares of preferred stock could have the effect of delaying or preventing a change in control of Sovran even if a change in control were in the shareholders’ interest. In addition, the Maryland General Corporation Law, or MGCL, imposes restrictions and requires that specified procedures with respect to the acquisition of stated levels of share ownership and business combinations, including combinations with interested shareholders. These provisions of the MGCL could have the effect of delaying or preventing a change in control of Sovran even if a change in control were in the shareholders’ interest. Waivers and exemptions have been granted to the initial purchasers of our former Series C preferred stock in connection with these provisions of the MGCL. In addition, under the Partnership’s agreement of limited partnership, in general, we may not merge, consolidate or engage in any combination with another person or sell all or substantially all of our assets unless that transaction includes the merger or sale of all or substantially all of the assets of the Partnership, which requires the approval of the holders of 75% of the limited partnership interests thereof. If we were to own less than 75% of the limited partnership interests in the Partnership, this provision of the limited partnership agreement could have the effect of delaying or preventing us from engaging in some change of control transactions.

Our Failure to Qualify as a REIT Would Have Adverse Consequences

We intend to operate in a manner that will permit us to qualify as a REIT under the Code. Qualification as a REIT involves the application of highly technical and complex Code provisions for which there are only limited judicial and administrative interpretations. Continued qualification as a REIT depends upon our continuing ability to meet various requirements concerning, among other things, the ownership of our outstanding stock, the nature of our assets, the sources of our income and the amount of our distributions to our shareholders.

In addition, a REIT is limited with respect to the services it can provide for its tenants. In the past, we have provided certain conveniences for our tenants, including property insurance underwritten by a third party insurance company that pays us commissions. We believe the insurance provided by the insurance company would not constitute a prohibited service to our tenants. No assurances can be given, however, that the IRS will not challenge our position. If the IRS successfully challenged our position, our qualification as a REIT could be adversely affected.

If we were to fail to qualify as a REIT in any taxable year, we would not be allowed a deduction for distributions to shareholders in computing our taxable income and would be subject to federal income tax (including any applicable alternative minimum tax) on our taxable income at regular corporate rates. Unless entitled to relief under certain Code provisions, we also would be ineligible for qualification as a REIT for the four taxable years following the year during which our qualification was lost. As a result, distributions to the shareholders would be reduced for each of the years involved. Although we currently intend to operate in a manner designed to qualify as a REIT, it is possible that future economic, market, legal, tax or other considerations may cause our Board of Directors to revoke our REIT election.

We May Pay Some Taxes, Reducing Cash Available for Shareholders

Even if we qualify as a REIT for federal income tax purposes, we are required to pay some federal, foreign,

state and local taxes on our income and property. Certain of our corporate subsidiaries have elected to be treated as “taxable REIT subsidiaries” of the Company for federal income tax purposes. A taxable REIT subsidiary is taxable as a regular corporation and is limited in its ability to deduct interest payments made to us in excess of a certain amount. In addition, if we receive or accrue certain amounts and the underlying economic arrangements among our taxable REIT subsidiaries and us are not comparable to similar arrangements among unrelated parties, we will be subject to a 100% penalty tax on those payments in excess of amounts deemed reasonable between unrelated parties. Finally, some state and local jurisdictions may tax some of our income even though as a REIT we are not subject to federal income tax on that income because not all states and localities follow the federal income tax treatment of REITs. To the extent that the Company or any taxable REIT subsidiary is required to pay federal, foreign, state or local taxes, we will have less cash available for distribution to shareholders.

We May Change the Dividend Policy for Our Common Stock in the Future

In 2009, our board of directors authorized and we declared quarterly common stock dividends of $0.64 per share for the first fiscal quarter; the equivalent of an annual rate of $2.56 per share. With respect to the second quarter of 2009, recognizing the need to maintain maximum financial flexibility in light of the current state of the capital markets, our board of directors reduced the quarterly common stock dividend to $0.45 per share, for an annual rate of $1.80 per share. A $0.45 per share quarterly common stock dividend was also declared with respect to the third and fourth quarters of 2009. We can provide no assurance that the board will not reduce or eliminate entirely dividend distributions on our common stock in the future.

A recent Internal Revenue Service revenue procedure allows us to satisfy the REIT income distribution requirements with respect to our 2010 and 2011 taxable years by distributing up to 90% of our dividends for such years on our common stock in shares of our common stock in lieu of paying dividends entirely in cash, so long as we follow a process allowing our shareholders to elect cash or stock subject to a cap that we impose on the maximum amount of cash that will be paid. Although we may utilize this procedure in the future, we currently have no intent to do so. In the event that we pay a portion of a dividend in shares of our common stock, taxable U.S. shareholders would be required to pay tax on the entire amount of the dividend, including the portion paid in shares of common stock, in which case such shareholders might have to pay the tax using cash from other sources. If a U.S. shareholder sells the stock it receives as a dividend in order to pay this tax, the sales proceeds may be less than the amount included in income with respect to the dividend, depending on the market price of our stock at the time of the sale. Furthermore, with respect to non-U.S. shareholders, we may be required to withhold U.S. tax with respect to such dividend, including in respect to all of or a portion of such dividend that is payable in stock. In addition, if a significant number of our shareholders sell shares of our common stock in order to pay taxes owed on dividends, such sales could put downward pressure on the market price of our common stock.

Our board of directors will continue to evaluate our distribution policy on a quarterly basis as they monitor the capital markets and the impact of the economy on our operations. The decision to authorize and pay dividends on our common stock in the future, as well as the timing, amount and composition of any such future dividends, will be at the sole discretion of our board of directors in light of conditions then existing, including our earnings, financial condition, capital requirements, debt maturities, the availability of capital, applicable REIT and legal restrictions and the general overall economic conditions and other factors. Any change in our dividend policy could have a material adverse effect on the market price of our common stock.

We May Have Rescission Liability in Connection with Sales of Unregistered Shares to Certain Investors

As previously disclosed in our Form 10-Q for the three months ended March 31, 2009, from December 2008 through April 2009, we sold an aggregate of 653,757 shares of common stock under our dividend reinvestment and stock purchase plan (the “DRSPP”) which were not registered under the Securities Act as a result of the expiration in November 2008 of our registration statement covering the DRSPP. Some or all of those sales, which resulted in proceeds to us of approximately $14.0 million, may have violated Section 5 of the Securities Act. Purchasers of shares issued in violation of Section 5 have a right to rescind their purchases for a period of twelve months following the date of original purchase under Section 13 of the Securities Act. As a result, we could be required to repurchase some or all of the shares issued under the DRSPP during this period at the original sale price plus statutory interest.

Market Interest Rates May Influence the Price of Our Common Stock

One of the factors that may influence the price of our common stock in public trading markets or in private transactions is the annual yield on our common stock as compared to yields on other financial instruments. An increase in market interest rates will result in higher yields on other financial instruments, which could adversely affect the price of our common stock.

Regional Concentration of Our Business May Subject Us to Economic Downturns in the States of Texas and Florida

As of December 31, 2009, 147 of our 381 self-storage facilities are located in the states of Texas and Florida. For the year ended December 31, 2009, these facilities accounted for approximately 42.0% of store revenues. This concentration of business in Texas and Florida exposes us to potential losses resulting from a downturn in the economies of those states. If economic conditions in those states continue to deteriorate, we will experience a reduction in existing and new business, which may have an adverse effect on our business, financial condition and results of operations.

Changes in Taxation of Corporate Dividends May Adversely Affect the Value of Our Common Stock

The maximum marginal rate of tax payable by domestic noncorporate taxpayers on dividends received from a regular “C” corporation under current law is 15% through 2010, as opposed to higher ordinary income rates. The reduced tax rate, however, does not apply to distributions paid to domestic noncorporate taxpayers by a REIT on its stock, except for certain limited amounts. Although the earnings of a REIT that are distributed to its stockholders generally remain subject to less federal income taxation than earnings of a non-REIT “C” corporation that are distributed to its stockholders net of corporate-level income tax, legislation that extends the application of a lower rate of taxation to dividends paid after 2010 by “C” corporations could cause domestic noncorporate investors to view the stock of regular “C” corporations as more attractive relative to the stock of a REIT, because the dividends from regular “C” corporations would continue to be taxed at a lower rate while distributions from REITs (other than distributions designated as capital gain dividends) are generally taxed at the same rate as other ordinary income of domestic noncorporate taxpayers and the maximum rate for domestic noncorporate taxpayers will increase in 2011 unless current tax laws are changed.

Item 1B. Unresolved Staff Comments

None.


Item 2.		Properties

At December 31, 2009, we held ownership interests in and managed a total of 381 Properties situated in twenty-four states. Among the 381 self-storage facilities are 27 Properties that we manage for a consolidated joint venture of which we are a majority owner and 25 Properties that we manage for a joint venture of which we are a 20% owner.

Our self-storage facilities offer inexpensive, easily accessible, enclosed storage space to residential and commercial users on a month-to-month basis. Most of our Properties are fenced with computerized gates and are well lighted. A majority of the Properties are single-story, thereby providing customers with the convenience of direct vehicle access to their storage spaces. Our stores range in size from 21,000 to 181,000 net rentable square feet, with an average of approximately 65,000 net rentable square feet. The Properties generally are constructed of masonry or steel walls resting on concrete slabs and have standing seam metal, shingle, or tar and gravel roofs. All Properties have a property manager on-site during business hours. Customers have access to their storage areas during business hours, and some commercial customers are provided 24-hour access. Individual storage spaces are secured by a lock furnished by the customer to provide the customer with control of access to the space.

All of the Properties conduct business under the user-friendly name Uncle Bob’s Self-Storage ^®.

The following table provides certain information regarding the Properties in which we have an ownership interest and manage as of December 31, 2009:


	Number of
	Stores at						Percentage
	December 31,		Square		Number of		of Store
	2009		Feet		Spaces		Revenue
Alabama		22		1,587,552		11,895		4.9	%
Arizona		9		532,834		4,723		2.3	%
Connecticut		5		300,860		2,866		1.9	%
Colorado		4		276,927		2,374		1.3	%
Florida		57		3,641,512		33,394		15.1	%
Georgia		27		1,710,528		13,935		6.1	%
Kentucky		2		144,872		1,323		0.6	%
Louisiana		14		836,350		7,309		3.7	%
Maine		2		114,265		1,010		0.5	%
Maryland		4		172,083		2,037		0.9	%
Massachusetts		12		664,614		6,067		3.2	%
Michigan		6		354,608		3,035		1.1	%
Mississippi		12		922,933		7,116		3.4	%
Missouri		7		432,039		3,791		2.0	%
New Hampshire		4		259,555		2,331		1.0	%
New York		28		1,590,577		14,566		8.4	%
North Carolina		14		723,262		6,223		2.7	%
Ohio		23		1,558,905		12,900		5.5	%
Pennsylvania		4		208,400		1,630		0.8	%
Rhode Island		4		168,346		1,565		0.8	%
South Carolina		8		443,158		3,782		1.7	%
Tennessee		4		291,204		2,457		0.9	%
Texas		90		6,624,499		54,563		26.9	%
Virginia		19		1,130,226		10,528		4.3	%

Total		381		24,690,109		211,420		100.0	%

At December 31, 2009, the Properties had an average occupancy of 80.0% and an annualized rent per occupied square foot of $10.29.


Item 3.		Legal Proceedings

In the normal course of business, we are subject to various claims and litigation. While the outcome of any litigation is inherently unpredictable, we do not believe that any matters currently pending against the Company will have a material adverse impact on our financial condition, results of operations or cash flows.


Item 4.		Submission of Matters to a Vote of Security Holders

No matters were submitted during the fourth quarter of the fiscal year covered by this report to a vote of security holders, through the solicitation of proxies or otherwise.

Part II


Item 5.		Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

Our Common Stock is traded on the New York Stock Exchange under the symbol “SSS.” Set forth below are the high and low sales prices for our Common Stock for each full quarterly period within the two most recent fiscal years.


Quarter 2008	High		Low
1st	$	44.62	$	33.56
2nd		46.50		41.37
3rd		46.15		35.77
4th		44.16		19.18


Quarter 2009	High		Low
1st	$	36.12	$	16.40
2nd		26.95		19.28
3rd		33.33		22.69
4th		38.06		28.88

As of February 15, 2010, there were approximately 1,335 holders of record of our Common Stock.

We have paid quarterly dividends to our shareholders since our inception. Reflected in the table below are the dividends paid in the last two years.

For federal income tax purposes, distributions to shareholders are treated as ordinary income, capital gain, return of capital or a combination thereof. Distributions to shareholders for 2009 represent 45% ordinary income, and 55% return of capital.

History of Dividends Declared on Common Stock


March 2008		$0.630 per share
June 2008		$0.630 per share
September 2008		$0.640 per share
December 2008		$0.640 per share

March 2009		$0.640 per share
July 2009		$0.450 per share
October 2009		$0.450 per share

January 2010		$0.450 per share

EQUITY COMPENSATION PLAN INFORMATION

The following table sets forth certain information as of December 31, 2009, with respect to equity compensation plans under which shares of the Company’s Common Stock may be issued.

Number of

securities to be

issued upon

Weighted average

Number of

exercise of

exercise price of

securities

outstanding

remaining available

options, warrants

for future issuance

Plan Category

and rights (#)

and rights ($)

(#)

Equity compensation plans approved by shareholders:

2005 Award and Option Plan

316,163

42.86

998,330

1995 Award and Option Plan

46,300

27.23

2009 Outside Directors’ Stock Option and Award Plan

9,500

23.15

137,044

1995 Outside Directors’ Stock Option Plan

25,505

46.23

Deferred Compensation Plan for Directors (1)

29,390

N/A

27,671

Equity compensation plans not approved by shareholders:

N/A


(1)		Under the Deferred Compensation Plan for Directors, non-employee Directors may defer all or part of their Directors’ fees that are otherwise payable in cash. Directors’ fees that are deferred under the Plan will be credited to each Directors’ account under the Plan in the form of Units. The number of Units credited is determined by dividing the amount of Directors’ fees deferred by the closing price of the Company’s Common Stock on the New York Stock Exchange on the day immediately preceding the day upon which Directors’ fees otherwise would be paid by the Company. A Director is credited with additional Units for dividends on the shares of Common Stock represented by Units in such Directors’ Account. A Director may elect to receive the shares in a lump sum on a date specified by the Director or in quarterly or annual installments over a specified period and commencing on a specified date.

CORPORATE PERFORMANCE GRAPH

The following chart and line-graph presentation compares (i) the Company’s shareholder return on an indexed basis since December 31, 2004 with (ii) the S&P Stock Index and (iii) the National Association of Real Estate Investment Trusts Equity Index.

CUMULATIVE TOTAL SHAREHOLDER RETURN
SOVRAN SELF STORAGE, INC.
DECEMBER 31, 2004 — DECEMBER 31, 2009


	Dec. 31, 2004		Dec. 31, 2005		Dec. 31, 2006		Dec. 31, 2007		Dec. 31, 2008		Dec. 31, 2009
S&P		100.00		104.91		121.48		128.15		80.74		102.11
NAREIT		100.00		112.17		151.49		127.72		79.54		101.80
SSS		100.00		117.89		150.77		110.72		105.80		114.07

The foregoing item assumes $100.00 invested on December 31, 2004, with dividends reinvested.

Item 6. Selected Financial Data

The following selected financial and operating information should be read in conjunction with “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” and the financial statements and related notes included elsewhere in this Annual Report on Form 10-K:


	At or For Year Ended December 31,

(dollars in thousands, except per share data)	2009			2008			2007			2006			2005
Operating Data
Operating revenues	$	195,011		$	200,193		$	190,013		$	162,541		$	134,524
Income from continuing operations		22,438			37,803			40,184			37,306			34,379
(Loss) income from discontinued operations (1)		(784	)		1,880			1,661			1,738			1,940
Net income		21,654			39,683			41,845			39,044			36,319
Net income attributable to common shareholders		19,916			37,399			37,958			34,098			30,667
Income from continuing operations per common share attributable to common shareholders — diluted		0.87			1.63			1.73			1.80			1.72
Net income per common share attributable to common shareholders — basic		0.84			1.72			1.81			1.90			1.86
Net income per common share attributable to common shareholders — diluted		0.84			1.72			1.81			1.89			1.84
Dividends declared per common share (2)		1.54			2.54			2.50			2.47			2.44

Balance Sheet Data
Investment in storage facilities at cost	$	1,387,583		$	1,366,615		$	1,300,847		$	1,115,255		$	865,692
Total assets		1,185,201			1,212,528			1,164,475			1,053,033			784,195
Total debt		481,219			623,261			566,517			462,027			339,144
Total liabilities		520,142			692,381			610,644			495,175			364,856
Series C preferred stock		—			—			—			26,613			26,613

Other Data
Net cash provided by operating activities	$	59,123		$	77,132		$	85,175		$	64,656		$	60,724
Net cash used in investing activities		(4,448	)		(82,711	)		(190,267	)		(176,567	)		(79,156	)
Net cash (used in) provided by financing activities		(48,451	)		6,055			61,372			154,730			20,238


(1)		In 2009 we sold five stores and in 2008 we sold one store whose results of operations and (loss) gain on disposal are classified as discontinued operations for all previous years presented.

(2)		In 2009 we declared dividends in March, July, and October (see Item 5). On January 4, 2010 we declared a dividend of $0.45 per common share, and therefore it is not included in the 2009 column.


Item 7.		Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis of the consolidated financial condition and results of operations should be read in conjunction with the financial statements and notes thereto included elsewhere in this report.

Disclosure Regarding Forward-Looking Statements

When used in this discussion and elsewhere in this document, the words “intends,” “believes,” “expects,” “anticipates,” and similar expressions are intended to identify “forward-looking statements” within the meaning of that term in Section 27A of the Securities Act of 1933 and in Section 21E of the Securities Exchange Act of 1934. Such forward-looking statements involve known and unknown risks, uncertainties and other factors, which may cause our actual results, performance or achievements to be materially different from those expressed or implied by such forward-looking statements. Such factors include, but are not limited to, the effect of competition from new self-storage facilities, which would cause rents and occupancy rates to decline; the Company’s ability to evaluate, finance and integrate acquired businesses into the Company’s existing business and operations; the Company’s ability to effectively compete in the industry in which it does business; the Company’s existing indebtedness may mature in an unfavorable credit environment, preventing refinancing or forcing refinancing of the indebtedness on terms that are not as favorable as the existing terms; interest rates may fluctuate, impacting costs associated with the Company’s outstanding floating rate debt; the Company’s ability to comply with debt covenants; any future ratings on the Company’s debt instruments; the regional concentration of the Company’s business may subject it to economic downturns in the states of Florida and Texas; the Company’s reliance on its call center; the Company’s cash flow may be insufficient to meet required payments of principal, interest and dividends; and tax law changes that may change the taxability of future income.

Business and Overview

We believe we are the fourth largest operator of self-storage properties in the United States based on facilities owned and managed. All of our stores are operated under the user-friendly name “Uncle Bob’s Self-Storage”^®.

Operating Strategy

Our operating strategy is designed to generate growth and enhance value by:

Increasing operating performance and cash flow through aggressive management of our stores:

We seek to differentiate our self-storage facilities from our competition through innovative marketing and value-added product offerings including:

	-		Our Customer Care Center, which answers sales inquiries and makes reservations for all of our Properties on a centralized basis,

	-		The Uncle Bob’s truck move-in program, under which, at present, 258 of our stores offer a free Uncle Bob’s truck to assist our customers in moving into their spaces,

	-		Our dehumidification system, known as Dri-guard, which provides our customers with a better environment to store their goods and improves yields on our Properties, and

	-		Internet marketing and sales.

	-		Our “Name your Price” concession differentiates us from the “free month” offer now prevalent in our industry, and allows us to engage the customer in a unique manner. We are able to customize this offer based on occupancies and demand.

	-		Our customized property management systems enable us to improve our ability to track trends, set optimal pricing levels, enjoy considerable economies of scale in vendor and supply pricing, and control collections and accounts receivable.

In addition, our managers are better qualified and receive a significantly higher level of training than they did in the past, customer access and security are greatly enhanced as a result of advances in technology, and property appearance and functionality have been improved.

Acquiring additional stores:

	-		Our objective is to acquire new stores one or two at a time in markets we currently operate in. By so doing, we can add to our existing base, which should improve market penetration in those areas, and contribute to the benefits achieved from economies of scale.

	-		We may also enter new markets if we can do so by acquiring a group of stores in those markets. We feel that our marketing efforts and control systems would enhance even those portfolios that have been managed efficiently by independent operators, and that attractive returns can be generated by such acquisitions.

Expanding our management business:

We see our management business as a source of future acquisitions. We may develop additional joint ventures in which we are minority owners and managers of the self-storage facilities acquired by these joint ventures. The joint venture agreements will give us first right of refusal to purchase the managed properties in the event they are offered for sale.

Expanding and enhancing our existing stores:

Over the past five years, we have undertaken a program of expanding and enhancing our Properties. In 2007, we expended approximately $25 million to add some 444,000 square feet of premium space (i.e., air-conditioned and/or humidity controlled) to our Properties; in 2008, we spent approximately $26 million to add 403,000 square feet and to convert 95,000 square feet to premium storage; and in 2009, we completed construction of a new 78,000 square foot facility in Richmond Virginia, added 175,000 square feet to other existing Properties, and converted 64,000 square feet to premium storage for a total cost of approximately $18 million.

Supply and Demand

We believe the supply and demand model in the self-storage industry is micro market specific in that a majority of our business comes from within a five mile radius of our stores. The current economic conditions and the credit market environment have resulted in a decrease in new supply on a national basis in 2008 and 2009. With the decrease of debt and equity capital brought about by the credit market tightening in the past year, we have seen capitalization rates on acquisitions (expected annual return on investment) increase to approximately 8.0% and expect continued increases in 2010. From 2003 to 2007, the historically low interest rates available to developers resulted in increased supply on a national basis. We experienced some of this excess supply in certain markets in Texas and Florida from 2003 to 2007, but because of the demand model, we did not see a widespread effect on our stores in those years. In 2008, the Florida market was negatively affected by the current economic downturn and in 2009 many markets were affected as consumers pulled back spending.

Operating Trends

Since 2007, our industry has experienced some softness in demand. This was due to the economic slowdown that began in late 2007, and in part to regional issues, such as the reduction of hurricane driven demand in Florida and the Gulf Coast states, and to an overall slowdown in the housing sector. We believe the housing slowdown has impacted our industry in two ways: 1.) a reduction in lease-up activity resulting from fewer residential real estate transactions (both buyers and sellers of residences use our product in times of transition) and 2.) a contraction of housing construction activity which has reduced the number of people working in the construction trades (trades people are a measurable part of our usual customer base.)

While we enjoyed same store revenue growth from 2003 through 2008, in 2009 our same store revenue decreased 3.1%, primarily because of the aforementioned issues. We expect conditions in most of our markets to remain challenging and are forecasting -2% to 0% revenue growth on a same store basis in 2010.

We were able to reduce many expenses at the store operating level in 2009 to mitigate the effect of the revenue decline. Expenses related to operating a self-storage facility had increased substantially over the previous five years as a result of expanded hours, increased health care costs, property insurance costs, and the costs of amenities (such as Uncle Bob’s trucks). While we do not expect further expense decreases in 2010, we do believe expense increases will be at a manageable level of between 2% and 4%.

Critical Accounting Policies and Estimates

The discussion and analysis of our financial condition and results of operations are based upon our consolidated financial statements, which have been prepared in accordance with U.S. generally accepted accounting principles. The preparation of these financial statements requires us to make estimates and judgments that affect the amounts reported in our financial statements and the accompanying notes. On an on-going basis, we evaluate our estimates and judgments, including those related to carrying values of storage facilities, bad debts, and contingencies and litigation. We base these estimates on experience and on various other assumptions that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.

Carrying value of storage facilities: We believe our judgment regarding the impairment of the carrying value of our storage facilities is a critical accounting policy. Our policy is to assess any impairment of value whenever events or circumstances indicate that the carrying value of a storage facility may not be recoverable. Such events or circumstances would include negative operating cash flow, significant declining revenue per storage facility, or an exception that, more likely than not, a property will be sold or otherwise disposed of significantly before the end of its previously estimated useful life. Impairment is evaluated based upon comparing the sum of the expected undiscounted future cash flows to the carrying value of the storage facility, on a property by property basis. If the sum of the undiscounted cash flow is less than the carrying amount, an impairment loss is recognized for the amount by which the carrying amount exceeds the fair value of the asset. If cash flow projections are inaccurate and in the future it is determined that storage facility carrying values are not recoverable, impairment charges may be required at that time and could materially affect our operating results and financial position. Estimates of undiscounted cash flows could change based upon changes in market conditions, expected occupancy rates, etc. At December 31, 2009 and 2008, no assets had been determined to be impaired under this policy.

Estimated useful lives of long-lived assets: We believe that the estimated lives used for our depreciable, long-lived assets is a critical accounting policy. We periodically evaluate the estimated useful lives of our long-lived assets to determine if any changes are warranted based upon various factors, including changes in the planned usage of the assets, customer demand, etc. Changes in estimated useful lives of these assets could have a material adverse impact on our financial condition or results of operations. We have not made significant changes to the estimated useful lives of our long-lived assets in the past and we don’t have any current expectation of making significant changes in 2010.

Consolidation and investment in joint ventures: We consolidate all wholly owned subsidiaries. Partially owned subsidiaries and joint ventures are consolidated when we control the entity. Investments in joint ventures that we do not control but for which we have significant influence over are reported using the equity method. Under the equity method, our investment in joint ventures are stated at cost and adjusted for our share of net earnings or losses and reduced by distributions. Equity in earnings of real estate ventures is generally recognized based on our ownership interest in the earnings of each of the unconsolidated real estate ventures.

Revenue and Expense Recognition: Rental income is recognized when earned pursuant to month-to-month leases for storage space. Promotional discounts are recognized as a reduction to rental income over the promotional period, which is generally during the first month of occupancy. Rental income received prior to the start of the rental period is included in deferred revenue.

Qualification as a REIT: We operate, and intend to continue to operate, as a REIT under the Code, but no assurance can be given that we will at all times so qualify. To the extent that we continue to qualify as a REIT, we will not be taxed, with certain limited exceptions, on the taxable income that is distributed to our shareholders. If we fail to qualify as a REIT, any requirement to pay federal income taxes could have a material adverse impact on our financial conditions and results of operations.

Recent Accounting Pronouncements

In June 2009, the FASB issued revised accounting guidance under ASC Topic 810, “Consolidation” by issuing SFAS No. 167, “Amendments to FASB Interpretation No. 46(R)” (“SFAS 167”). The revised guidance amends previous guidance (as previously required under FASB Interpretation No. 46(R), “Variable Interest Entities”) for determining whether an entity is a variable interest entity (“VIE”) and requires an enterprise to perform an analysis to determine whether the enterprise’s variable interest or interests give it a controlling financial interest in a VIE. Under the revised guidance, an enterprise has a controlling financial interest when it has a) the power to direct the activities of a VIE that most significantly impact the entity’s economic performance and b) the obligation to absorb losses of the entity or the right to receive benefits from the entity that could potentially be significant to the VIE. The revised guidance also requires an enterprise to assess whether it has an implicit financial responsibility to ensure that a VIE operates as designed when determining whether it has power to direct the activities of the VIE that most significantly impact the entity’s economic performance. The revised guidance also requires ongoing assessments of whether an enterprise is the primary beneficiary of a VIE, requires enhanced disclosures and eliminates the scope exclusion for qualifying special-purpose entities. The revised guidance is effective for the first annual reporting period that begins after November 15, 2009, with early adoption prohibited. The Company is currently evaluating the impact that the adoption of the revised guidance will have on its consolidated financial statements.

YEAR ENDED DECEMBER 31, 2009 COMPARED TO
YEAR ENDED DECEMBER 31, 2008

We recorded rental revenues of $186.9 million for the year ended December 31, 2009, a decrease of $5.6 million or 2.9% when compared to 2008 rental revenues of $192.5 million. Of the decrease in rental revenue, $6.2 million resulted from a 3.2% decrease in rental revenues at the 352 core properties considered in same store sales (those properties included in the consolidated results of operations since January 1, 2008). The decrease in same store rental revenues was a result of a 2.1% decrease in average rental income per square foot as a result of increased move-in incentives used in 2009 to attract customers. We also experienced a decrease in square foot occupancy of 115 basis points, which we believe resulted from general economic conditions, in particular the housing sector. These decreases were partially offset by a $0.6 million increase in rental revenues resulting from having the three stores acquired in 2008 included for a full year of operations. Other income, which includes merchandise sales, insurance commissions, truck rentals, management fees and acquisition fees, increased in 2009 primarily as a result of $0.3 million increase in commissions earned from our customer insurance program.

Property operating and real estate tax expense decreased $2.0 million, or 2.7%, in 2009 compared to 2008. Much of the decrease resulted from numerous expense control initiatives and from a reduction in yellow page advertising at the 352 core properties considered same stores. These expense decreases were partially offset by a 4.1% increase in same store property tax expense and $0.3 million of additional expenses incurred from having the 2008 acquisitions included for a full year of operations. We expect same-store operating costs to increase only moderately in 2010 with increases primarily attributable to utilities and property taxes.

General and administrative expenses increased $1.4 million or 7.9% from 2008 to 2009. The increase primarily resulted from the write-off of construction in progress projects that were terminated and an increase in internet advertising.

Depreciation and amortization expense decreased to $33.4 million in 2009 from $33.9 million in 2008, primarily as a result of a $1.0 million decrease in amortization of in-place customers leases relating to previous year acquisitions, offset partially by a full year of depreciation on those acquisitions.

Interest expense increased from $38.1 million in 2008 to $50.1 million in 2009 as a result of the following factors:

	•		A credit ratings downgrade by Fitch Ratings in May 2009 on our unsecured floating rate notes triggered a 1.75% increase in the interest rate on our $150 million term notes and a 0.375% increase in the interest rate on our $250 million term notes. The increase was effective from May to October of 2009, at which time our credit rating was upgraded back to investment grade rating after our common stock offering in October 2009;

	•		At March 31, 2009, the Company had violated the leverage ratio covenant contained in the line of credit and term note agreements. In May 2009, the Company obtained a waiver of the violation as of March 31, 2009. The fees paid to obtain the waiver were approximately $0.9 million and are included in 2009 interest expense and;

	•		On October 5, 2009, the Company used proceeds from the issuance of common stock to terminate the interest rate swap agreements with notional amounts of $75 million and $25 million (see Note 9 of our financial statements). The total cost to terminate the swaps was $8.4 million and is included as additional interest expense in 2009 and;

	•		In October 2009, we wrote-off to interest expense $0.6 million of unamortized financing fees related to the $100 million term note that was repaid with the proceeds of the common stock offering.

The casualty loss recorded in 2009 relates to insurance proceeds received that were less than the carrying value of a building damaged by a fire at one of our facilities.

During 2009, we sold a parcel of land to the State of Georgia Department of Transportation for their use as part of a road widening project for net cash proceeds of $1.1 million resulting in a gain on sale of $1.1 million.

As described in Note 5 to the financial statements, during 2009 the Company sold five non-strategic storage facilities for net cash proceeds of $16.3 million resulting in a loss of $1.6 million. During 2008 the Company sold one non-strategic storage facility for net cash proceeds of $7.0 million resulting in a gain of $0.7 million. The 2009, 2008, and 2007 operations of these facilities and the loss/gain associated with the disposal are reported in income from discontinued operations for all periods presented.

YEAR ENDED DECEMBER 31, 2008 COMPARED TO
YEAR ENDED DECEMBER 31, 2007

We recorded rental revenues of $192.5 million for the year ended December 31, 2008, an increase of $8.7 million or 4.7% when compared to 2007 rental revenues of $183.8 million. Of the increase in rental revenue, $1.3 million resulted from a 0.7% increase in rental revenues at the 321 core properties considered in same store sales (those properties included in the consolidated results of operations since January 1, 2007). The increase in same store rental revenues was achieved primarily through rate increases on select units averaging 1.9%, offset by a decrease in square foot occupancy of 150 basis points, which we believe resulted from general economic conditions, in particular the housing sector. The remaining $7.4 million increase in rental revenues resulted from the acquisition of three stores during 2008 and from having the 31 stores acquired in 2007 included for a full year of operations. Other income, which includes merchandise sales, insurance commissions, truck rentals, management fees and acquisition fees, increased in 2008 primarily as a result of $1.1 million of management and acquisition fees generated from our unconsolidated joint venture, Sovran HHF Storage Holdings LLC.

Property operating and real estate tax expense increased $5.0 million, or 7.3%, in 2008 compared to 2007. Of this increase, $2.7 million were expenses incurred by the facilities acquired in 2008 and from having expenses from the 2007 acquisitions included for a full year of operations. $2.3 million of the increase was due to increased payroll, property taxes, utilities, and maintenance expenses at the 321 core properties considered same stores.

General and administrative expenses increased $2.0 million or 13.4% from 2007 to 2008. The increase primarily resulted from the costs associated with operating the properties acquired in 2008 and 2007, and from managing the 25 properties acquired by our joint venture in 2008.

Depreciation and amortization expense increased to $33.9 million in 2008 from $33.4 million in 2007, primarily as a result of additional depreciation taken on real estate assets acquired in 2008, and a full year of depreciation on 2007 acquisitions, offset by a decrease in amortization of in-place customers leases relating to these acquisitions.

Interest expense increased from $33.9 million in 2007 to $38.1 million in 2008 as a result of additional borrowings under our line of credit and term notes to purchase three stores in 2008, as well as an increase in interest rates as a result of our debt refinancing in June 2008.

As described in Note 5 to the financial statements, during 2009, the Company sold five non-strategic storage facilities in Massachusetts, North Carolina, and Pennsylvania for net cash proceeds of $16.3 million resulting in a loss of $1.6 million. In 2008, the Company sold one non-strategic storage facility located in Michigan for net cash proceeds of $7.0 million resulting in a gain of $0.7 million. The 2008 and 2007 operations of these facilities are reported as discontinued operations.

The decrease in preferred stock dividends from 2007 to 2008 was a result of the conversion of all remaining 1,200,000 shares of our Series C Preferred Stock into 920,244 shares of common stock in July 2007.

FUNDS FROM OPERATIONS

We believe that Funds from Operations (“FFO”) provides relevant and meaningful information about our operating performance that is necessary, along with net earnings and cash flows, for an understanding of our operating results. FFO adds back historical cost depreciation, which assumes the value of real estate assets diminishes predictably in the future. In fact, real estate asset values increase or decrease with market conditions. Consequently, we believe FFO is a useful supplemental measure in evaluating our operating performance by disregarding (or adding back) historical cost depreciation.

FFO is defined by the National Association of Real Estate Investment Trusts, Inc. (“NAREIT”) as net income computed in accordance with generally accepted accounting principles (“GAAP”), excluding gains or losses on sales of properties, plus depreciation and amortization and after adjustments to record unconsolidated partnerships and joint ventures on the same basis. We believe that to further understand our performance, FFO should be compared with our reported net income and cash flows in accordance with GAAP, as presented in our consolidated financial statements.

Our computation of FFO may not be comparable to FFO reported by other REITs or real estate companies that do not define the term in accordance with the current NAREIT definition or that interpret the current NAREIT definition differently. FFO does not represent cash generated from operating activities determined in accordance with GAAP, and should not be considered as an alternative to net income (determined in accordance with GAAP) as an indication of our performance, as an alternative to net cash flows from operating activities (determined in accordance with GAAP) as a measure of our liquidity, or as an indicator of our ability to make cash distributions.

Reconciliation of Net Income to Funds From Operations


	For Year Ended December 31,
(dollars in thousands)	2009			2008			2007			2006			2005
Net income attributable to common shareholders	$	19,916		$	37,399		$	37,958		$	34,098		$	30,667
Net income attributable to noncontrolling interests		1,738			2,284			2,631			2,434			1,529
Depreciation of real estate and amortization of intangible assets exclusive of deferred financing fees		33,385			33,876			33,360			24,653			20,604
Depreciation of real estate included in discontinued operations		434			591			676			652			618
Depreciation and amortization from unconsolidated joint ventures		820			333			59			168			484
Casualty gain		—			—			(114	)		—			—
Loss (gain) on sale of real estate		509			(716	)		—			—			—
Funds from operations allocable to noncontrolling interest in Operating Partnership		(984	)		(1,366	)		(1,425	)		(1,450	)		(1,519	)
Funds from operations allocable to noncontrolling interest in consolidated joint ventures		(1,360	)		(1,564	)		(1,848	)		(1,785	)		(1,499	)

Funds from operations available to common shareholders	$	54,458		$	70,837		$	71,297		$	58,770		$	50,884

LIQUIDITY AND CAPITAL RESOURCES

Our line of credit and term notes require us to meet certain financial covenants measured on a quarterly basis, including prescribed leverage, fixed charge coverage, minimum net worth, limitations on additional indebtedness and limitations on dividend payouts. At December 31, 2009, the Company was in compliance with all debt covenants. The most sensitive covenant is the leverage ratio covenant contained in our line of credit and term note agreements. This covenant limits our total consolidated liabilities to 55% of our gross asset value. At December 31, 2009, our leverage ratio as defined in the agreements was approximately 42.8%. The agreements define total consolidated liabilities to include the liabilities of the Company plus our share of liabilities of unconsolidated joint ventures. The agreements also define a prescribed formula for determining gross asset value which incorporates the use of a 9.25% capitalization rate applied to annualized earnings before interest, taxes, depreciation and amortization (“EBITDA”) as defined in the agreements. At March 31, 2009, the Company had violated the leverage ratio covenant contained in the line of credit and term note agreements. In May 2009, the Company obtained a waiver of the violation as of March 31, 2009. The fees paid to obtain the waiver were approximately $0.9 million and are included in interest expense in 2009. In the event that the Company violates debt covenants in the future, the amounts due under the agreements could be callable by the lenders.

On May 6, 2009, we announced a reduction in our quarterly dividend for the remainder of 2009 from $0.64 per share to $0.45 per share. In addition to the reduction in the dividend, in the second quarter of 2009 we changed our policy of declaring the dividend from the last week in the quarter to the first week following the quarter end. As a result of this date change, no dividend was declared in the three months ended June 30, 2009. A dividend of $0.45 per common share was declared on January 4, 2010 and paid on January 26, 2010. The dividend paid amounted to $12.4 million. In 2010, we expect to declare and pay four dividends in the calendar year.

On October 5, 2009, the Company completed the public offering of 4,025,000 shares of its common stock at $29.75 per share. Net proceeds to the Company after deducting underwriting discounts and commissions and estimated offering expenses were approximately $114.0 million. The Company used the net proceeds from the offering to repay $100 million of the Company’s unsecured term note due June 2012 and to terminate two interest rate swaps relating to the debt repaid at a cost of $8.4 million. The Company used the remaining proceeds along with operating cash flows to payoff a maturing mortgage in December 2009 of $26.1 million.

We believe that the steps the Company has taken, including but not limited to the equity raised from our common stock offering of approximately $114.0 million, the pay down of $100 million of our term notes, and the reduction in the quarterly dividend, will be adequate to avoid future covenant violations under the current terms of our line of credit and term note agreements.

Our ability to retain cash flow is limited because we operate as a REIT. In order to maintain our REIT status, a substantial portion of our operating cash flow must be used to pay dividends to our shareholders. We believe that our internally generated net cash provided by operating activities and our availability on our line of credit will be sufficient to fund ongoing operations, capital improvements, dividends and debt service requirements through June 2011, at which time our revolving line of credit matures. Future draws on our line of credit may be limited due to covenant restrictions.

Cash flows from operating activities were $59.1 million, $77.1 million and $85.2 million for the years ended December 31, 2009, 2008, and 2007, respectively. The decrease in operating cash flows from 2008 to 2009 was primarily due to a decrease in net income. The decrease in net income was primarily a result of lower rental income and increased interest expense. The decrease in operating cash from 2007 to 2008 was primarily attributable to a decrease in net income and accounts payable remaining consistent with the prior year.

Cash used in investing activities was $4.4 million, $82.7 million, and $190.3 million for the years ended December 31, 2009, 2008, and 2007 respectively. The decrease in cash used from 2008 to 2009 was due to (i) reduced acquisition and capital improvement activity in 2009, (ii) an increase in proceeds from the sale of storage facilities, and (iii) a reduction in the funding of our share of the joint venture entered into in 2008. The decrease in cash used from 2007 to 2008 was attributable to reduced acquisition activity in 2008 as many of the properties acquired were acquired through a joint venture of which we are a 20% owner.

Cash used in financing activities was $48.5 million in 2009, compared to cash provided by financing activities of $6.0 million in 2008 and $61.4 million in 2007. In 2009, we used our operating cash flow and the proceeds from our common stock offering to paydown $14.0 million of our line of credit, $100 million of term notes, and a $26.1 million mortgage. Our reduced acquisition activity in 2008 was the driver behind the decrease in cash provided from financing activities from 2007 to 2008.

On June 25, 2008, we entered into agreements relating to new unsecured credit arrangements, and received funds under those arrangements. As part of the agreements, the Company entered into a $250 million unsecured term note maturing in June 2012 bearing interest at LIBOR plus 1.625% (based on the Company’s December 31, 2009 credit rating). The proceeds from this term note were used to repay the Company’s previous line of credit that was to mature in September 2008, the Company’s term note that was to mature in September 2009, the term note maturing in July 2008, and to provide for working capital. We repaid $100 million of this term note with the proceeds of our common stock offering. The agreements also provide for a $125 million (expandable to $175 million) revolving line of credit maturing June 2011 bearing interest at a variable rate equal to LIBOR plus 1.375% (based on the Company’s credit rating at December 31, 2009), and requires a 0.25% facility fee. The interest rate at December 31, 2009 on the Company’s available line of credit was approximately 1.61% (1.8% at December 31, 2008). At December 31, 2009, there was $125 million available on the unsecured line of credit. We believe that if operating results remain consistent with historical levels and levels of other debt and liabilities remain consistent with amounts outstanding at December 31, 2009, the entire $125 million line of credit could be drawn without violating our debt covenants.

We also maintain a $80 million term note maturing September 2013 bearing interest at a fixed rate of 6.26%, a $20 million term note maturing September 2013 bearing interest at a variable rate equal to LIBOR plus 1.50%, and a $150 million unsecured term note maturing in April 2016 bearing interest at 6.38% (based on our December 31, 2009 credit ratings).

Prior to our October 2009 common stock offering, the line of credit facility and term notes had an investment grade rating from Standard and Poor’s (BBB-). Due to our debt covenant violation and operating trends, Fitch Ratings downgraded the Company’s rating on its revolving credit facility and term notes to non-investment

grade (BB+) in May 2009. As a result of our common stock offering in October 2009 and the use of proceeds to repay $100 million of term notes, Fitch Ratings upgraded our rating on our line of credit and term notes again to investment grade (BBB-). Combined, this credit rating upgrade, the repayment of $100 million of term notes and the termination of the interest rate swaps related to these term notes are expected to reduce our annualized interest by approximately $9.8 million.

In addition to the unsecured financing mentioned above, our consolidated financial statements also include $81.2 million of mortgages payable as detailed below:


*		7.80% mortgage note due December 2011, secured by 11 self-storage facilities (Locke Sovran I) with an aggregate net book value of $42.7 million, principal and interest paid monthly. The outstanding balance at December 31, 2009 on this mortgage was $28.4 million.

*		7.19% mortgage note due March 2012, secured by 27 self-storage facilities (Locke Sovran II) with an aggregate net book value of $80.3 million, principal and interest paid monthly. The outstanding balance at December 31, 2009 on this mortgage was $41.5 million.

*		7.25% mortgage note due December 2011, secured by 1 self-storage facility with an aggregate net book value of $5.7 million, principal and interest paid monthly. Estimated market rate at time of acquisition 5.40%. The outstanding balance at December 31, 2008 on this mortgage was $3.4 million.

*		6.76% mortgage note due September 2013, secured by 1 self-storage facility with an aggregate net book value of $2.0 million, principal and interest paid monthly. The outstanding balance at December 31, 2009 on this mortgage was $1.0 million.

*		6.35% mortgage note due March 2014, secured by 1 self-storage facility with an aggregate net book value of $3.7 million, principal and interest paid monthly. The outstanding balance at December 31, 2009 on this mortgage was $1.1 million.

*		7.50% mortgage notes due August 2011, secured by 3 self-storage facilities with an aggregate net book value of $14.0 million, principal and interest paid monthly. Estimated market rate at time of acquisition 6.42%. The outstanding balance at December 31, 2009 on this mortgage was $5.9 million.

The 7.80% and 7.19% mortgages were incurred in 2001 and 2002 respectively as part of the financing of the consolidated joint ventures. The Company assumed the 7.25%, 6.76%, 6.35%, and 7.50% mortgage notes in connection with the acquisitions of storage facilities in 2005 and 2006.

During 2009, we issued approximately 1.4 million shares via our Dividend Reinvestment and Stock Purchase Plan and Employee Stock Option Plan. We received $32.6 million from the sale of such shares. Our Dividend Reinvestment and Stock Purchase Plan was suspended in November 2009. We plan to reinstate our Dividend Reinvestment and Stock Purchase Plan in 2010 and expect to issue shares when our share price and capital needs warrant such issuance.

During 2009 and 2008, we did not acquire any shares of our common stock via the Share Repurchase Program authorized by the Board of Directors. From the inception of the Share Repurchase Program through December 31, 2009, we have reacquired a total of 1,171,886 shares pursuant to this program. From time to time, subject to market price and certain loan covenants, we may reacquire additional shares.

Future acquisitions, our expansion and enhancement program, and share repurchases are expected to be funded with draws on our line of credit, sale of properties and private placement solicitation of joint venture equity. Current capital market conditions may prevent us from accessing other traditional sources of capital including the issuance of common and preferred stock and the issuance of unsecured term notes. Should these capital market conditions persist, we may have to curtail acquisitions, our expansion and enhancement program, and share repurchases as we approach June 2011, when our line of credit matures.

CONTRACTUAL OBLIGATIONS

The following table summarizes our future contractual obligations:


		Payments due by period
Contractual
obligations	Total		2010		2011-2012		2013-2014		2015 and thereafter
Line of credit		—		—		—		—		—
Term notes	$	400.0 million		—	$	150.0 million	$	100.0 million	$	150.0 million
Mortgages payable	$	81.2 million	$	2.2 million	$	77.1 million	$	1.9 million		—
Interest payments	$	99.2 million	$	23.8 million	$	40.6 million	$	22.9 million	$	11.9 million
Interest rate swap payments	$	11.5 million	$	7.0 million	$	4.2 million	$	0.3 million		—
Land lease	$	1.1 million	$	0.1 million	$	0.1 million	$	0.1 million	$	0.8 million
Building leases	$	0.1 million	$	0.1 million		—		—		—

Total	$	593.1 million	$	33.2 million	$	272.0 million	$	125.2 million	$	162.7 million

Interest payments include actual interest on fixed rate debt and estimated interest for floating-rate debt based on December 31, 2009 rates. Interest rate swap payments include net settlements of swap liabilities based on forecasted variable rates.

ACQUISITION OF PROPERTIES

We acquired no properties in 2009. During 2008, we used operating cash flow, borrowings pursuant to the line of credit, borrowings under the bank term note, and proceeds from our Dividend Reinvestment and Stock Purchase Plan to acquire three Properties in Mississippi and Ohio comprising 0.2 million square feet from unaffiliated storage operators. During 2007, we used operating cash flow, borrowings pursuant to the line of credit, borrowings under the bank term note, proceeds from our Dividend Reinvestment and Stock Purchase Plan, and proceeds from the December 2006 common stock offering to acquire 31 Properties in Alabama, Florida, Mississippi, New York, and Texas comprising 2.3 million square feet from unaffiliated storage operators.

FUTURE ACQUISITION AND DEVELOPMENT PLANS

Our external growth strategy is to increase the number of facilities we own by acquiring suitable facilities in markets in which we already have operations, or to expand in new markets by acquiring several facilities at once in those new markets. No properties were acquired in 2009 and acquisitions in 2010 may be limited due to the fact that, at present, seller’s asking prices remain considerably higher than the Company believes market conditions warrant.

In 2009 we scaled back a planned $550 million program to expand and enhance our existing properties. Instead we spent approximately $18 million to add 175,000 square feet to existing Properties, and to convert 64,000 square feet to premium storage. We also completed construction of a new 78,000 square foot facility in Richmond, Virginia. Although we do not expect to construct any new facilities in 2010, we do plan to expend up to $20 million to expand and enhance existing facilities.

DISPOSITION OF PROPERTIES

During 2009, we sold five non-strategic storage facilities in Massachusetts, North Carolina, and Pennsylvania for net cash proceeds of $16.3 million resulting in a loss of $1.6 million. During 2008, we sold one non-strategic storage facility located in Michigan for net cash proceeds of $7.0 million resulting in a gain of $0.7 million. No sales took place in 2007.

We may seek to sell additional Properties to third parties or joint venture programs in 2010.

OFF-BALANCE SHEET ARRANGEMENTS

We have a 20% ownership interest in Sovran HHF Storage Holdings LLC (“Sovran HHF”), a joint venture that was formed in May 2008 to acquire self-storage properties that are managed by us. The carrying value of our investment at December 31, 2009 was $19.9 million. Twenty five properties were acquired by Sovran HHF as of December 31, 2008 for approximately $171.5 million. We contributed $18.6 million to the joint venture as our share of capital required to fund the acquisitions.

As manager of Sovran HHF, we earn a management and call center fee of 7% of gross revenues which totaled $1.2 million and $0.5 million for 2009 and 2008, respectively. We also received an acquisition fee of 0.5% or $0.7 million of purchase price for securing purchases for the joint venture in 2008. Our share of Sovran HHF’s income for 2009 and 2008 was $0.2 million and $0.1 million, respectively. At December 31, 2009, Sovran HHF owed us $0.2 million for payments made by us on behalf of the joint venture.

We also have a 49% ownership interest in Iskalo Office Holdings, LLC, which owns the building that houses the Company’s headquarters and other tenants. Our investment includes a capital contribution of $49. The carrying value of our investment is a liability of $0.5 million at December 31, 2009 and 2008, and is included in accounts payable and accrued liabilities in the accompanying consolidated balance sheets. For the years ended December 31, 2009, 2008 and 2007, our share of Iskalo Office Holdings, LLC’s income (loss) was $7,000, ($6,000), and $80,000, respectively. We paid rent to Iskalo Office Holdings, LLC of $608,000, $600,000 and $561,000 in 2009, 2008, and 2007, respectively. Future minimum lease payments under the lease are $0.6 million per year through 2010.

A summary of the unconsolidated joint venture’s financial statements as of and for the year ended December 31, 2009 is as follows:


	Sovran HHF
	Storage		Iskalo Office
(dollars in thousands)	Holdings LLC		Holdings, LLC
Balance Sheet Data:
Investment in storage facilities, net	$	168,237	$	—
Investment in office building		—		5,322
Other assets		3,575		688

Total Assets	$	171,812	$	6,010


Due to the Company	$	173	$	—
Mortgages payable		78,512		7,037
Other liabilities		2,087		224

Total Liabilities		80,772		7,261

Unaffiliated partners’ equity (deficiency)		72,832		(714	)
Company equity (deficiency)		18,208		(537	)

Total Liabilities and Partners’ Equity (deficiency)	$	171,812	$	6,010


Income Statement Data:
Total revenues	$	17,702	$	1,129
Total expenses		16,761		1,115

Net income	$	941	$	14

We do not expect to have material future cash outlays relating to these joint ventures outside our share of capital for future acquisitions of properties by Sovran HHF. We do not guarantee the debt of Sovran HHF or Iskalo Office Holdings, LLC. A summary of our cash flows arising from the off-balance sheet arrangements with Sovran

HHF and Iskalo Office Holdings, LLC for the three years ended December 31, 2009 are as follows:


	Year ended December 31,
(dollars in thousands)	2009			2008			2007
Statement of Operations
Other operating income (management fees and acquisition fee income)	$	1,243		$	1,135		$	—
General and administrative expenses (corporate office rent)		608			600			561
Equity in income of joint ventures		235			104			119
Distributions from unconsolidated joint ventures		686			345			98

Investing activities
Investment in joint ventures		(331	)		(20,287	)		—
Reimbursement of advances to (advances to) joint ventures		163			(336	)		—

REIT QUALIFICATION AND DISTRIBUTION REQUIREMENTS

As a REIT, we are not required to pay federal income tax on income that we distribute to our shareholders, provided that the amount distributed is equal to at least 90% of our taxable income. These distributions must be made in the year to which they relate, or in the following year if declared before we file our federal income tax return, and if it is paid before the first regular dividend of the following year. The first distribution of 2010 may be applied toward our 2009 distribution requirement.

As a REIT, we must derive at least 95% of our total gross income from income related to real property, interest and dividends. In 2009, our percentage of revenue from such sources was approximately 98%, thereby passing the 95% test, and no special measures are expected to be required to enable us to maintain our REIT designation. Although we currently intend to operate in a manner designed to qualify as a REIT, it is possible that future economic, market, legal, tax or other considerations may cause our Board of Directors to revoke our REIT election.

INTEREST RATE RISK

We have entered into interest rate swap agreements in order to mitigate the effects of fluctuations in interest rates on our variable rate debt. At December 31, 2009, we have three outstanding interest rate swap agreements as summarized below:

Fixed

Floating Rate

Notional Amount

Effective Date

Expiration Date

Rate Paid

Received

$20 Million

9/4/05

9/4/13

4.4350

6 month LIBOR

$50 Million

7/1/08

6/25/12

4.2825

1 month LIBOR

$100 Million

7/1/08

6/22/12

4.2965

1 month LIBOR

Upon renewal or replacement of the credit facility, our total interest may change dependent on the terms we negotiate with the lenders; however, the LIBOR base rates have been contractually fixed on $170 million of our debt through the interest rate swap termination dates.

Through June 2012, all of our $400 million of unsecured debt is on a fixed rate basis after taking into account the interest rate swaps noted above. Based on our outstanding unsecured debt of $400 million at December 31, 2009, a 100 basis point increase in interest rates would have no effect on our interest expense.

The table below summarizes our debt obligations and interest rate derivatives at December 31, 2009. The estimated fair value of financial instruments is subjective in nature and is dependent on a number of important assumptions, including discount rates and relevant comparable market information associated with each financial

instrument. The use of different market assumptions and estimation methodologies may have a material effect on the reported estimated fair value amounts. Accordingly, the estimates presented below are not necessarily indicative of the amounts the Company would realize in a current market exchange.


	Expected Maturity Date Including Discount
															Fair
(dollars in thousands)	2010		2011		2012		2013		2014		Thereafter		Total		Value
Line of credit — variable rate LIBOR + 1.375 (1.61% at December 31, 2009)		—		—		—		—		—		—		—		—

Notes Payable:
Term note — variable rate LIBOR+1.625% (1.86% at December 31, 2009)		—		—	$	150,000		—		—		—	$	150,000	$	150,000
Term note — variable rate LIBOR+1.50% (2.23% at December 31, 2009)		—		—		—	$	20,000		—		—	$	20,000	$	20,000
Term note — fixed rate 6.26%		—		—		—	$	80,000		—		—	$	80,000	$	76,958
Term note — fixed rate 6.38%		—		—		—		—		—	$	150,000	$	150,000	$	136,630

Mortgage note — fixed rate 7.80%	$	630	$	27,817		—		—		—		—	$	28,447	$	29,454
Mortgage note — fixed rate 7.19%	$	1,211	$	1,301	$	38,963		—		—		—	$	41,475	$	43,133
Mortgage note — fixed rate 7.25%	$	149	$	3,220		—		—		—		—	$	3,369	$	3,385
Mortgage note — fixed rate 6.76%	$	25	$	27	$	29	$	896		—		—	$	977	$	1,011
Mortgage note — fixed rate 6.35%	$	28	$	30	$	31	$	34	$	949		—	$	1,072	$	1,059
Mortgage notes — fixed rate 7.50%	$	222	$	5,657		—		—		—		—	$	5,879	$	6,003

Interest rate derivatives – liability		—		—		—		—		—		—		—	$	11,524

INFLATION

We do not believe that inflation has had or will have a direct effect on our operations. Substantially all of the leases at the facilities are on a month-to-month basis which provides us with the opportunity to increase rental rates as each lease matures.

SEASONALITY

Our revenues typically have been higher in the third and fourth quarters, primarily because we increase rental rates on most of our storage units at the beginning of May and because self-storage facilities tend to experience greater occupancy during the late spring, summer and early fall months due to the greater incidence of residential moves during these periods. However, we believe that our customer mix, diverse geographic locations, rental structure and expense structure provide adequate protection against undue fluctuations in cash flows and net revenues during off-peak seasons. Thus, we do not expect seasonality to affect materially distributions to shareholders.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

The information required is incorporated by reference to the information appearing under the caption “Interest Rate Risk” in Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” above.

Item 8. Financial Statements and Supplementary Data

Report of Independent Registered Public Accounting Firm

The Board of Directors and Shareholders of Sovran Self Storage, Inc.

We have audited the accompanying consolidated balance sheets of Sovran Self Storage, Inc. as of December 31, 2009 and 2008, and the related consolidated statements of operations, shareholders’ equity and comprehensive income, and cash flows for each of the three years in the period ended December 31, 2009. Our audits also included the financial statement schedule listed in the Index at Item 15(a). These financial statements and schedule are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements and schedule based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Sovran Self Storage, Inc. at December 31, 2009 and 2008, and the consolidated results of its operations and its cash flows for each of the three years in the period ended December 31, 2009, in conformity with U.S. generally accepted accounting principles. Also, in our opinion, the related financial statement schedule, when considered in relation to the basic financial statements taken as a whole, presents fairly in all material respects the information set forth therein.

As discussed in Note 2 to the consolidated financial statements, the Company retrospectively adjusted the consolidated financial statements as a result of the Company’s adoption of Statement of Financial Accounting Standards No. 160, “Noncontrolling Interests in Consolidated Financial Statements – an Amendment of ARB No. 51” (codified in FASB ASC Topic 810 “Consolidation”) on January 1, 2009.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), Sovran Self Storage, Inc.’s internal control over financial reporting as of December 31, 2009, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated February 26, 2010 expressed an unqualified opinion thereon.

/s/ Ernst & Young LLP

Buffalo, New York
February 26, 2010

SOVRAN SELF STORAGE, INC.
CONSOLIDATED BALANCE SHEETS


	December 31,
(dollars in thousands, except share data)	2009			2008
Assets
Investment in storage facilities:
Land	$	237,684		$	236,655
Building, equipment, and construction in progress		1,149,899			1,129,960

		1,387,583			1,366,615
Less: accumulated depreciation		(245,178	)		(212,301	)

Investment in storage facilities, net		1,142,405			1,154,314
Cash and cash equivalents		10,710			4,486
Accounts receivable		2,405			2,934
Receivable from related parties		—			14
Receivable from unconsolidated joint venture		173			336
Investment in unconsolidated joint venture		19,944			20,111
Prepaid expenses		4,250			4,647
Other assets		5,314			7,460
Net assets of discontinued operations		—			18,226

Total Assets	$	1,185,201		$	1,212,528


Liabilities
Line of credit	$	—		$	14,000
Term notes		400,000			500,000
Accounts payable and accrued liabilities		22,339			23,970
Deferred revenue		5,060			5,570
Fair value of interest rate swap agreements		11,524			25,490
Accrued dividends		—			14,090
Mortgages payable		81,219			109,261

Total Liabilities		520,142			692,381

Noncontrolling redeemable Operating Partnership Units at redemption value		15,005			15,118

Shareholders’ Equity
Common stock $.01 par value, 100,000,000 shares authorized, 27,547,027 shares outstanding (22,016,348 at December 31, 2008)		287			232
Additional paid-in capital		814,988			666,633
Dividends in excess of net income		(139,863	)		(122,581	)
Accumulated other comprehensive income		(11,265	)		(25,162	)
Treasury stock at cost, 1,171,886 shares		(27,175	)		(27,175	)

Total Shareholders’ Equity		636,972			491,947
Noncontrolling interest- consolidated joint venture		13,082			13,082

Total Equity		650,054			505,029

Total Liabilities and Shareholders’ Equity	$	1,185,201		$	1,212,528

See notes to consolidated financial statements.

SOVRAN SELF STORAGE, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS


	Year Ended December 31,
(dollars in thousands, except per share data)	2009			2008			2007
Revenues
Rental income	$	186,892		$	192,474		$	183,802
Other operating income		8,119			7,719			6,211

Total operating revenues		195,011			200,193			190,013

Expenses
Property operations and maintenance		51,955			54,858			51,466
Real estate taxes		19,591			18,706			17,095
General and administrative		18,650			17,279			15,234
Depreciation and amortization		33,384			33,876			33,360

Total operating expenses		123,580			124,719			117,155


Income from operations		71,431			75,474			72,858

Other income (expenses)
Interest expense		(50,050	)		(38,097	)		(33,861	)
Interest income		85			322			954
Casualty (loss) gain		(390	)		—			114
Gain on sale of land		1,127			—			—
Equity in income of joint ventures		235			104			119


Income from continuing operations		22,438			37,803			40,184
(Loss) income from discontinued operations (including loss on disposal of $1,636 in 2009 and gain on disposal of $716 in 2008)		(784	)		1,880			1,661

Net income		21,654			39,683			41,845
Preferred stock dividends		—			—			(1,256	)
Net income attributable to noncontrolling interest		(1,738	)		(2,284	)		(2,631	)

Net income attributable to common shareholders	$	19,916		$	37,399		$	37,958


Earnings per common share attributable to common shareholders — basic
Continuing operations	$	0.87		$	1.63		$	1.73
Discontinued operations		(0.03	)		0.09			0.08

Earning per share — basic	$	0.84		$	1.72		$	1.81


Earnings per common share attributable to common shareholders — diluted
Continuing operations	$	0.87		$	1.63		$	1.73
Discontinued operations		(0.03	)		0.09			0.08

Earning per share — diluted	$	0.84		$	1.72		$	1.81


Dividends declared per common share	$	1.54		$	2.54		$	2.50

See notes to consolidated financial statements.

SOVRAN SELF STORAGE, INC.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY AND COMPREHENSIVE INCOME


	8.375% Series
	C Preferred			8.375% Series C			Common
	Stock			Preferred			Stock		Common
(dollars in thousands, except share data)	Shares			Stock			Shares		Stock
Balance January 1, 2007		1,200,000			26,613			20,443,529		216
Net proceeds from issuance of stock through Dividend Reinvestment and Stock Purchase Plan		—			—			252,816		3
Exercise of stock options		—			—			13,100		—
Issuance of non-vested stock		—			—			43,989		—
Earned portion of non-vested stock		—			—			—		—
Stock option expense		—			—			—		—
Deferred compensation outside directors		—			—			—		—
Conversion of Series C Preferred Stock to common stock and exercise of related stock warrants		(1,200,000	)		(26,613	)		920,244		9
Conversion of operating partnership units to common stock		—			—			2,908		—
Carrying value less than redemption value on redeemed partnership units		—			—			—		—
Adjustment to redemption value of noncontrolling redeemable Operating Partnership Units		—			—			—		—
Net income		—			—			—		—
Change in fair value of derivatives		—			—			—		—
Total comprehensive income		—			—			—		—
Dividends		—			—			—		—

Balance December 31, 2007		—			—			21,676,586		228
Net proceeds from issuance of stock through Dividend Reinvestment and Stock Purchase Plan		—			—			285,308		3
Exercise of stock options		—			—			2,600		—
Issuance of non-vested stock		—			—			45,713		1
Earned portion of non-vested stock		—			—			—		—
Stock option expense		—			—			—		—
Deferred compensation outside directors		—			—			6,141		—
Carrying value less than redemption value on redeemed partnership units		—			—			—		—
Adjustment to redemption value of noncontrolling redeemable Operating Partnership Units		—			—			—		—
Net income		—			—			—		—
Change in fair value of derivatives		—			—			—		—
Total comprehensive income		—			—			—		—
Dividends		—			—			—		—

Balance December 31, 2008		—			—			22,016,348		232
Net proceeds from the issuance of common stock		—			—			4,025,000		40
Net proceeds from issuance of stock through Dividend Reinvestment and Stock Purchase Plan		—			—			1,430,521		14
Exercise of stock options		—			—			3,770		—
Issuance of non-vested stock		—			—			59,590		1
Earned portion of non-vested stock		—			—			—		—
Stock option expense		—			—			—		—
Deferred compensation outside directors		—			—			11,798		—
Adjustment to redemption value of noncontrolling redeemable Operating Partnership Units		—			—			—		—
Net income		—			—			—		—
Change in fair value of derivatives		—			—			—		—
Total comprehensive income		—			—			—		—
Dividends		—			—			—		—

Balance December 31, 2009		—		$	—			27,547,027	$	287

See notes to consolidated financial statements

SOVRAN SELF STORAGE, INC.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY AND COMPREHENSIVE INCOME


	Additional			Dividends in			Accumulated
	Paid-in			Excess of			Other Comprehensive			Treasury			Total
(dollars in thousands, except share data)	Capital			Net Income			Income (loss)			Stock			Equity
Balance January 1, 2007		612,738			(98,020	)		2,128			(27,175	)		516,500
Net proceeds from issuance of stock through Dividend Reinvestment and Stock Purchase Plan		12,756			—			—			—			12,759
Exercise of stock options		425			—			—			—			425
Issuance of non-vested stock		—			—			—			—			—
Earned portion of non-vested stock		1,224			—			—			—			1,224
Stock option expense		183			—			—			—			183
Deferred compensation outside directors		161			—			—			—			161
Conversion of Series C Preferred Stock to common stock and exercise of related stock warrants.		26,604			—			—			—			—
Conversion of operating partnership units to common stock		167			—			—			—			167
Carrying value less than redemption value on redeemed partnership units		(117	)		—			—			—			(117	)
Adjustment to redemption value of noncontrolling redeemable Operating Partnership Units		—			7,119			—			—			7,119
Net income		—			39,214			—			—			39,214
Change in fair value of derivatives		—			—			(3,496	)		—			(3,496	)

Total comprehensive income		—			—			—			—			35,718
Dividends		—			(54,042	)		—			—			(54,042	)

Balance December 31, 2007		654,141			(105,729	)		(1,368	)		(27,175	)		520,097
Net proceeds from issuance of stock through Dividend Reinvestment and Stock Purchase Plan		10,654			—			—			—			10,657
Exercise of stock options		72			—			—			—			72
Issuance of non-vested stock		—			—			—			—			1
Earned portion of non-vested stock		1,444			—			—			—			1,444
Stock option expense		279			—			—			—			279
Deferred compensation outside directors		112			—			—			—			112
Carrying value less than redemption value on redeemed partnership units		(69	)		—			—			—			(69	)
Adjustment to redemption value of noncontrolling redeemable Operating Partnership Units		—			1,439			—			—			1,439
Net income		—			37,399			—			—			37,399
Change in fair value of derivatives		—			—			(23,794	)		—			(23,794	)

Total comprehensive income		—			—			—			—			13,605
Dividends		—			(55,690	)		—			—			(55,690	)

Balance December 31, 2008		666,633			(122,581	)	$	(25,162	)		(27,175	)		491,947
Net proceeds from the issuance of common stock		113,931			—			—			—			113,971
Net proceeds from issuance of stock through Dividend Reinvestment and Stock Purchase Plan		32,548			—			—			—			32,562
Exercise of stock options		62			—			—			—			62
Issuance of non-vested stock		—			—			—			—			1
Earned portion of non-vested stock		1,379			—			—			—			1,379
Stock option expense		321			—			—			—			321
Deferred compensation outside directors		114			—			—			—			114
Adjustment to redemption value of noncontrolling redeemable Operating Partnership Units		—			(156	)		—			—			(156	)
Net income		—			19,916			—			—			19,916
Change in fair value of derivatives		—			—			13,897			—			13,897

Total comprehensive income		—			—			—			—			33,813
Dividends		—			(37,042	)		—			—			(37,042	)

Balance December 31, 2009	$	814,988		$	(139,863	)	$	(11,265	)	$	(27,175	)	$	636,972

SOVRAN SELF STORAGE, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS


	Year Ended December 31,
(dollars in thousands)	2009			2008			2007
Operating Activities
Net income	$	21,654		$	39,683		$	41,845
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		35,656			35,659			34,999
Loss (gain) on sale of storage facilities		1,636			(716	)		—
Gain on sale of land		(1,127	)		—			—
Casualty loss (gain)		390			—			(114	)
Equity in income of joint ventures		(235	)		(104	)		(119	)
Distributions from unconsolidated joint venture		686			345			98
Non-vested stock earned		1,379			1,444			1,224
Stock option expense		321			279			183
Changes in assets and liabilities:
Accounts receivable		509			(171	)		(599	)
Prepaid expenses		413			118			822
Accounts payable and other liabilities		(1,677	)		619			7,082
Deferred revenue		(462	)		(24	)		(246	)

Net cash provided by operating activities		59,143			77,132			85,175

Investing Activities
Acquisition of storage facilities		—			(18,547	)		(138,059	)
Improvements, equipment additions, and construction in progress		(22,261	)		(45,709	)		(52,441	)
Net proceeds from the sale of storage facility		16,309			7,002			—
Net proceeds from the sale of land		1,140			—			—
Casualty insurance proceeds received		518			—			1,692
Investment in unconsolidated joint venture		(331	)		(20,287	)		—
Additional investment in consolidated joint ventures net of cash acquired		—			(6,106	)		—
Reimbursement of advances (advances) to joint ventures		163			(336	)		—
Reimbursement of (payment of) property deposits		—			1,259			(1,469	)
Receipts from related parties		14			13			10

Net cash used in investing activities		(4,448	)		(82,711	)		(190,267	)

Financing Activities
Net proceeds from sale of common stock		146,710			10,842			13,345
Proceeds from line of credit		30,000			14,000			112,000
Repayment of line of credit and term note		(144,000	)		(206,000	)		(12,000	)
Proceeds from term notes		—			250,000			6,000
Financing costs		—			(3,085	)		(316	)
Dividends paid — common stock		(51,133	)		(55,256	)		(51,805	)
Dividends paid — preferred stock		—			—			(1,256	)
Distributions to noncontrolling interest holders		(2,006	)		(2,633	)		(2,912	)
Redemption of operating partnership units		—			(114	)		(174	)
Mortgage principal and capital lease payments		(28,042	)		(1,699	)		(1,510	)

Net cash (used in) provided by financing activities		(48,471	)		6,055			61,372

Net increase (decrease) in cash		6,224			476			(43,720	)
Cash at beginning of period		4,486			4,010			47,730

Cash at end of period	$	10,710		$	4,486		$	4,010


Supplemental cash flow information
Cash paid for interest, net of interest capitalized	$	49,154		$	37,970		$	32,313

Fair value of net liabilities assumed on the acquisition of storage facilities		—			107			1,580

Dividends declared but unpaid at December 31, 2009, 2008 and 2007 were $0, $14,090, and $13,656, respectively.

See notes to consolidated financial statements.

SOVRAN SELF STORAGE, INC. — DECEMBER 31, 2009
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. ORGANIZATION

Sovran Self Storage, Inc. (the “Company,” “We,” “Our,” or “Sovran”), a self-administered and self-managed real estate investment trust (a “REIT”), was formed on April 19, 1995 to own and operate self-storage facilities throughout the United States. On June 26, 1995, the Company commenced operations effective with the completion of its initial public offering. At December 31, 2009, we had an ownership interest in and managed 381 self-storage properties in 24 states under the name Uncle Bob’s Self Storage ^®. Among our 381 self-storage properties are 27 properties that we manage for a consolidated joint venture of which we are a majority owner and 25 properties that we manage for an unconsolidated joint venture of which we are a 20% owner. Approximately 42% of the Company’s revenue is derived from stores in the states of Texas and Florida.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation: All of the Company’s assets are owned by, and all its operations are conducted through, Sovran Acquisition Limited Partnership (the “Operating Partnership”). Sovran Holdings, Inc., a wholly-owned subsidiary of the Company (the “Subsidiary”), is the sole general partner of the Operating Partnership; the Company is a limited partner of the Operating Partnership, and through its ownership of the Subsidiary and its limited partnership interest controls the operations of the Operating Partnership, holding a 98.5% ownership interest therein as of December 31, 2009. The remaining ownership interests in the Operating Partnership (the “Units”) are held by certain former owners of assets acquired by the Operating Partnership subsequent to its formation.

We consolidate all wholly owned subsidiaries. Partially owned subsidiaries and joint ventures are consolidated when we control the entity. Our consolidated financial statements include the accounts of the Company, the Operating Partnership, Locke Sovran I, LLC, and Locke Sovran II, LLC, which is a majority owned joint venture. All intercompany transactions and balances have been eliminated. Investments in joint ventures that we do not control but for which we have significant influence over are reported using the equity method.

In June 2008, the Company made an additional investment of $6.1 million in Locke Sovran I, LLC that increased the Company’s ownership from approximately 70% to 100%.

In December 2007, the FASB issued additional accounting guidance now codified in ASC Topic 810, “Consolidation” through the issuance of FASB Statement No. 160, “Noncontrolling Interests in Consolidated Financial Statements” (“SFAS No. 160”) which was adopted by the Company on January 1, 2009. The additional guidance requires that the portion of equity in a subsidiary attributable to the owners of the subsidiary other than the parent or the parent’s affiliates be labeled “noncontrolling interests” and presented in the consolidated balance sheet as a component of equity. The additional guidance does not significantly change the Company’s past accounting practices with respect to the attribution of net income between controlling and noncontrolling interests, however, the provisions of the additional guidance require that earnings attributable to noncontrolling interests be reported as part of consolidated earnings and not as a separate component of income or expense. In addition, the additional guidance requires the disclosure of the attribution of consolidated earnings to the controlling and noncontrolling interests on the face of the statement of operations. The presentation and disclosure requirements of the additional guidance are applied retrospectively and all prior period information has been presented and disclosed in accordance with these new requirements. The adoption of this additional guidance did not result in any differences between net income available to common shareholders as previously reported and net income attributable to common shareholders as currently reported.

As a result of the adoption of these additional guidelines we now present noncontrolling interests in Locke Sovran II, LLC as a separate component of equity, called “Noncontrolling interests — consolidated joint venture” in the consolidated balance sheets. Prior to the adoption of these additional guidelines, the noncontrolling interests in Locke Sovran I, LLC and Locke Sovran II, LLC were called “Minority interest — consolidated joint venture” and were presented in the “mezzanine” section of the consolidated balance sheet, above equity. The following table sets forth the activity in the noncontrolling interest — consolidated joint venture:


(Dollars in thousands)	2009			2008
Beginning balance noncontrolling interests — consolidated joint venture	$	13,082		$	16,783
Carrying value of Locke Sovran I, LLC purchased in 2008 for $6.1 million		—			(3,701	)
Net income attributable to noncontrolling interests — consolidated joint venture		1,360			1,563
Distributions		(1,360	)		(1,563	)

Ending balance noncontrolling interests — consolidated joint venture	$	13,082		$	13,082

Included in the consolidated balance sheets are noncontrolling redeemable operating partnership units. Prior to the adoption of these additional guidelines, we referred to these noncontrolling interests as “Minority interest — Operating Partnership.” These interests are presented in the “mezzanine” section of the consolidated balance sheet because they don’t meet the functional definition of a liability or equity under current authorative accounting literature. These represent the outside ownership interests of the limited partners in the Operating Partnership. At December 31, 2009 and 2008, there was 419,952 noncontrolling redeemable operating partnership Units outstanding. The Operating Partnership is obligated to redeem each of these limited partnership Units in the Operating Partnership at the request of the holder thereof for cash equal to the fair market value of a share of the Company’s common stock, at the time of such redemption, provided that the Company at its option may elect to acquire any such Unit presented for redemption for one common share or cash. Effective January 1, 2009, the Company accounts for these noncontrolling redeemable Operating Partnership Units under the provisions of FASB ASC Topic 480-10-S99. The application of the FASB ASC Topic 480-10-S99 accounting model requires the noncontrolling interest to follow normal noncontrolling interest accounting and then be marked to redemption value at the end of each reporting period if higher (but never adjusted below that normal noncontrolling interest accounting amount). The offset to the adjustment to the carrying amount of the noncontrolling redeemable Operating Partnership Units is reflected in accumulated deficit. Accordingly, in the accompanying consolidated balance sheet, noncontrolling redeemable Operating Partnership Units are reflected at redemption value at December 31, 2009 and December 31, 2008, equal to the number of Units outstanding multiplied by the fair market value of the Company’s common stock at that date. Redemption value exceeded the value determined under the Company’s historical basis of accounting at those dates.


(Dollars in thousands)	2009			2008
Beginning balance noncontrolling redeemable Operating Partnership Units	$	15,118		$	16,951
Redemption of Operating Partnership Units		—			(115	)
Redemption value in excess of carrying value		—			70
Net income attributable to noncontrolling interests — consolidated joint venture		378			721
Distributions		(647	)		(1,070	)
Adjustment to redemption value		156			(1,439	)

Ending balance noncontrolling redeemable Operating Partnership Units	$	15,005		$	15,118

Retrospective Impact of New Accounting Pronouncement Adopted January 1, 2009 (in thousands):

Statement of Operations:


	For the Year Ended December 31, 2008:
	As Previously Reported
	adjusted for discontinued
	operations		Adjustments		As Adjusted
Income from continuing operations	$	35,519	$	2,284	$	37,803
Net income		37,399		2,284		39,683
Net income attributable to noncontrolling interest		—		2,284		2,284
Net income attributable to common shareholders		—		37,399		37,399


	For the Year Ended December 31, 2007:
	As Previously Reported
	adjusted for discontinued
	operations		Adjustments		As Adjusted
Income from continuing operations	$	37,553	$	2,631	$	40,184
Net income		39,214		2,631		41,845
Net income attributable to noncontrolling interest		—		2,631		2,631
Net income attributable to common shareholders		—		37,958		37,958

Balance Sheet:


	December 31, 2008:
	As Previously Reported			Adjustments			As Adjusted
Minority interest — operating partnership	$	9,265		$	(9,265	)	$	—
Noncontrolling redeemable operating partnership units		—			15,118			15,118
Minority interest — consolidated joint venture		13,082			(13,082	)		—
Accumulated deficit		(116,728	)		(5,853	)		(122,581	)
Total shareholders’ equity		497,800			(5,853	)		491,947
Noncontrolling interest — consolidated joint venture		—			13,082			13,082
Total equity		497,800			7,229			505,029

Statement of Cash Flows:


	For the Year Ended December 31, 2008:
	As Previously Reported		Adjustments			As Adjusted
Net income		37,399		2,284			39,683
Minority interest		2,284		(2,284	)		—


	For the Year Ended December 31, 2007:
	As Previously Reported		Adjustments			As Adjusted
Net income		39,214		2,631			41,845
Minority interest		2,631		(2,631	)		—

Cash and Cash Equivalents: The Company considers all highly liquid investments purchased with maturities of three months or less to be cash equivalents. The cash balance includes $2.3 million and $3.8 million, respectively, held in escrow for encumbered properties at December 31, 2009 and 2008.

Revenue and Expense Recognition: Rental income is recognized when earned pursuant to month-to-month leases for storage space. Promotional discounts are recognized as a reduction to rental income over the promotional period, which is generally during the first month of occupancy. Rental income received prior to the start of the rental period is included in deferred revenue. Equity in earnings of real estate joint ventures that we have significant influence over is recognized based on our ownership interest in the earnings of these entities.

Cost of operations, general and administrative expense, interest expense and advertising costs are expensed as incurred. For the years ended December 31, 2009, 2008, and 2007, advertising costs were $1.9 million, $1.4 million, and $1.4 million, respectively. The Company accrues property taxes based on estimates and historical trends. If these estimates are incorrect, the timing and amount of expense recognition would be affected.

Other Operating Income: Consists primarily of sales of storage-related merchandise (locks and packing supplies), insurance commissions, incidental truck rentals, and management fees from unconsolidated joint ventures.

Investment in Storage Facilities: Storage facilities are recorded at cost. The purchase price of acquired facilities is allocated to land, building, equipment, and in-place customer leases based on the fair value of each component. Depreciation is computed using the straight-line method over estimated useful lives of forty years for buildings and improvements, and five to twenty years for furniture, fixtures and equipment. Expenditures for significant renovations or improvements that extend the useful life of assets are capitalized. Interest and other costs incurred during the construction period of major expansions are capitalized. Capitalized interest during the years ended December 31, 2009, 2008, and 2007 was $0.2, $0.4 million and $0.4 million, respectively. Repair and

maintenance costs are expensed as incurred.

Whenever events or changes in circumstances indicate that the basis of the Company’s property may not be recoverable, the Company’s policy is to assess any impairment of value. Impairment is evaluated based upon comparing the sum of the expected undiscounted future cash flows to the carrying value of the property, on a property by property basis. If the sum of the undiscounted cash flow is less than the carrying amount, an impairment loss is recognized for the amount by which the carrying amount of the asset exceeds the fair value of the asset. At December 31, 2009 and 2008, no assets had been determined to be impaired under this policy and, accordingly, this policy had no impact on the Company’s financial position or results of operations.

Other Assets: Included in other assets are net loan acquisition costs, a note receivable, property deposits, and the value placed on in-place customer leases at the time of acquisition. The loan acquisition costs were $5.9 million and $6.8 million at December 31, 2009, and 2008, respectively. Accumulated amortization on the loan acquisition costs was approximately $3.4 million and $2.5 million at December 31, 2009, and 2008, respectively. Loan acquisition costs are amortized over the terms of the related debt. The note receivable of $2.8 million represents a note from certain investors of Locke Sovran II, LLC. The note bears interest at LIBOR plus 2.4% and matures upon the dissolution of Locke Sovran II, LLC. There were no property deposits at December 31, 2009 and $0.1 million at December 31, 2008.

The Company allocates a portion of the purchase price of acquisitions to in-place customer leases. The value of in-place customer leases is based on the Company’s experience with customer turnover. The Company amortizes in-place customer leases on a straight-line basis over 12 months (the estimated future benefit period). At December 31, 2009, the gross carrying amount of in-place customer leases was $5.4 million and the accumulated amortization was $5.4 million

Amortization expense, including amortization of in-place customer leases, was $2.1 million, $2.5 million and $4.8 million for the periods ended December 31, 2009, 2008 and 2007, respectively.

Accounts Payable and Accrued Liabilities: Accounts payable and accrued liabilities consists primarily of trade payables, accrued interest, and property tax accruals. The Company accrues property tax expense based on estimates and historical trends. Actual expense could differ from these estimates.

Income Taxes: The Company qualifies as a REIT under the Internal Revenue Code of 1986, as amended, and will generally not be subject to corporate income taxes to the extent it distributes at least 90% of its taxable income to its shareholders and complies with certain other requirements. Accordingly, no provision has been made for federal income taxes in the accompanying financial statements. On an aggregate basis, the Company’s reported amounts of net assets exceeds the tax basis by approximately $73 million and $74 million at December 31, 2009 and 2008, respectively.

Comprehensive Income: Comprehensive income consists of net income and the change in value of derivatives used for hedging purposes and is reported in the consolidated statements of shareholders’ equity. Comprehensive income was $33.8 million, $13.6 million and $35.7 million for the years ended December 31, 2009, 2008, and 2007, respectively.

Derivative Financial Instruments: The Company accounts for derivatives in accordance with ASC Topic 815 “Derivatives and Hedging", which requires companies to carry all derivatives on the balance sheet at fair value. The Company determines the fair value of derivatives by reference to quoted market prices. The accounting for changes in the fair value of a derivative instrument depends on whether it has been designated and qualifies as part of a hedging relationship and, if so, the reason for holding it. The Company’s use of derivative instruments is limited to cash flow hedges of certain interest rate risks.

Recent Accounting Pronouncements: In June 2009, the FASB issued revised accounting guidance under ASC Topic 810, “Consolidation” by issuing SFAS No. 167, “Amendments to FASB Interpretation No. 46(R)” (“SFAS 167”). The revised guidance amends previous guidance (as previously required under FASB Interpretation No. 46(R), “Variable Interest Entities”) for determining whether an entity is a variable interest entity (“VIE”) and requires an enterprise to perform an analysis to determine whether the enterprise’s variable interest or interests give

it a controlling financial interest in a VIE. Under the revised guidance, an enterprise has a controlling financial interest when it has a) the power to direct the activities of a VIE that most significantly impact the entity’s economic performance and b) the obligation to absorb losses of the entity or the right to receive benefits from the entity that could potentially be significant to the VIE. The revised guidance also requires an enterprise to assess whether it has an implicit financial responsibility to ensure that a VIE operates as designed when determining whether it has power to direct the activities of the VIE that most significantly impact the entity’s economic performance. The revised guidance also requires ongoing assessments of whether an enterprise is the primary beneficiary of a VIE, requires enhanced disclosures and eliminates the scope exclusion for qualifying special-purpose entities. The revised guidance is effective for the first annual reporting period that begins after November 15, 2009, with early adoption prohibited. The Company is currently evaluating the impact that the adoption of the revised guidance will have on its consolidated financial statements.

In May 2009, the FASB issued accounting guidance now codified as FASB ASC Topic 855, "Subsequent Events”. FASB ASC Topic 855 establishes general standards for accounting for and disclosure of events that occur after the balance sheet date but before financial statements are available to be issued (“subsequent events”). More specifically, FASB ASC Topic 855 sets forth the period after the balance sheet date during which management of a reporting entity should evaluate events or transactions that may occur for potential recognition in the financial statements, identifies the circumstances under which an entity should recognize events or transactions occurring after the balance sheet date in its financial statements and the disclosures that should be made about events or transactions that occur after the balance sheet date. FASB ASC Topic 855 provides largely the same guidance on subsequent events which previously existed only in auditing literature. We adopted FASB ASC Topic 855 on April 1, 2009. We have evaluated subsequent events through February 26, 2010, the date this quarterly report on Form 10-K was filed with the U.S. Securities and Exchange Commission. See Note 17 for further information regarding our evaluation of subsequent events.

Stock-Based Compensation: Effective January 1, 2006, the Company adopted ASC Topic 718, "Compensation — Stock Compensation” (formerly, FASB Statement 123R) and uses the modified-prospective method. Under the modified-prospective method, the Company recognizes compensation cost in the financial statements issued subsequent to January 1, 2006 for all share based payments granted, modified, or settled after the date of adoption as well as for any awards that were granted prior to the adoption date for which the requisite service period has not been completed as of the adoption date.

The Company recorded compensation expense (included in general and administrative expense) of $321,000, $279,000 and $183,000 related to stock options and $1.4 million, $1.4 million and $1.2 million related to amortization of non-vested stock grants for the years ended December 31, 2009, 2008 and 2007, respectively. The Company uses the Black-Scholes Merton option pricing model to estimate the fair value of stock options granted subsequent to the adoption of ASC Topic 718. The application of this pricing model involves assumptions that are judgmental and sensitive in the determination of compensation expense. The weighted average for key assumptions used in determining the fair value of options granted during 2009 follows:


	Weighted Average			Range
Expected life (years)		4.50			4.50
Risk free interest rate		2.04	%		1.65 — 2.63	%
Expected volatility		38.65	%		36.40% — 41.10	%
Expected dividend yield		9.43	%		5.40% — 12.60	%
Fair value	$	2.73		$	1.59 — $7.35

The weighted-average fair value of options granted during the years ended December 31, 2008 and 2007, were $4.79 and $6.86, respectively.

To determine expected volatility, the Company uses historical volatility based on daily closing prices of its Common Stock over periods that correlate with the expected terms of the options granted. The risk-free rate is based on the United States Treasury yield curve at the time of grant for the expected life of the options granted. Expected dividends are based on the Company’s history and expectation of dividend payouts. The expected life of stock options is based on the midpoint between the vesting date and the end of the contractual term.

Use of Estimates: The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates.

3. EARNINGS PER SHARE

The Company reports earnings per share data in accordance ASC Topic 260, “Earnings Per Share.” Effective January 1, 2009, FASB ASC Topic 260 was updated for the issuance of FASB Staff Position (“FSP”) EITF 03-6-1, “Determining Whether Instruments Granted in Share-Based Payment Transactions Are Participating Securities", or FSP EITF 03-6-1, with transition guidance included in FASB ASC Topic 260-10-65-2. Under FSP EITF 03-6-1, unvested share-based payment awards that contain nonforfeitable rights to dividends or dividend equivalents, whether paid or unpaid, are participating securities and shall be included in the computation of earnings-per-share pursuant to the two-class method. The codification update requires retrospective restatement of all prior period earnings per share data to conform with its provisions. The Company has calculated its 2009 basic and diluted earnings per share using the two-class method. The Company has also calculated its basic and diluted earnings per share amounts for 2008 and 2007 under the two-class method and it resulted in no change in basic and diluted earnings per share as previously reported. The following table sets forth the computation of basic and diluted earnings per common share utilizing the two-class method.


	Year Ended December 31,
(Amounts in thousands, except per share data)	2009		2008		2007
Numerator:
Net income from continuing operations attributable to common shareholders	$	20,700	$	35,519	$	36,297

Denominator:
Denominator for basic earnings per share - weighted average shares		23,787		21,762		20,955
Effect of Dilutive Securities:
Stock options and warrants and non-vested stock		10		21		49


Denominator for diluted earnings per share - adjusted weighted average shares and assumed conversion		23,797		21,783		21,004

Basic Earnings per Common Share from continuing operations attributable to common shareholders	$	0.87	$	1.63	$	1.73
Basic Earnings per Common Share attributable to common shareholders	$	0.84	$	1.72	$	1.81

Diluted Earnings per Common Share from continuing operations attributable to common shareholders	$	0.87	$	1.63	$	1.73
Diluted Earnings per Common Share attributable to common shareholders	$	0.84	$	1.72	$	1.81

Not included in the effect of dilutive securities above are 333,072 stock options and 125,871 unvested restricted shares for the year ended December 31, 2009; 262,247 stock options and 124,161 unvested restricted shares for the year ended December 31, 2008; and 67,500 stock options and 105,266 unvested restricted shares for the year ended December 31, 2007, because their effect would be antidilutive.

4. INVESTMENT IN STORAGE FACILITIES

The following summarizes activity in storage facilities during the years ended December 31, 2009 and December 31, 2008.


(Dollars in thousands)	2009			2008
Cost:
Beginning balance	$	1,366,615		$	1,300,847
Acquisition of storage facilities		—			18,454
Additional investment in consolidated joint ventures		—			2,473
Improvements and equipment additions		26,256			44,273
(Decrease) increase in construction in progress		(4,121	)		761
Dispositions		(1,167	)		(193	)

Ending balance	$	1,387,583		$	1,366,615


Accumulated Depreciation:
Beginning balance	$	212,301		$	179,880
Additions during the year		33,096			32,556
Dispositions		(219	)		(135	)

Ending balance	$	245,178		$	212,301

The Company allocates purchase price to the tangible and intangible assets and liabilities acquired based on their estimated fair values. The value of land and buildings are determined at replacement cost. Intangible assets, which represent the value of existing customer leases, are recorded at their estimated fair values. The Company did not acquire any storage facilities in 2009. During 2008, the Company acquired three storage facilities for $18.9 million. Substantially all of the purchase price for these facilities was allocated to land ($3.7 million), building ($14.7 million), equipment ($0.1 million) and in-place customer leases ($0.4 million) and the operating results of the acquired facilities have been included in the Company’s operations since the respective acquisition dates.

5. DISCONTINUED OPERATIONS

During 2009, the Company sold five non-strategic storage facilities in Massachusetts, North Carolina, and Pennsylvania for net cash proceeds of $16.3 million resulting in a loss of $1.6 million. In April 2008, the Company sold one non-strategic storage facility located in Michigan for net cash proceeds of $7.0 million resulting in a gain of $0.7 million. The operations of these facilities and the loss or gain on sale are reported as discontinued operations. The amounts in the 2008 and 2007 financial statements related to the operations and the net assets of this property have been reclassified and are presented as discontinued operations and net assets from discontinued operations, respectively. Cash flows of discontinued operations have not been segregated from the cash flows of continuing operations on the accompanying consolidated statement of cash flows for the years ended December 31, 2009, 2008 and 2007. The following is a summary of the amounts reported as discontinued operations:


	Year Ended December 31,
(dollars in thousands)	2009			2008			2007
Total revenue	$	2,187		$	3,043		$	3,757
Property operations and maintenance expense		(643	)		(956	)		(1,048	)
Real estate tax expense		(258	)		(332	)		(372	)
Depreciation and amortization expense		(434	)		(591	)		(676	)
Net realized (loss) gain on sale of property		(1,636	)		716			—

Total (loss) income from discontinued operations	$	(784	)	$	1,880		$	1,661

6. PRO FORMA FINANCIAL INFORMATION (UNAUDITED)

The following unaudited pro forma Condensed Statement of Operations is presented as if the 31 storage facilities purchased during 2007 and the related indebtedness incurred and assumed on these transactions had all occurred at January 1, 2007. Such unaudited pro forma information is based upon the historical statements of operations of the Company. It should be read in conjunction with the financial statements of the Company. In management’s opinion, all adjustments necessary to reflect the effects of these transactions have been made. This unaudited pro forma information does not purport to represent what the actual results of operations of the Company would have been assuming such transactions had been completed as set forth above nor does it purport to represent the results of operations for future periods.


	Year Ended
(dollars in thousands, except share data)	December 31, 2007
Pro forma total operating revenues	$	199,569
Pro forma net income	$	41,749
Pro forma earnings per common share — diluted	$	1.92

7. UNSECURED LINE OF CREDIT AND TERM NOTES

On June 25, 2008, the Company entered into agreements relating to new unsecured credit arrangements, and received funds under those arrangements. As part of the agreements, the Company entered into a $250 million unsecured term note maturing in June 2012 bearing interest at LIBOR plus 1.625% (based on the Company’s December 31, 2009 credit rating). In October 2009, the Company repaid $100 million of this term note. The new agreements also provide for a $125 million (expandable to $175 million) revolving line of credit maturing June 2011 bearing interest at a variable rate equal to LIBOR plus 1.375% (based on the Company’s credit rating at December 31, 2009), and requires a 0.25% facility fee. The interest rate at December 31, 2009 on the Company’s available line of credit was approximately 1.61% (1.8% at December 31, 2008). At December 31, 2009, there was $125 million available on the unsecured line of credit.

The Company also maintains an $80 million term note maturing September 2013 bearing interest at a fixed rate of 6.26%, a $20 million term note maturing September 2013 bearing interest at a variable rate equal to LIBOR plus 1.50%, and a $150 million unsecured term note maturing in April 2016 bearing interest at 6.38% (based on the Company’s credit rating at December 31, 2009).

The line of credit and term notes require the Company to meet certain financial covenants, measured on a quarterly basis, including prescribed leverage, fixed charge coverage, minimum net worth, limitations on additional indebtedness and limitations on dividend payouts. At December 31, 2009, the Company was in compliance with its debt covenants. At March 31, 2009, the Company had violated the leverage ratio covenant contained in the line of credit and term note agreements. In May 2009, the Company obtained a waiver of the violation as of March 31, 2009. The fees paid to obtain the waiver were approximately $0.9 million and are included in interest expense for the year ended December 31, 2009.

As a result of the debt covenant violation and operating trends, Fitch Ratings downgraded the Company’s rating on its revolving credit facility and term notes to non-investment grade in May 2009. In October 2009, Fitch Ratings adjusted the Company’s rating on its revolving credit facility and term notes back to investment grade.

We believe that if operating results remain consistent with historical levels and levels of other debt and liabilities remain consistent with amounts outstanding at December 31, 2009 the entire $125 million line of credit could be drawn without violating our debt covenants.

8. MORTGAGES PAYABLE AND OTHER DEBT DISCLOSURES

Mortgages payable at December 31, 2009 and December 31, 2008 consist of the following:


	December 31,		December 31,
(dollars in thousands)	2009		2008
7.80% mortgage note due December 2011, secured by 11 self-storage facilities (Locke Sovran I) with an aggregate net book value of $42.7 million, principal and interest paid monthly	$	28,447	$	29,033
7.19% mortgage note due March 2012, secured by 27 self-storage facilities (Locke Sovran II) with an aggregate net book value of $80.3 million, principal and interest paid monthly		41,475		42,603
7.25% mortgage note due December 2011, secured by 1 self-storage facility with an aggregate net book value of $5.7 million, principal and interest paid monthly. Estimated market rate at time of acquisition 5.40%		3,369		3,510
6.76% mortgage note due September 2013, secured by 1 self-storage facility with an aggregate net book value of $2.0 million, principal and interest paid monthly		977		1,000
6.35% mortgage note due March 2014, secured by 1 self-storage facility with an aggregate net book value of $3.7 million, principal and interest paid monthly		1,072		1,098
5.55% mortgage notes secured by 8 self storage facilities paid December 1, 2009		—		25,930
7.50% mortgage notes due August 2011, secured by 3 self-storage facilities with an aggregate net book value of $14.0 million, principal and interest paid monthly. Estimated market rate at time of acquisition 6.42%		5,879		6,087

Total mortgages payable	$	81,219	$	109,261

The Company assumed the 7.25%, 6.76%, 6.35%, and 7.50% mortgage notes in connection with the acquisitions of storage facilities in 2005 and 2006. The 7.25% and 7.50% mortgages were recorded at their estimated fair value based upon the estimated market rates at the time of the acquisitions ranging from 5.40% to 6.42%. The carrying value of these two mortgages approximates the actual principal balance of the mortgages payable. An immaterial premium exists at December 31, 2009, which will be amortized over the remaining term of the mortgages based on the effective interest method.

The table below summarizes the Company’s debt obligations and interest rate derivatives at December 31, 2009. The estimated fair value of financial instruments is subjective in nature and is dependent on a number of important assumptions, including discount rates and relevant comparable market information associated with each financial instrument. The fair value of the fixed rate term note and mortgage note were estimated by discounting the future cash flows using the current rates at which similar loans would be made to borrowers with similar credit ratings and for the same remaining maturities. The use of different market assumptions and estimation methodologies may have a material effect on the reported estimated fair value amounts. Accordingly, the estimates presented below are not necessarily indicative of the amounts the Company would realize in a current market exchange.


	Expected Maturity Date Including Discount
															Fair
(dollars in thousands)	2010		2011		2012		2013		2014		Thereafter		Total		Value
Line of credit — variable rate LIBOR + 1.375 (1.61% at December 31, 2009)		—		—		—		—		—		—		—		—

Notes Payable:
Term note — variable rate LIBOR+1.625% (1.86% at December 31, 2009)		—		—	$	150,000		—		—		—	$	150,000	$	150,000
Term note — variable rate LIBOR+1.50% (2.23% at December 31, 2009)		—		—		—	$	20,000		—		—	$	20,000	$	20,000
Term note — fixed rate 6.26%		—		—		—	$	80,000		—		—	$	80,000	$	76,958
Term note — fixed rate 6.38%		—		—		—		—		—	$	150,000	$	150,000	$	136,630

Mortgage note — fixed rate 7.80%	$	630	$	27,817		—		—		—		—	$	28,447	$	29,454
Mortgage note — fixed rate 7.19%	$	1,211	$	1,301	$	38,963		—		—		—	$	41,475	$	43,133
Mortgage note — fixed rate 7.25%	$	149	$	3,220		—		—		—		—	$	3,369	$	3,385
Mortgage note — fixed rate 6.76%	$	25	$	27	$	29	$	896		—		—	$	977	$	1,011
Mortgage note — fixed rate 6.35%	$	28	$	30	$	31	$	34	$	949		—	$	1,072	$	1,059
Mortgage notes — fixed rate 7.50%	$	222	$	5,657		—		—		—		—	$	5,879	$	6,003

Interest rate derivatives — liability		—		—		—		—		—		—		—	$	11,524

9. DERIVATIVE FINANCIAL INSTRUMENTS

Interest rate swaps are used to adjust the proportion of total debt that is subject to variable interest rates. The interest rate swaps require the Company to pay an amount equal to a specific fixed rate of interest times a notional principal amount and to receive in return an amount equal to a variable rate of interest times the same notional amount. The notional amounts are not exchanged. No other cash payments are made unless the contract is terminated prior to its maturity, in which case the contract would likely be settled for an amount equal to its fair value. The Company enters interest rate swaps with a number of major financial institutions to minimize counterparty credit risk.

The interest rate swaps qualify and are designated as hedges of the amount of future cash flows related to interest payments on variable rate debt. Therefore, the interest rate swaps are recorded in the consolidated balance sheet at fair value and the related gains or losses are deferred in shareholders’ equity as Accumulated Other Comprehensive Income (“AOCI”). These deferred gains and losses are amortized into interest expense during the period or periods in which the related interest payments affect earnings. However, to the extent that the interest rate swaps are not perfectly effective in offsetting the change in value of the interest payments being hedged, the ineffective portion of these contracts is recognized in earnings immediately. Ineffectiveness was immaterial in 2009, 2008, and 2007.

The Company has three interest rate swap agreements in effect at December 31, 2009 as detailed below to effectively convert a total of $170 million of variable-rate debt to fixed-rate debt.


			Fixed			Floating Rate
Notional Amount	Effective Date	Expiration Date	Rate Paid			Received
$20 Million	9/4/05	9/4/13		4.4350	%	6 month LIBOR
$50 Million	7/1/08	6/25/12		4.2825	%	1 month LIBOR
$100 Million	7/1/08	6/22/12		4.2965	%	1 month LIBOR

The interest rate swap agreements are the only derivative instruments, as defined by FASB ASC Topic 815,

held by the Company. During 2009, 2008, and 2007, the net reclassification from AOCI to interest expense was $9.7 million, $2.6 million and ($1.1) million, respectively, based on payments (receipts) made or received under the swap agreements. Based on current interest rates, the Company estimates that payments under the interest rate swaps will be approximately $7.0 million in 2010. Payments made under the interest rate swap agreements will be reclassified to interest expense as settlements occur. The fair value of the swap agreements, including accrued interest, was a liability of $11.5 million and $25.5 million at December 31, 2009, and 2008 respectively.


	Jan. 1, 2009			Jan. 1, 2008
	to			to
(dollars in thousands)	Dec. 31, 2009			Dec. 31, 2008
Adjustments to interest expense:
Realized loss reclassified from accumulated other comprehensive loss to interest expense	$	(9,687	)	$	(2,601	)

Adjustments to other comprehensive income (loss):
Realized loss reclassified to interest expense for 2009 and 2008, respectively		9,687			2,601
Unrealized gain (loss) from changes in the fair value of the effective portion of the interest rate swaps for 2009 and 2008, respectively		4,210			(26,395	)

Gain (loss) included in other comprehensive income (loss)	$	13,897		$	(23,794	)

In October 2009, the Company prepaid $100 million in variable rate term notes. In October 2009, the Company also terminated two interest rate swap agreements that were designated as hedges of forecasted interest payments on variable rate debt. Realized losses recognized in interest expense in 2009 include $8.4 million in costs to terminate the interest rate swaps. The cost approximated the fair market values of the swaps at the date of termination.

10. FAIR VALUE MEASUREMENTS

In September 2006, the FASB issued additional accounting guidance under ASC Topic 820, “Fair Value Measurements” through the issuance of SFAS No. 157, “Fair Value Measurements,” (“SFAS 157”). The additional guidance defines fair value, establishes a framework for measuring fair value and expands the related disclosure requirements. This additional guidance applies under other codification standards that require or permit fair value measurements. The additional guidance indicates, among other things, that a fair value measurement assumes that the transaction to sell an asset or transfer a liability occurs in the principal market for the asset or liability or, in the absence of a principal market, the most advantageous market for the asset or liability. FASB ASC Topic 820 defines fair value based upon an exit price model.

In 2008 and 2009, the FASB issued additional guidance under ASC Topic 820 through the issuance of FASB Staff Positions (FSP) 157-1, 157-2, and 157-3. FSP 157-1 provides additional guidance under ASC Topic 820 to exclude FASB ASC Topic 840, “Leases” and its related interpretive accounting guidance that addresses leasing transactions, while FSP 157-2 delays the effective date of the application of the fair value guidelines added to FASB ASC Topic 820 through the issuance of SFAS 157 to fiscal years beginning after November 15, 2008 for all nonfinancial assets and nonfinancial liabilities that are recognized or disclosed at fair value in the financial statements on a nonrecurring basis. FSP 157-3 addresses considerations in determining the fair value of a financial asset when the market for that asset is not active.

We adopted, as of January 1, 2008, the additional guidance in FASB ASC Topic 820 through the issuance of SFAS 157, with the exception of the application of the statement to non-recurring nonfinancial assets and nonfinancial liabilities. We applied the provisions of the additional guidance issued in SFAS 157 in determining the fair value of our nonfinancial assets and nonfinancial liabilities on a nonrecurring basis effective January 1, 2009. Assets that are measured on a nonrecurring basis include those measured at fair value in a business combination accounted for under the provisions of the updated codification standard, as well as investments in storage facilities in circumstances when we determine that those assets are impaired under the provisions of FASB ASC Topic 360-10-35, “Property, Plant and Equipment — Subsequent Measurement”. No non-recurring fair value measurements were made during the year ended December 31, 2009.

FASB ASC Topic 820, through the additional guidance provided by SFAS 157, establishes a valuation hierarchy for disclosure of the inputs to valuation used to measure fair value. This hierarchy prioritizes the inputs into three broad levels as follows. Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities. Level 2 inputs are quoted prices for similar assets and liabilities in active markets or inputs that are observable for the asset or liability, either directly or indirectly through market corroboration, for substantially the full term of the financial instrument. Level 3 inputs are unobservable inputs based on our own assumptions used to measure assets and liabilities at fair value. A financial asset or liability’s classification within the hierarchy is determined based on the lowest level input that is significant to the fair value measurement.

The following table provides the assets and liabilities carried at fair value measured on a recurring basis as of December 31, 2009 (in thousands):


	Asset
	(Liability)			Level 1		Level 2			Level 3
Interest rate swaps		(11,524	)		—		(11,524	)		—

Interest rate swaps are over the counter securities with no quoted readily available Level 1 inputs, and therefore are measured at fair value using inputs that are directly observable in active markets and are classified within Level 2 of the valuation hierarchy, using the income approach.

11. STOCK OPTIONS AND NON-VESTED STOCK

The Company established the 2005 Award and Option Plan (the “Plan”) which replaced the expired 1995 Award and Option Plan for the purpose of attracting and retaining the Company’s executive officers and other key employees. 1,500,000 shares were authorized for issuance under the Plan. The options vest ratably over four and eight years, and must be exercised within ten years from the date of grant. The exercise price for qualified incentive stock options must be at least equal to the fair market value of the common shares at the date of grant. As of December 31, 2009, options for 362,463 shares were outstanding under the Plans and options for 998,330 shares of common stock were available for future issuance.

The Company also established the 2009 Outside Directors’ Stock Option and Award Plan (the Non-employee Plan) which replaced the 1995 Outside Directors’ Stock Option Plan for the purpose of attracting and retaining the services of experienced and knowledgeable outside directors. The Non-employee Plan provides for the initial granting of options to purchase 3,500 shares of common stock and for the annual granting of options to purchase 2,000 shares of common stock to each eligible director. Such options vest over a one-year period for initial awards and immediately upon subsequent grants. In addition, each outside director receives non-vested shares annually equal to 80% of the annual fees paid to them. During the restriction period, the non-vested shares may not be sold, transferred, or otherwise encumbered. The holder of the non-vested shares has all rights of a holder of common shares, including the right to vote and receive dividends. During 2009, 3,456 non-vested shares were issued to outside directors. Such non-vested shares vest over a one-year period. The total shares reserved under the Non-employee Plan is 150,000. The exercise price for options granted under the Non-employee Plan is equal to the fair market value at the date of grant. As of December 31, 2009, options for 35,005 common shares and non-vested shares of 12,161 were outstanding under the Non-employee Plans and options for 137,044 shares of common stock were available for future issuance.

A summary of the Company’s stock option activity and related information for the years ended December 31 follows:


	2009					2008					2007
				Weighted					Weighted					Weighted
				average					average					average
				exercise					exercise					exercise
	Options			price		Options			price		Options			price
Outstanding at beginning of year:		360,688		$	43.06		168,125		$	42.54		113,225		$	35.77

Granted		51,500			23.99		201,163			43.12		74,000			52.49
Exercised		(4,225	)		21.46		(2,600	)		27.78		(13,100	)		32.44
Forfeited		(10,495	)		44.53		(6,000	)		36.86		(6,000	)		59.62


Outstanding at end of year		397,468		$	40.78		360,688		$	43.06		168,125		$	42.54

Exercisable at end of year		159,701		$	40.71		118,025		$	38.84		82,625		$	34.45

A summary of the Company’s stock options outstanding at December 31, 2009 follows:


	Outstanding				Exercisable
			Weighted				Weighted
			average				average
			exercise				exercise
Exercise Price Range	Options		price		Options		price
$20.375 — 29.99		72,750	$	22.35		33,250	$	21.88
$30.00 — 39.99		37,050	$	35.05		22,050	$	34.87
$40.00 — 57.79		287,668	$	46.18		104,401	$	47.94

Total		397,468	$	40.78		159,701	$	40.71


Intrinsic value of outstanding stock options at December 31, 2009	$	1,034,302
Intrinsic value of exercisable stock options at December 31, 2009	$	505,412

The intrinsic value of stock options exercised during the years ended December 31, 2009, 2008, and 2007, were $50,188, $37,691, and $346,306 respectively.

The aggregate intrinsic value is calculated as the difference between the exercise price of the underlying awards and the quoted price of the Company’s common stock at December 31, 2009, or the price on the date of exercise for those exercised during the year. As of December 31, 2009, there was approximately $1.0 million of total unrecognized compensation cost related to non-vested share-based compensation arrangements granted under our stock award plans. That cost is expected to be recognized over a weighted-average period of approximately 4.6 years. The weighted average remaining contractual life of all options is 7.4 years, and for exercisable options is 5.8 years.

Non-vested Stock

The Company has also issued 348,732 shares of non-vested stock to employees which vest over two to nine year periods. During the restriction period, the non-vested shares may not be sold, transferred, or otherwise encumbered. The holder of the non-vested shares has all rights of a holder of common shares, including the right to vote and receive dividends. For issuances of non-vested stock during the year ended December 31, 2009, the fair market value of the non-vested stock on the date of grant ranged from $21.82 to $35.15. During 2009, 59,590 shares of non-vested stock were issued to employees and directors with an aggregate fair value of $1.8 million. The Company charges additional paid-in capital for the market value of shares as they are issued. The unearned portion is then amortized and charged to expense over the vesting period. The Company uses the average of the high and

low price of its common stock on the date the award is granted as the fair value for non-vested stock awards.

A summary of the status of unvested shares of stock issued to employees and directors as of and during the years ended December 31 follows:


	2009					2008					2007
				Weighted					Weighted					Weighted
	Non-			average		Non-			average		Non-			average
	vested			grant date fair		vested			grant date fair		vested			grant date fair
	Shares			value		Shares			value		Shares			value
Unvested at beginning of year:		130,807		$	44.79		115,896		$	45.54		96,453		$	40.21

Granted		59,590			29.70		45,713			41.50		43,989			53.79
Vested		(35,349	)		41.25		(30,802	)		42.71		(24,546	)		39.39
Forfeited		(455	)		43.95		—			—		—			—


Unvested at end of year		154,593		$	39.79		130,807		$	44.79		115,896		$	45.54

Compensation expense of $1.4 million, $1.4 million and $1.2 million was recognized for the vested portion of non-vested stock grants in 2009, 2008 and 2007, respectively. The fair value of non-vested stock that vested during 2009, 2008 and 2007 was $1.5 million, $1.3 million and $1.0 million, respectively. The total unrecognized compensation cost related to non-vested stock was $5.2 million at December 31, 2009, and the remaining weighted-average period over which this expense will be recognized was 5.6 years.

12. RETIREMENT PLAN

Employees of the Company qualifying under certain age and service requirements are eligible to be a participant in a 401(k) Plan. The Company contributes to the Plan at the rate of 10% of the first 4% of gross wages that the employee contributes. Total expense to the Company was approximately $114,000, $284,000, and $256,000 for the years ended December 31, 2009, 2008 and 2007, respectively.

13. INVESTMENT IN JOINT VENTURES

The Company has a 20% ownership interest in Sovran HHF Storage Holdings LLC (“Sovran HHF”), a joint venture that was formed in May 2008 to acquire self-storage properties that will be managed by the Company. The carrying value of the Company’s investment at December 31, 2009 was $19.9 million. Twenty five properties were acquired by Sovran HHF as of December 31, 2008 for approximately $171.5 million. In 2008, the Company contributed $18.6 million to the joint venture as its share of capital required to fund the acquisitions. As of December 31, 2009, the carrying value of the Company’s investment in Sovran HHF exceeds its share of the underlying equity in net assets of Sovran HHF by approximately $1.7 million as a result of the capitalization of certain acquisition related costs. This difference is not amortized, it is included in the carrying value of the investment, which is assessed for impairment on a periodic basis.

As manager of Sovran HHF, the Company earns a management and call center fee of 7% of gross revenues which totaled $1.2 million and $0.5 million for 2009 and 2008, respectively. The Company also received an acquisition fee of 0.5% or $0.7 million of purchase price for securing purchases for the joint venture in 2008. The Company’s share of Sovran HHF’s income for 2009 and 2008 was $0.2 million and $0.1 million, respectively. At December 31, 2009, Sovran HHF owed the Company $0.2 million for payments made by the Company on behalf of the joint venture.

The Company also has a 49% ownership interest in Iskalo Office Holdings, LLC, which owns the building that houses the Company’s headquarters and other tenants. The Company’s investment includes a capital contribution of $49. The carrying value of the Company’s investment is a liability of $0.5 million at December 31, 2009 and 2008, and is included in accounts payable and accrued liabilities in the accompanying consolidated

balance sheets. For the years ended December 31, 2009, 2008 and 2007, the Company’s share of Iskalo Office Holdings, LLC’s income (loss) was $7,000, ($6,000), and $80,000, respectively. The Company paid rent to Iskalo Office Holdings, LLC of $608,000, $600,000 and $561,000 in 2009, 2008, and 2007, respectively. Future minimum lease payments under the lease are $0.6 million per year through 2010.

A summary of the unconsolidated joint ventures’ financial statements as of and for the year ended December 31, 2009 is as follows:


	Sovran HHF
	Storage		Iskalo Office
(dollars in thousands)	Holdings LLC		Holdings, LLC
Balance Sheet Data:
Investment in storage facilities, net	$	168,237	$	—
Investment in office building		—		5,322
Other assets		3,575		688

Total Assets	$	171,812	$	6,010


Due to the Company	$	173	$	—
Mortgages payable		78,512		7,037
Other liabilities		2,087		224

Total Liabilities		80,772		7,261

Unaffiliated partners’ equity (deficiency)		72,832		(714	)
Company equity (deficiency)		18,208		(537	)

Total Liabilities and Partners’ Equity (deficiency)	$	171,812	$	6,010


Income Statement Data:
Total revenues	$	17,702	$	1,129
Total expenses		16,761		1,115

Net income	$	941	$	14

The Company does not guarantee the debt of Sovran HHF or Iskalo Office Holdings, LLC.

14. SHAREHOLDERS’ EQUITY

During 2009, the Company issued 1,430,521 shares via its Dividend Reinvestment and Stock Purchase Plan. The Company received $32.6 million from the sale of such shares. During 2008 and 2007, the Company issued 285,308 and 252,816 shares, respectively, via this plan and received net proceeds of approximately $10.7 million and $12.8 million, respectively. Our Dividend Reinvestment and Stock Purchase Plan was suspended in November 2009.

On July 3, 2002, the Company entered into an agreement providing for the issuance of 2,800,000 shares of 8.375% Series C Convertible Cumulative Preferred Stock (“Series C Preferred”) in a privately negotiated transaction. The Company immediately issued 1,600,000 shares of the Series C Preferred and issued the remaining 1,200,000 shares on November 27, 2002. The offering price was $25.00 per share resulting in net proceeds for the Series C Preferred and related common stock warrants of $67.9 million after expenses. In 2004, the Company issued 306,748 shares of its common stock in connection with the conversion of 400,000 shares of Series C Preferred Stock into common stock. During 2005, the Company issued 920,244 shares of its common stock in connection with a written notice from one of the holders of the Series C Preferred Stock requesting the conversion of 1,200,000 shares of Series C Preferred Stock into common stock. On July 7, 2007, we issued 920,244 shares of our common stock to the holder of our Series C Preferred Stock upon the holder’s election to convert the remaining 1,200,000 shares of Series C Preferred Stock into common stock.

15. SUPPLEMENTARY QUARTERLY FINANCIAL DATA (UNAUDITED)

The following is a summary of quarterly results of operations for the years ended December 31, 2009 and 2008 (dollars in thousands, except per share data).


	2009 Quarter Ended
	March 31		June 30		Sept. 30			Dec. 31 (b)
Operating revenue	$	48,846	$	48,097	$	49,551		$	48,517
Income (loss) from continuing operations (a)	$	7,873	$	6,436	$	8,722		$	(593	)
(Loss) income from discontinued operations (a)	$	247	$	306	$	(752	)	$	(585	)
Net Income(Loss)	$	8,120	$	6,742	$	7,970		$	(1,178	)
Net income (loss) attributable to common shareholders	$	7,635	$	6,286	$	7,496		$	(1,501	)
Net Income (Loss) Per Share Attributable to Common Shareholders
Basic	$	0.35	$	0.28	$	0.32		$	(0.06	)
Diluted	$	0.35	$	0.28	$	0.32		$	(0.06	)


	2008 Quarter Ended
	March 31		June 30		Sept. 30		Dec. 31
Operating revenue (a)	$	48,925	$	49,421	$	51,769	$	50,078
Income from continuing operations (a)	$	9,271	$	10,166	$	9,743	$	8,623
Income from discontinued operations (a)	$	318	$	1,000	$	308	$	254
Net Income	$	9,589	$	11,166	$	10,051	$	8,877
Net income attributable to common shareholders	$	8,953	$	10,541	$	9,528	$	8,377
Net Income Per Share Attributable to Common Shareholders
Basic	$	0.41	$	0.49	$	0.44	$	0.38
Diluted	$	0.41	$	0.48	$	0.44	$	0.38


(a)		Data as presented in this table differ from the amounts as presented in the Company’s quarterly reports due to the impact of discontinued operations accounting with respect to the five properties sold in 2009 and the one property sold in 2008 as described in Note 5.

(b)		As discussed in Note 9, in the fourth quarter of 2009 the Company recorded $8.4 million in interest expense related to the termination of two interest rate swap agreements.

16. COMMITMENTS AND CONTINGENCIES

The Company’s current practice is to conduct environmental investigations in connection with property acquisitions. At this time, the Company is not aware of any environmental contamination of any of its facilities that individually or in the aggregate would be material to the Company’s overall business, financial condition, or results of operations.

At December 31, 2009, we have a contract in place with a potential buyer for the possible sale of two properties for approximately $2.4 million. The sale of these properties is subject to significant contingencies as of December 31, 2009, including the potential buyer’s satisfactory completion of an inspection of the properties and the buyer securing funds from its lender to finance the transaction. While there can be no assurances that we will successfully complete the sale of these properties, based upon the status of our dealings with the potential buyer, the sale of these properties is expected to close in March 2010. Should these sales occur, the Company would recognize a loss of approximately $0.1 million on the disposal of these properties in the first quarter of 2010.

17. SUBSEQUENT EVENTS

On January 4, 2010, the Company declared a quarterly dividend of $0.45 per common share. The dividend was paid on January 26, 2010 to shareholders of record on January 14, 2010. The total dividend paid amounted to $12.4 million.

In January and February 2010, the Company entered into contracts for the sale of ten non-strategic properties in North Carolina, Georgia, Michigan, and Virginia for approximately $25.0 million. The sales of these properties are subject to significant contingencies and there is no assurance that the properties will be sold. Should the sales occur, the Company would recognize an aggregate gain of approximately $7.7 million.


Item 9.		Changes in and Disagreements With Accountants on Accounting and Financial Disclosure

None.


Item 9A.		Controls and Procedures

Conclusion Regarding the Effectiveness of Disclosure Controls and Procedures

Our management conducted an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures, as such term is defined under Rule 13a-15(e) promulgated under the Securities Exchange Act of 1934, as amended (Exchange Act), under the supervision of and with the participation of our management, including the Chief Executive Officer and Chief Financial Officer. Based on that evaluation, our management, including the Chief Executive Officer and Chief Financial Officer, concluded that our disclosure controls and procedures were effective at December 31, 2009. There have not been changes in the Company’s internal controls or in other factors that could significantly affect these controls during the quarter ended December 31, 2009.

Management’s Report on Internal Control Over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting, and for performing an assessment of the effectiveness of internal control over financial reporting as of December 31, 2009. Internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. Our system of internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the Company’s assets that could have a material effect on the financial statements.

Our management performed an assessment of the effectiveness of our internal control over financial reporting as of December 31, 2009 based upon criteria in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”). Based on our assessment, management determined that our internal control over financial reporting was effective as of December 31, 2009 based on the criteria in Internal Control-Integrated Framework issued by COSO.

The effectiveness of the Company’s internal control over financial reporting as of December 31, 2009 has been audited by Ernst & Young LLP, an independent registered public accounting firm, as stated in their report which is included in Item 9A herein.


/s/ Robert J. Attea		/s/ David L. Rogers

Robert J. Attea		David L. Rogers
Chief Executive Officer		Chief Financial Officer

Report of Independent Registered Public Accounting Firm

The Board of Directors and Shareholders of Sovran Self Storage, Inc.

We have audited Sovran Self Storage, Inc.’s internal control over financial reporting as of December 31, 2009, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (the COSO criteria). Sovran Self Storage, Inc.’s management is responsible for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying Management’s Report on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on the company’s internal control over financial reporting based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

In our opinion, Sovran Self Storage, Inc. maintained, in all material respects, effective internal control over financial reporting as of December 31, 2009, based on the COSO criteria.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheets of Sovran Self Storage, Inc. as of December 31, 2009 and 2008, and the related consolidated statements of operations, shareholders’ equity and comprehensive income, and cash flows for each of the three years in the period ended December 31, 2009 of Sovran Self Storage, Inc. and our report dated February 26, 2010 expressed an unqualified opinion thereon.

/s/ Ernst & Young LLP

Buffalo, New York
February 26, 2010

Part III


Item 10.		Directors, Executive Officers and Corporate Governance

The information contained in the Proxy Statement for the Annual Meeting of Shareholders of the Company to be held on May 26, 2010, with respect to directors, executive officers, audit committee, and audit committee financial experts of the Company and Section 16(a) beneficial ownership reporting compliance, is incorporated herein by reference in response to this item.

The Company has adopted a code of ethics that applies to all of its directors, officers, and employees. The Company has made the Code of Ethics available on its website at http://www.sovranss.com.


Item 11.		Executive Compensation

The information required is incorporated by reference to “Executive Compensation” and “Director Compensation” in the Company’s Proxy Statement for the Annual Meeting of Shareholders of the Company to be held on May 26, 2010.


Item 12.		Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

The information required herein is incorporated by reference to “Stock Ownership By Directors and Executive Officers” and “Security Ownership of Certain Beneficial Owners” in the Proxy Statement for the Annual Meeting of Shareholders of the Company to be held on May 26, 2010.


Item 13.		Certain Relationships and Related Transactions, and Director Independence

The information required herein is incorporated by reference to “Certain Transactions” and “Election of Directors—Director Independence” in the Company’s Proxy Statement for the Annual Meeting of Shareholders to be held on May 26, 2010.


Item 14.		Principal Accountant Fees and Services

The information required herein is incorporated by reference to “Appointment of Independent Auditor” in the Company’s Proxy Statement for the Annual Meeting of Shareholders to be held on May 26, 2010.

Part IV


Item 15.		Exhibits, Financial Statement Schedules

(a)

Documents filed as part of this Annual Report on Form 10-K:

The following consolidated financial statements of Sovran Self Storage, Inc. are included in Item 8.

	(i)		Consolidated Balance Sheets as of December 31, 2009 and 2008.

	(ii)		Consolidated Statements of Operations for Years Ended December 31, 2009, 2008, and 2007.

	(iii)		Consolidated Statements of Shareholders’ Equity and Comprehensive Income for Years Ended December 31, 2009, 2008, and 2007.

	(iv)		Consolidated Statements of Cash Flows for Years Ended December 31, 2009, 2008, and 2007.

	(v)		Notes to Consolidated Financial Statements.

2.		The following financial statement Schedule as of the period ended December 31, 2009 is included in this Annual Report on Form 10-K.

		Schedule III Real Estate and Accumulated Depreciation.

All other Consolidated financial schedules are omitted because they are inapplicable, not required, or the information is included elsewhere in the consolidated financial statements or the notes thereto.

Exhibits

The exhibits required to be filed as part of this Annual Report on Form 10-K have been included as follows:


3.1		Amended and Restated Articles of Incorporation of the Registrant. (incorporated by reference to Exhibit 3.1 (a) to the Registrant’s Registration Statement on Form S-11 (File No. 33-91422) filed June 19, 1995).

3.2		Articles Supplementary to the Amended and Restated Articles of Incorporation of the Registrant classifying and designating the series A Junior Participating Cumulative Preferred Stock. (incorporated by reference to Exhibit 3.1 to the Registrant’s Form 8-A filed December 3, 1996.)

3.3		Articles Supplementary to the Amended and Restated Articles of Incorporation of the Registrant classifying and designating the 8.375% Series C Convertible Cumulative Preferred Stock. (incorporated by reference to Exhibit 4.1 to Registrant’s Current Report on Form 8-K filed July 12, 2002).

3.4*		Bylaws, as amended, of the Registrant.

4.1		Form of Common Stock Certificate (incorporated by reference to Exhibit 4.1 to Registrant’s Registration Statement on Form S-11 (File No. 33-91422) filed June 19, 1995).

10.1+*		Sovran Self Storage, Inc. 2005 Award and Option Plan, as amended.

10.2+*		Sovran Self Storage, Inc. 1995 Outside Directors’ Stock Option Plan, as amended.

10.3+		Employment Agreement between the Registrant and Robert J. Attea (incorporated by reference to Exhibit 10.3 to Registrant’s Form 10-K filed February 27, 2009).

10.4+		Employment Agreement between the Registrant and Kenneth F. Myszka (incorporated by reference to Exhibit 10.4 to Registrant’s Form 10-K filed February 27, 2009).

10.5+		Employment Agreement between the Registrant and David L. Rogers (incorporated by reference to Exhibit 10.5 to Registrant’s Form 10-K filed February 27, 2009).

10.6+		Form of restricted stock grant pursuant to Sovran Self Storage, Inc. 2005 Award and Option Plan (incorporated by reference to Exhibit 10.1 to Registrant’s Quarterly Report on Form 10-Q/A filed November 24, 2006).

10.7+		Form of stock option grant pursuant to Sovran Self Storage, Inc. 2005 Award and Option Plan (incorporated by reference to Exhibit 10.2 to Registrant’s Quarterly Report on Form 10-Q/A filed November 24, 2006).

10.8+		Form of restricted stock grant pursuant to Sovran Self Storage, Inc. 1995 Award and Option Plan (incorporated by reference to Exhibit 10.3 to Registrant’s Quarterly Report on Form 10-Q/A filed November 24, 2006).

10.9+		Form of stock option grant pursuant to Sovran Self Storage, Inc. 1995 Award and Option Plan (incorporated by reference to Exhibit 10.4 to Registrant’s Quarterly Report on Form 10-Q/A filed November 24, 2006).


10.10+		Deferred Compensation Plan for Directors (incorporated by reference to Schedule 14A Proxy Statement filed April 10, 2008).

10.11		Amended Indemnification Agreements with members of the Board of Directors and Executive Officers (incorporated by reference to Exhibit 10.35 and 10.36 to Registrant’s Current Report on Form 8-K filed July 20, 2006).

10.12		Agreement of Limited Partnership of Sovran Acquisition Limited Partnership (incorporated by reference to Exhibit 3.1 on Form 10 filed April 22, 1998).

10.13		Amendments to the Agreement of Limited Partnership of Sovran Acquisition Limited Partnership dated July 30, 1999 and July 3, 2002 (incorporated by reference to Exhibit 10.13 to registrant’s Form 10-K filed February 27, 2009).

10.14*		Promissory Note between Locke Sovran II, LLC and PNC Bank, National Association.

10.15		Third Amended and Restated Revolving Credit and Term Loan Agreement among Registrant, the Partnership, Manufacturers and Traders Trust Company and other lenders named therein (incorporated by reference to Exhibit 10.1 filed in the Company’s Current Report on Form 8-K, filed June 27, 2008).

10.16		Cornerstone Acquisition Agreement and Amendments to Certain Loan Agreements (incorporated by reference to Exhibits 10.30, 10.31, 10.32, 10.33 and 10.34 of Registrant’s Current Report on Form 8-K filed June 26, 2006).

10.17		$150 million, 6.38% Senior Guaranteed Notes, Series C due April 26, 2016, and Amendments to Second Amendment Restated Revolving Credit and Term Loan Agreement dated December 16, 2004 and Amendment to Note Purchase Agreement dated September 4, 2003 (incorporated by reference to Exhibits 10.27, 10.28, and 10.29 of the Registrant’s Current Report on Form 8-K filed May 1, 2006).

10.18		Promissory Note between Locke Sovran I, LLC and GMAC Commercial Mortgage Corporation (incorporated by reference to Exhibit 10.21 as filed in the Company’s Annual Report on Form 10-K, filed March 1, 2007).

10.19		Indemnification Agreement dated September 25, 2009 between Registrant, Sovran Acquisition Limited Partnership and James R. Boldt, a director of the Company (incorporated by reference to Exhibit 10.1 to Registrant’s Current Report on Form 8-K filed September 25, 2009).

10.20+		Sovran Self Storage, Inc. 2009 Outside Directors Stock Option and Award Plan (incorporated by reference to Registrant’s Proxy Statement filed April 9, 2009).

12.1*		Statement Re: Computation of Earnings to Fixed Charges.

21.1*		Subsidiaries of the Company.

23.1*		Consent of Independent Registered Public Accounting Firm.

24.1*		Powers of Attorney (included on signature pages).

31.1*		Certification of Chief Executive Officer pursuant to Rule 13a-14(a) and Rule 15d-14(a) of the Securities Exchange Act, as amended.

31.2*		Certification of Chief Financial Officer pursuant to Rule 13a-14(a) and Rule 15d-14(a) of the Securities Exchange Act, as amended.


32.1*		Certification of Chief Executive Officer and Chief Financial Officer Pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.


*		Filed herewith.

₊		Management contract or compensatory plan or arrangement.

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.


	SOVRAN SELF STORAGE, INC.
February 26, 2010	By:	/s/ David L. Rogers
		David L. Rogers,
		Chief Financial Officer, Secretary

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.


Signature	Title	Date
/s/ Robert J. Attea Robert J. Attea	Chairman of the Board of Directors Chief Executive Officer and Director (Principal Executive Officer)	February 26, 2010

/s/ Kenneth F. Myszka Kenneth F. Myszka	President, Chief Operating Officer and Director	February 26, 2010

/s/ David L. Rogers David L. Rogers	Chief Financial Officer (Principal Financial and Accounting Officer)	February 26, 2010

/s/ John Burns	Director	February 26, 2010

John Burns

/s/ James R. Boldt	Director	February 26, 2010

James R. Boldt

/s/ Anthony P. Gammie	Director	February 26, 2010

Anthony P. Gammie

/s/ Charles E. Lannon	Director	February 26, 2010

Charles E. Lannon

Sovran Self Storage, Inc.
Schedule III
Combined Real Estate and Accumulated Depreciation
(in thousands)
December 31, 2009


							Cost Capitalized														Life on
							Subsequent to		Gross Amount at Which												which
			Initial Cost to Company				Acquisition		Carried at Close of Period												depreciation
					Building,		Building,				Building,										in latest
					Equipment		Equipment				Equipment										income
		Encum			and		and				and				Accum.		Date of		Date		statement
Description	ST	brance	Land		Improvements		Improvements		Land		Improvements		Total		Deprec.		Construction		Acquired		is computed
Boston-Metro I	MA		$	363	$	1,679	$	545	$	363		2,224	$	2,587	$	778		1980		6/26/1995		5 to 40 years
Boston-Metro II	MA			680		1,616		383		680		1,999		2,679		764		1986		6/26/1995		5 to 40 years
E. Providence	RI			345		1,268		688		345		1,956		2,301		631		1984		6/26/1995		5 to 40 years
Charleston l	SC			416		1,516		2,080		416		3,596		4,012		878		1985		6/26/1995		5 to 40 years
Lakeland I	FL			397		1,424		1,465		397		2,889		3,286		703		1985		6/26/1995		5 to 40 years
Charlotte	NC			308		1,102		1,124		747		1,787		2,534		617		1986		6/26/1995		5 to 40 years
Tallahassee I	FL			770		2,734		1,889		770		4,623		5,393		1,599		1973		6/26/1995		5 to 40 years
Youngstown	OH			239		1,110		1,317		239		2,427		2,666		705		1980		6/26/1995		5 to 40 years
Cleveland-Metro II	OH			701		1,659		822		701		2,481		3,182		840		1987		6/26/1995		5 to 40 years
Tallahassee II	FL			204		734		923		198		1,663		1,861		565		1975		6/26/1995		5 to 40 years
Pt. St. Lucie	FL			395		1,501		885		779		2,002		2,781		817		1985		6/26/1995		5 to 40 years
Deltona	FL			483		1,752		2,077		483		3,829		4,312		1,032		1984		6/26/1995		5 to 40 years
Middletown	NY			224		808		817		224		1,625		1,849		570		1988		6/26/1995		5 to 40 years
Buffalo I	NY			423		1,531		1,660		497		3,117		3,614		1,115		1981		6/26/1995		5 to 40 years
Rochester I	NY			395		1,404		491		395		1,895		2,290		678		1981		6/26/1995		5 to 40 years
Salisbury	MD			164		760		463		164		1,223		1,387		460		1979		6/26/1995		5 to 40 years
Jacksonville I	FL			152		728		1,028		688		1,220		1,908		454		1985		6/26/1995		5 to 40 years
Columbia I	SC			268		1,248		447		268		1,695		1,963		664		1985		6/26/1995		5 to 40 years
Rochester II	NY			230		847		452		234		1,295		1,529		466		1980		6/26/1995		5 to 40 years
Savannah l	GA			463		1,684		3,832		805		5,174		5,979		1,213		1981		6/26/1995		5 to 40 years
Greensboro	NC			444		1,613		2,846		444		4,459		4,903		831		1986		6/26/1995		5 to 40 years
Raleigh I	NC			649		2,329		855		649		3,184		3,833		1,126		1985		6/26/1995		5 to 40 years
New Haven	CT			387		1,402		962		387		2,364		2,751		732		1985		6/26/1995		5 to 40 years
Atlanta-Metro I	GA			844		2,021		670		844		2,691		3,535		987		1988		6/26/1995		5 to 40 years
Atlanta-Metro II	GA			302		1,103		369		303		1,471		1,774		588		1988		6/26/1995		5 to 40 years
Buffalo II	NY			315		745		1,662		517		2,205		2,722		601		1984		6/26/1995		5 to 40 years
Raleigh II	NC			321		1,150		655		321		1,805		2,126		611		1985		6/26/1995		5 to 40 years
Columbia II	SC			361		1,331		599		374		1,917		2,291		722		1987		6/26/1995		5 to 40 years
Columbia III	SC			189		719		1,079		189		1,798		1,987		563		1989		6/26/1995		5 to 40 years
Columbia IV	SC			488		1,188		508		488		1,696		2,184		648		1986		6/26/1995		5 to 40 years
Atlanta-Metro III	GA			430		1,579		1,941		602		3,348		3,950		854		1988		6/26/1995		5 to 40 years
Orlando I	FL			513		1,930		474		513		2,404		2,917		934		1988		6/26/1995		5 to 40 years
Sharon	PA			194		912		441		194		1,353		1,547		492		1975		6/26/1995		5 to 40 years
Ft. Lauderdale	FL			1,503		3,619		839		1,503		4,458		5,961		1,362		1985		6/26/1995		5 to 40 years


							Cost Capitalized														Life on
							Subsequent to		Gross Amount at Which												which
			Initial Cost to Company				Acquisition		Carried at Close of Period												depreciation
					Building,		Building,				Building,										in latest
					Equipment		Equipment				Equipment										income
		Encum			and		and				and				Accum.		Date of		Date		statement
Description	ST	brance	Land		Improvements		Improvements		Land		Improvements		Total		Deprec.		Construction		Acquired		is computed
West Palm l	FL			398		1,035		292		398		1,327		1,725		560		1985		6/26/1995		5 to 40 years
Atlanta-Metro IV	GA			423		1,015		375		424		1,389		1,813		562		1989		6/26/1995		5 to 40 years
Atlanta-Metro V	GA			483		1,166		939		483		2,105		2,588		619		1988		6/26/1995		5 to 40 years
Atlanta-Metro VI	GA			308		1,116		521		308		1,637		1,945		676		1986		6/26/1995		5 to 40 years
Atlanta-Metro VII	GA			170		786		562		174		1,344		1,518		511		1981		6/26/1995		5 to 40 years
Atlanta-Metro VIII	GA			413		999		645		413		1,644		2,057		672		1975		6/26/1995		5 to 40 years
Baltimore I	MD			154		555		1,369		306		1,772		2,078		464		1984		6/26/1995		5 to 40 years
Baltimore II	MD			479		1,742		2,810		479		4,552		5,031		994		1988		6/26/1995		5 to 40 years
Augusta I	GA			357		1,296		832		357		2,128		2,485		732		1988		6/26/1995		5 to 40 years
Macon I	GA			231		1,081		469		231		1,550		1,781		579		1989		6/26/1995		5 to 40 years
Melbourne I	FL			883		2,104		1,577		883		3,681		4,564		1,254		1986		6/26/1995		5 to 40 years
Newport News	VA			316		1,471		780		316		2,251		2,567		824		1988		6/26/1995		5 to 40 years
Pensacola I	FL			632		2,962		1,105		651		4,048		4,699		1,559		1983		6/26/1995		5 to 40 years
Augusta II	GA			315		1,139		769		315		1,908		2,223		657		1987		6/26/1995		5 to 40 years
Hartford-Metro I	CT			715		1,695		1,061		715		2,756		3,471		883		1988		6/26/1995		5 to 40 years
Atlanta-Metro IX	GA			304		1,118		2,521		619		3,324		3,943		829		1988		6/26/1995		5 to 40 years
Alexandria	VA			1,375		3,220		2,166		1,376		5,385		6,761		1,612		1984		6/26/1995		5 to 40 years
Pensacola II	FL			244		901		420		244		1,321		1,565		586		1986		6/26/1995		5 to 40 years
Melbourne II	FL			834		2,066		1,136		1,591		2,445		4,036		998		1986		6/26/1995		5 to 40 years
Hartford-Metro II	CT			234		861		1,881		612		2,364		2,976		638		1992		6/26/1995		5 to 40 years
Atlanta-Metro X	GA			256		1,244		1,803		256		3,047		3,303		847		1988		6/26/1995		5 to 40 years
Norfolk I	VA			313		1,462		938		313		2,400		2,713		827		1984		6/26/1995		5 to 40 years
Norfolk II	VA			278		1,004		375		278		1,379		1,657		540		1989		6/26/1995		5 to 40 years
Birmingham I	AL			307		1,415		1,559		384		2,897		3,281		786		1990		6/26/1995		5 to 40 years
Birmingham II	AL			730		1,725		619		730		2,344		3,074		898		1990		6/26/1995		5 to 40 years
Montgomery l	AL			863		2,041		626		863		2,667		3,530		1,018		1982		6/26/1995		5 to 40 years
Jacksonville II	FL			326		1,515		423		326		1,938		2,264		746		1987		6/26/1995		5 to 40 years
Pensacola III	FL			369		1,358		2,741		369		4,099		4,468		1,027		1986		6/26/1995		5 to 40 years
Pensacola IV	FL			244		1,128		714		719		1,367		2,086		550		1990		6/26/1995		5 to 40 years
Pensacola V	FL			226		1,046		543		226		1,589		1,815		614		1990		6/26/1995		5 to 40 years
Tampa I	FL			1,088		2,597		988		1,088		3,585		4,673		1,360		1989		6/26/1995		5 to 40 years
Tampa II	FL			526		1,958		798		526		2,756		3,282		1,032		1985		6/26/1995		5 to 40 years
Tampa III	FL			672		2,439		583		672		3,022		3,694		1,115		1988		6/26/1995		5 to 40 years
Jackson I	MS			343		1,580		2,213		796		3,340		4,136		817		1990		6/26/1995		5 to 40 years
Jackson II	MS			209		964		597		209		1,561		1,770		635		1990		6/26/1995		5 to 40 years
Richmond	VA			443		1,602		826		443		2,428		2,871		851		1987		8/25/1995		5 to 40 years
Orlando II	FL			1,161		2,755		976		1,162		3,730		4,892		1,378		1986		9/29/1995		5 to 40 years
Birmingham III	AL			424		1,506		691		424		2,197		2,621		903		1970		1/16/1996		5 to 40 years
Macon II	GA			431		1,567		734		431		2,301		2,732		785		1989/94		12/1/1995		5 to 40 years


									Cost Capitalized														Life on
									Subsequent to		Gross Amount at Which												which
					Initial Cost to Company				Acquisition		Carried at Close of Period												depreciation
							Building,		Building,				Building,										in latest
							Equipment		Equipment				Equipment										income
		Encum					and		and				and				Accum.		Date of		Date		statement
Description	ST	brance			Land		Improvements		Improvements		Land		Improvements		Total		Deprec.		Construction		Acquired		is computed
Harrisburg I	PA					360		1,641		599		360		2,240		2,600		819		1983		12/29/1995		5 to 40 years
Harrisburg II	PA		(1	)		627		2,224		958		692		3,117		3,809		1,018		1985		12/29/1995		5 to 40 years
Syracuse I	NY					470		1,712		1,313		472		3,023		3,495		923		1987		12/27/1995		5 to 40 years
Ft. Myers	FL					205		912		310		206		1,221		1,427		573		1988		12/28/1995		5 to 40 years
Ft. Myers II	FL					412		1,703		458		413		2,160		2,573		947		1991/94		12/28/1995		5 to 40 years
Newport News II	VA					442		1,592		1,180		442		2,772		3,214		731		1988/93		1/5/1996		5 to 40 years
Montgomery II	AL					353		1,299		653		353		1,952		2,305		633		1984		1/23/1996		5 to 40 years
Charleston II	SC					237		858		623		232		1,486		1,718		529		1985		3/1/1996		5 to 40 years
Tampa IV	FL					766		1,800		649		766		2,449		3,215		844		1985		3/28/1996		5 to 40 years
Arlington I	TX					442		1,767		319		442		2,086		2,528		730		1987		3/29/1996		5 to 40 years
Arlington II	TX					408		1,662		1,070		408		2,732		3,140		881		1986		3/29/1996		5 to 40 years
Ft. Worth	TX					328		1,324		331		328		1,655		1,983		598		1986		3/29/1996		5 to 40 years
San Antonio I	TX					436		1,759		1,121		436		2,880		3,316		937		1986		3/29/1996		5 to 40 years
San Antonio II	TX					289		1,161		543		289		1,704		1,993		582		1986		3/29/1996		5 to 40 years
Syracuse II	NY					481		1,559		2,391		671		3,760		4,431		1,015		1983		6/5/1996		5 to 40 years
Montgomery III	AL					279		1,014		998		433		1,858		2,291		575		1988		5/21/1996		5 to 40 years
West Palm II	FL					345		1,262		354		345		1,616		1,961		577		1986		5/29/1996		5 to 40 years
Ft. Myers III	FL					229		884		298		229		1,182		1,411		413		1986		5/29/1996		5 to 40 years
Lakeland II	FL					359		1,287		1,065		359		2,352		2,711		814		1988		6/26/1996		5 to 40 years
Springfield	MA					251		917		2,267		297		3,138		3,435		885		1986		6/28/1996		5 to 40 years
Ft. Myers IV	FL					344		1,254		292		310		1,580		1,890		567		1987		6/28/1996		5 to 40 years
Cincinnati	OH		(2	)		557		1,988		775		688		2,632		3,320		299		1988		7/23/1996		5 to 40 years
Dayton	OH		(2	)		667		2,379		433		683		2,796		3,479		340		1988		7/23/1996		5 to 40 years
Baltimore III	MD					777		2,770		434		777		3,204		3,981		1,087		1990		7/26/1996		5 to 40 years
Jacksonville III	FL					568		2,028		931		568		2,959		3,527		1,052		1987		8/23/1996		5 to 40 years
Jacksonville IV	FL					436		1,635		520		436		2,155		2,591		789		1985		8/26/1996		5 to 40 years
Jacksonville V	FL					535		2,033		321		538		2,351		2,889		908		1987/92		8/30/1996		5 to 40 years
Charlotte II	NC					487		1,754		425		487		2,179		2,666		674		1995		9/16/1996		5 to 40 years
Charlotte III	NC					315		1,131		338		315		1,469		1,784		485		1995		9/16/1996		5 to 40 years
Orlando III	FL					314		1,113		953		314		2,066		2,380		702		1975		10/30/1996		5 to 40 years
Rochester III	NY					704		2,496		2,335		707		4,828		5,535		1,029		1990		12/20/1996		5 to 40 years
Youngstown ll	OH					600		2,142		2,073		693		4,122		4,815		939		1988		1/10/1997		5 to 40 years
Cleveland lll	OH					751		2,676		1,798		751		4,474		5,225		1,300		1986		1/10/1997		5 to 40 years
Cleveland lV	OH					725		2,586		1,354		725		3,940		4,665		1,206		1978		1/10/1997		5 to 40 years
Cleveland V	OH		(1	)		637		2,918		1,629		701		4,483		5,184		1,563		1979		1/10/1997		5 to 40 years
Cleveland Vl	OH					495		1,781		899		495		2,680		3,175		865		1979		1/10/1997		5 to 40 years
Cleveland Vll	OH					761		2,714		1,337		761		4,051		4,812		1,273		1977		1/10/1997		5 to 40 years
Cleveland Vlll	OH					418		1,921		1,655		418		3,576		3,994		1,110		1970		1/10/1997		5 to 40 years
Cleveland lX	OH					606		2,164		1,363		606		3,527		4,133		917		1982		1/10/1997		5 to 40 years


									Cost Capitalized														Life on
									Subsequent to		Gross Amount at Which												which
					Initial Cost to Company				Acquisition		Carried at Close of Period												depreciation
							Building,		Building,				Building,										in latest
							Equipment		Equipment				Equipment										income
		Encum					and		and				and				Accum.		Date of		Date		statement
Description	ST	brance			Land		Improvements		Improvements		Land		Improvements		Total		Deprec.		Construction		Acquired		is computed
Grand Rapids l	MI		(2	)		455		1,631		981		624		2,443		3,067		292		1976		1/17/1997		5 to 40 years
Grand Rapids ll	MI					219		790		879		219		1,669		1,888		535		1983		1/17/1997		5 to 40 years
Kalamazoo	MI		(2	)		516		1,845		1,729		694		3,396		4,090		367		1978		1/17/1997		5 to 40 years
Lansing	MI		(2	)		327		1,332		1,627		542		2,744		3,286		293		1987		1/17/1997		5 to 40 years
Holland	MI					451		1,830		1,899		451		3,729		4,180		1,143		1978		1/17/1997		5 to 40 years
San Antonio lll	TX		(1	)		474		1,686		442		504		2,098		2,602		644		1981		1/30/1997		5 to 40 years
Universal	TX					346		1,236		467		346		1,703		2,049		522		1985		1/30/1997		5 to 40 years
San Antonio lV	TX					432		1,560		1,695		432		3,255		3,687		927		1995		1/30/1997		5 to 40 years
Houston-Eastex	TX					634		2,565		1,172		634		3,737		4,371		1,139		1993/95		3/26/1997		5 to 40 years
Houston-Nederland	TX					566		2,279		356		566		2,635		3,201		837		1995		3/26/1997		5 to 40 years
Houston-College	TX					293		1,357		568		293		1,925		2,218		572		1995		3/26/1997		5 to 40 years
Lynchburg-Lakeside	VA					335		1,342		1,274		335		2,616		2,951		743		1982		3/31/1997		5 to 40 years
Lynchburg-Timberlake	VA					328		1,315		976		328		2,291		2,619		725		1985		3/31/1997		5 to 40 years
Lynchburg-Amherst	VA					155		710		337		152		1,050		1,202		372		1987		3/31/1997		5 to 40 years
Christiansburg	VA					245		1,120		583		245		1,703		1,948		478		1985/90		3/31/1997		5 to 40 years
Chesapeake	VA					260		1,043		1,188		260		2,231		2,491		627		1988/95		3/31/1997		5 to 40 years
Danville	VA					326		1,488		246		326		1,734		2,060		561		1988		3/31/1997		5 to 40 years
Orlando-W 25th St	FL					289		1,160		744		616		1,577		2,193		507		1984		3/31/1997		5 to 40 years
Delray l-Mini	FL					491		1,756		672		491		2,428		2,919		833		1969		4/11/1997		5 to 40 years
Savannah ll	GA					296		1,196		347		296		1,543		1,839		526		1988		5/8/1997		5 to 40 years
Delray ll-Safeway	FL					921		3,282		488		921		3,770		4,691		1,266		1980		5/21/1997		5 to 40 years
Cleveland X-Avon	OH					301		1,214		2,106		304		3,317		3,621		742		1989		6/4/1997		5 to 40 years
Dallas-Skillman	TX					960		3,847		1,500		960		5,347		6,307		1,651		1975		6/30/1997		5 to 40 years
Dallas-Centennial	TX					965		3,864		1,276		943		5,162		6,105		1,635		1977		6/30/1997		5 to 40 years
Dallas-Samuell	TX		(1	)		570		2,285		795		611		3,039		3,650		990		1975		6/30/1997		5 to 40 years
Dallas-Hargrove	TX					370		1,486		530		370		2,016		2,386		712		1975		6/30/1997		5 to 40 years
Houston-Antoine	TX					515		2,074		561		515		2,635		3,150		872		1984		6/30/1997		5 to 40 years
Atlanta-Alpharetta	GA					1,033		3,753		458		1,033		4,211		5,244		1,428		1994		7/24/1997		5 to 40 years
Atlanta-Marietta	GA		(1	)		769		2,788		465		825		3,197		4,022		1,031		1996		7/24/1997		5 to 40 years
Atlanta-Doraville	GA					735		3,429		318		735		3,747		4,482		1,230		1995		8/21/1997		5 to 40 years
GreensboroHilltop	NC					268		1,097		391		268		1,488		1,756		458		1995		9/25/1997		5 to 40 years
GreensboroStgCch	NC					89		376		1,539		89		1,915		2,004		463		1997		9/25/1997		5 to 40 years
Baton Rouge-Airline	LA		(1	)		396		1,831		966		421		2,772		3,193		796		1982		10/9/1997		5 to 40 years
Baton Rouge-Airline2	LA					282		1,303		312		282		1,615		1,897		551		1985		11/21/1997		5 to 40 years
Harrisburg-Peiffers	PA					635		2,550		532		637		3,080		3,717		940		1984		12/3/1997		5 to 40 years
Chesapeake-Military	VA					542		2,210		343		542		2,553		3,095		789		1996		2/5/1998		5 to 40 years
Chesapeake-Volvo	VA					620		2,532		908		620		3,440		4,060		1,015		1995		2/5/1998		5 to 40 years
Virginia Beach-Shell	VA					540		2,211		276		540		2,487		3,027		797		1991		2/5/1998		5 to 40 years
Virginia Beach-Central	VA					864		3,994		752		864		4,746		5,610		1,464		1993/95		2/5/1998		5 to 40 years


									Cost Capitalized														Life on
									Subsequent to		Gross Amount at Which												which
					Initial Cost to Company				Acquisition		Carried at Close of Period												depreciation
							Building,		Building,				Building,										in latest
							Equipment		Equipment				Equipment										income
		Encum					and		and				and				Accum.		Date of		Date		statement
Description	ST	brance			Land		Improvements		Improvements		Land		Improvements		Total		Deprec.		Construction		Acquired		is computed
Norfolk-Naval Base	VA					1,243		5,019		744		1,243		5,763		7,006		1,760		1975		2/5/1998		5 to 40 years
Tampa-E.Hillsborough	FL					709		3,235		750		709		3,985		4,694		1,331		1985		2/4/1998		5 to 40 years
Northbridge	MA		(2	)		441		1,788		990		694		2,525		3,219		263		1988		2/9/1998		5 to 40 years
Harriman	NY					843		3,394		490		843		3,884		4,727		1,225		1989/95		2/4/1998		5 to 40 years
Greensboro-High Point	NC					397		1,834		554		397		2,388		2,785		732		1993		2/10/1998		5 to 40 years
Lynchburg-Timberlake	VA					488		1,746		498		488		2,244		2,732		680		1990/96		2/18/1998		5 to 40 years
Titusville	FL		(2	)		492		1,990		934		688		2,728		3,416		292		1986/90		2/25/1998		5 to 40 years
Salem	MA					733		2,941		1,236		733		4,177		4,910		1,255		1979		3/3/1998		5 to 40 years
Chattanooga-Lee Hwy	TN					384		1,371		536		384		1,907		2,291		613		1987		3/27/1998		5 to 40 years
Chattanooga-Hwy 58	TN					296		1,198		2,090		414		3,170		3,584		657		1985		3/27/1998		5 to 40 years
Ft. Oglethorpe	GA					349		1,250		584		349		1,834		2,183		574		1989		3/27/1998		5 to 40 years
Birmingham-Walt	AL					544		1,942		831		544		2,773		3,317		922		1984		3/27/1998		5 to 40 years
East Greenwich	RI					702		2,821		1,080		702		3,901		4,603		1,151		1984/88		3/26/1998		5 to 40 years
Durham-Hillsborough	NC					775		3,103		710		775		3,813		4,588		1,143		1988/91		4/9/1998		5 to 40 years
Durham-Cornwallis	NC					940		3,763		749		940		4,512		5,452		1,342		1990/96		4/9/1998		5 to 40 years
Salem-Policy	NH					742		2,977		468		742		3,445		4,187		994		1980		4/7/1998		5 to 40 years
Warren-Elm	OH		(1	)		522		1,864		1,218		569		3,035		3,604		814		1986		4/22/1998		5 to 40 years
Warren-Youngstown	OH					512		1,829		1,860		675		3,526		4,201		779		1986		4/22/1998		5 to 40 years
Indian Harbor Beach	FL					662		2,654		-602		662		2,052		2,714		674		1985		6/2/1998		5 to 40 years
Jackson 3 - I55	MS					744		3,021		132		744		3,153		3,897		964		1995		5/13/1998		5 to 40 years
Katy-N.Fry	TX					419		1,524		3,284		419		4,808		5,227		704		1994		5/20/1998		5 to 40 years
Hollywood-Sheridan	FL					1,208		4,854		358		1,208		5,212		6,420		1,548		1988		7/1/1998		5 to 40 years
Pompano Beach-Atlantic	FL					944		3,803		352		944		4,155		5,099		1,254		1985		7/1/1998		5 to 40 years
Pompano Beach-Sample	FL					903		3,643		341		903		3,984		4,887		1,175		1988		7/1/1998		5 to 40 years
Boca Raton-18th St	FL					1,503		6,059		832		1,503		6,891		8,394		2,043		1991		7/1/1998		5 to 40 years
Vero Beach	FL					489		1,813		116		489		1,929		2,418		635		1997		6/12/1998		5 to 40 years
Humble	TX					447		1,790		2,246		740		3,743		4,483		824		1986		6/16/1998		5 to 40 years
Houston-Old Katy	TX		(1	)		659		2,680		377		698		3,018		3,716		810		1996		6/19/1998		5 to 40 years
Webster	TX					635		2,302		131		635		2,433		3,068		727		1997		6/19/1998		5 to 40 years
Carrollton	TX					548		1,988		295		548		2,283		2,831		668		1997		6/19/1998		5 to 40 years
Hollywood-N.21st	FL					840		3,373		363		840		3,736		4,576		1,139		1987		8/3/1998		5 to 40 years
San Marcos	TX					324		1,493		2,012		324		3,505		3,829		667		1994		6/30/1998		5 to 40 years
Austin-McNeil	TX					492		1,995		494		510		2,471		2,981		729		1994		6/30/1998		5 to 40 years
Austin-FM	TX					484		1,951		462		481		2,416		2,897		714		1996		6/30/1998		5 to 40 years
Jacksonville-Center	NC					327		1,329		678		327		2,007		2,334		500		1995		8/6/1998		5 to 40 years
Jacksonville-Gum Branch	NC					508		1,815		1,271		508		3,086		3,594		761		1989		8/17/1998		5 to 40 years
Jacksonville-N.Marine	NC					216		782		721		216		1,503		1,719		468		1985		9/24/1998		5 to 40 years
Euless	TX					550		1,998		660		550		2,658		3,208		709		1996		9/29/1998		5 to 40 years
N. Richland Hills	TX					670		2,407		1,540		670		3,947		4,617		905		1996		10/9/1998		5 to 40 years


									Cost Capitalized														Life on
									Subsequent to		Gross Amount at Which												which
					Initial Cost to Company				Acquisition		Carried at Close of Period												depreciation
							Building,		Building,				Building,										in latest
							Equipment		Equipment				Equipment										income
		Encum					and		and				and				Accum.		Date of		Date		statement
Description	ST	brance			Land		Improvements		Improvements		Land		Improvements		Total		Deprec.		Construction		Acquired		is computed
Batavia	OH					390		1,570		909		390		2,479		2,869		625		1988		11/19/1998		5 to 40 years
Jackson-N.West	MS					460		1,642		480		460		2,122		2,582		707		1984		12/1/1998		5 to 40 years
Katy-Franz	TX					507		2,058		1,599		507		3,657		4,164		741		1993		12/15/1998		5 to 40 years
W.Warwick	RI					447		1,776		813		447		2,589		3,036		717		1986/94		2/2/1999		5 to 40 years
Lafayette-Pinhook 1	LA					556		1,951		977		556		2,928		3,484		973		1980		2/17/1999		5 to 40 years
Lafayette-Pinhook2	LA					708		2,860		285		708		3,145		3,853		895		1992/94		2/17/1999		5 to 40 years
Lafayette-Ambassador	LA					314		1,095		665		314		1,760		2,074		631		1975		2/17/1999		5 to 40 years
Lafayette-Evangeline	LA					188		652		1,507		188		2,159		2,347		628		1977		2/17/1999		5 to 40 years
Lafayette-Guilbeau	LA					963		3,896		776		963		4,672		5,635		1,224		1994		2/17/1999		5 to 40 years
Gilbert-Elliot Rd	AZ					651		2,600		1,101		772		3,580		4,352		864		1995		5/18/1999		5 to 40 years
Glendale-59th Ave	AZ					565		2,596		556		565		3,152		3,717		852		1997		5/18/1999		5 to 40 years
Mesa-Baseline	AZ					330		1,309		2,399		733		3,305		4,038		482		1986		5/18/1999		5 to 40 years
Mesa-E.Broadway	AZ					339		1,346		593		339		1,939		2,278		493		1986		5/18/1999		5 to 40 years
Mesa-W.Broadway	AZ					291		1,026		874		291		1,900		2,191		414		1976		5/18/1999		5 to 40 years
Mesa-Greenfield	AZ					354		1,405		336		354		1,741		2,095		516		1986		5/18/1999		5 to 40 years
Phoenix-Camelback	AZ					453		1,610		834		453		2,444		2,897		665		1984		5/18/1999		5 to 40 years
Phoenix-Bell	AZ					872		3,476		871		872		4,347		5,219		1,196		1984		5/18/1999		5 to 40 years
Phoenix-35th Ave	AZ					849		3,401		666		849		4,067		4,916		1,094		1996		5/21/1999		5 to 40 years
Westbrook	ME					410		1,626		1,759		410		3,385		3,795		728		1988		8/2/1999		5 to 40 years
Cocoa	FL					667		2,373		775		667		3,148		3,815		850		1982		9/29/1999		5 to 40 years
Cedar Hill	TX					335		1,521		377		335		1,898		2,233		535		1985		11/9/1999		5 to 40 years
Monroe	NY					276		1,312		1,159		276		2,471		2,747		515		1998		2/2/2000		5 to 40 years
N.Andover	MA					633		2,573		808		633		3,381		4,014		755		1989		2/15/2000		5 to 40 years
Seabrook	TX					633		2,617		343		633		2,960		3,593		768		1996		3/1/2000		5 to 40 years
Plantation	FL					384		1,422		415		384		1,837		2,221		463		1994		5/2/2000		5 to 40 years
Birmingham-Bessemer	AL					254		1,059		1,194		254		2,253		2,507		411		1998		11/15/2000		5 to 40 years
Brewster	NY		(2	)		1,716		6,920		905		1,981		7,560		9,541		797		1991/97		12/27/2000		5 to 40 years
Austin-Lamar	TX		(2	)		837		2,977		496		966		3,344		4,310		400		1996/99		2/22/2001		5 to 40 years
Houston-E.Main	TX		(2	)		733		3,392		572		841		3,856		4,697		428		1993/97		3/2/2001		5 to 40 years
Ft.Myers-Abrams	FL		(2	)		787		3,249		374		902		3,508		4,410		424		1997		3/13/2001		5 to 40 years
Dracut	MA		(1	)		1,035		3,737		590		1,104		4,258		5,362		887		1986		12/1/2001		5 to 40 years
Methuen	MA		(1	)		1,024		3,649		567		1,091		4,149		5,240		856		1984		12/1/2001		5 to 40 years
Columbia 5	SC		(1	)		883		3,139		1,212		942		4,292		5,234		816		1985		12/1/2001		5 to 40 years
Myrtle Beach	SC		(1	)		552		1,970		881		589		2,814		3,403		582		1984		12/1/2001		5 to 40 years
Kingsland	GA		(1	)		470		1,902		2,914		666		4,620		5,286		642		1989		12/1/2001		5 to 40 years
Saco	ME		(1	)		534		1,914		279		570		2,157		2,727		452		1988		12/3/2001		5 to 40 years
Plymouth	MA					1,004		4,584		2,282		1,004		6,866		7,870		1,043		1996		12/19/2001		5 to 40 years
Sandwich	MA		(1	)		670		3,060		408		714		3,424		4,138		714		1984		12/19/2001		5 to 40 years
Syracuse	NY		(1	)		294		1,203		402		327		1,572		1,899		358		1987		2/5/2002		5 to 40 years


									Cost Capitalized														Life on
									Subsequent to		Gross Amount at Which												which
					Initial Cost to Company				Acquisition		Carried at Close of Period												depreciation
							Building,		Building,				Building,										in latest
							Equipment		Equipment				Equipment										income
		Encum					and		and				and				Accum.		Date of		Date		statement
Description	ST	brance			Land		Improvements		Improvements		Land		Improvements		Total		Deprec.		Construction		Acquired		is computed
Houston-Westward	TX		(1	)		853		3,434		855		912		4,230		5,142		883		1976		2/13/2002		5 to 40 years
Houston-Boone	TX		(1	)		250		1,020		495		268		1,497		1,765		319		1983		2/13/2002		5 to 40 years
Houston-Cook	TX		(1	)		285		1,160		326		306		1,465		1,771		323		1986		2/13/2002		5 to 40 years
Houston-Harwin	TX		(1	)		449		1,816		597		480		2,382		2,862		506		1981		2/13/2002		5 to 40 years
Houston-Hempstead	TX		(1	)		545		2,200		935		583		3,097		3,680		627		1974/78		2/13/2002		5 to 40 years
Houston-Kuykendahl	TX		(1	)		517		2,090		1,258		553		3,312		3,865		601		1979/83		2/13/2002		5 to 40 years
Houston-Hwy 249	TX		(1	)		299		1,216		1,053		320		2,248		2,568		428		1983		2/13/2002		5 to 40 years
Mesquite-Hwy 80	TX		(1	)		463		1,873		655		496		2,495		2,991		482		1985		2/13/2002		5 to 40 years
Mesquite-Franklin	TX		(1	)		734		2,956		678		784		3,584		4,368		694		1984		2/13/2002		5 to 40 years
Dallas-Plantation	TX		(1	)		394		1,595		283		421		1,851		2,272		394		1985		2/13/2002		5 to 40 years
San Antonio-Hunt	TX		(1	)		381		1,545		781		408		2,299		2,707		431		1980		2/13/2002		5 to 40 years
Humble-5250 FM	TX					919		3,696		363		919		4,059		4,978		763		1998/02		6/19/2002		5 to 40 years
Pasadena	TX					612		2,468		232		612		2,700		3,312		514		1999		6/19/2002		5 to 40 years
League City-E.Main	TX					689		3,159		269		689		3,428		4,117		658		1994/97		6/19/2002		5 to 40 years
Montgomery	TX					817		3,286		2,066		1,119		5,050		6,169		736		1998		6/19/2002		5 to 40 years
Texas City	TX					817		3,286		129		817		3,415		4,232		671		1999		6/19/2002		5 to 40 years
Houston-Hwy 6	TX					407		1,650		182		407		1,832		2,239		359		1997		6/19/2002		5 to 40 years
Lumberton	TX					817		3,287		191		817		3,478		4,295		670		1996		6/19/2002		5 to 40 years
The Hamptons l	NY					2,207		8,866		627		2,207		9,493		11,700		1,714		1989/95		12/16/2002		5 to 40 years
The Hamptons 2	NY					1,131		4,564		489		1,131		5,053		6,184		890		1998		12/16/2002		5 to 40 years
The Hamptons 3	NY					635		2,918		357		635		3,275		3,910		566		1997		12/16/2002		5 to 40 years
The Hamptons 4	NY					1,251		5,744		357		1,252		6,100		7,352		1,078		1994/98		12/16/2002		5 to 40 years
Duncanville	TX					1,039		4,201		46		1,039		4,247		5,286		693		1995/99		8/26/2003		5 to 40 years
Dallas-Harry Hines	TX					827		3,776		297		827		4,073		4,900		641		1998/01		10/1/2003		5 to 40 years
Stamford	CT					2,713		11,013		304		2,713		11,317		14,030		1,732		1998		3/17/2004		5 to 40 years
Houston-Tomball	TX					773		3,170		1,775		773		4,945		5,718		648		2000		5/19/2004		5 to 40 years
Houston-Conroe	TX					1,195		4,877		109		1,195		4,986		6,181		734		2001		5/19/2004		5 to 40 years
Houston-Spring	TX					1,103		4,550		253		1,103		4,803		5,906		716		2001		5/19/2004		5 to 40 years
Houston-Bissonnet	TX					1,061		4,427		2,663		1,061		7,090		8,151		822		2003		5/19/2004		5 to 40 years
Houston-Alvin	TX					388		1,640		852		388		2,492		2,880		296		2003		5/19/2004		5 to 40 years
Clearwater	FL					1,720		6,986		82		1,720		7,068		8,788		1,020		2001		6/3/2004		5 to 40 years
Houston-Missouri City	TX					1,167		4,744		3,459		1,566		7,804		9,370		746		1998		6/23/2004		5 to 40 years
Chattanooga-Hixson	TN					1,365		5,569		1,182		1,365		6,751		8,116		947		1998/02		8/4/2004		5 to 40 years
Austin-Round Rock	TX					2,047		5,857		675		2,051		6,528		8,579		902		2000		8/5/2004		5 to 40 years
Cicero	NY					527		2,121		564		527		2,685		3,212		355		1988/02		3/16/2005		5 to 40 years
Bay Shore	NY					1,131		4,609		59		1,131		4,668		5,799		593		2003		3/15/2005		5 to 40 years
Springfield-Congress	MA					612		2,501		106		612		2,607		3,219		337		1965/75		4/12/2005		5 to 40 years
Stamford-Hope	CT					1,612		6,585		201		1,612		6,786		8,398		855		2002		4/14/2005		5 to 40 years
Houston-Jones	TX		3,369			1,214		4,949		82		1,215		5,030		6,245		603		1997/99		6/6/2005		5 to 40 years


								Cost Capitalized														Life on
								Subsequent to		Gross Amount at Which												which
				Initial Cost to Company				Acquisition		Carried at Close of Period												depreciation
						Building,		Building,				Building,										in latest
						Equipment		Equipment				Equipment										income
		Encum				and		and				and				Accum.		Date of		Date		statement
Description	ST	brance		Land		Improvements		Improvements		Land		Improvements		Total		Deprec.		Construction		Acquired		is computed
Montgomery-Richard	AL				1,906		7,726		135		1,906		7,861		9,767		950		1997		6/1/2005		5 to 40 years
Oxford	MA				470		1,902		1,577		470		3,479		3,949		288		2002		6/23/2005		5 to 40 years
Austin-290E	TX				537		2,183		167		537		2,350		2,887		291		2003		7/12/2005		5 to 40 years
SanAntonio-Marbach	TX				556		2,265		206		556		2,471		3,027		290		2003		7/12/2005		5 to 40 years
Austin-South 1st	TX				754		3,065		148		754		3,213		3,967		388		2003		7/12/2005		5 to 40 years
Pinehurst	TX				484		1,977		1,361		484		3,338		3,822		303		2002/04		7/12/2005		5 to 40 years
Marietta-Austell	GA				811		3,397		433		811		3,830		4,641		449		2003		9/15/2005		5 to 40 years
Baton Rouge-Florida	LA				719		2,927		927		719		3,854		4,573		295		1984/94		11/15/2005		5 to 40 years
Cypress	TX				721		2,994		1,094		721		4,088		4,809		414		2003		1/13/2006		5 to 40 years
Texas City	TX				867		3,499		106		867		3,605		4,472		377		2003		1/10/2006		5 to 40 years
San Marcos-Hwy 35S	TX				628		2,532		450		982		2,628		3,610		274		2001		1/10/2006		5 to 40 years
Baytown	TX				596		2,411		86		596		2,497		3,093		266		2002		1/10/2006		5 to 40 years
Webster	NY				937		3,779		116		937		3,895		4,832		392		2002/06		2/1/2006		5 to 40 years
Houston-Jones Rd 2	TX				707		2,933		2,013		707		4,946		5,653		447		2000		3/9/2006		5 to 40 years
Cameron-Scott	LA		977		411		1,621		136		411		1,757		2,168		205		1997		4/13/2006		5 to 40 years
Lafayette-Westgate	LA				463		1,831		83		463		1,914		2,377		193		2001/04		4/13/2006		5 to 40 years
Broussard	LA				601		2,406		1,250		601		3,656		4,257		315		2002		4/13/2006		5 to 40 years
Congress-Lafayette	LA		1,072		542		1,319		2,101		542		3,420		3,962		224		1997/99		4/13/2006		5 to 40 years
Manchester	NH				832		3,268		90		832		3,358		4,190		320		2000		4/26/2006		5 to 40 years
Nashua	NH				617		2,422		489		617		2,911		3,528		256		1989		6/29/2006		5 to 40 years
Largo 2	FL				1,270		5,037		171		1,270		5,208		6,478		487		1998		6/22/2006		5 to 40 years
Pinellas Park	FL				929		3,676		109		929		3,785		4,714		344		2000		6/22/2006		5 to 40 years
Tarpon Springs	FL				696		2,739		110		696		2,849		3,545		263		1999		6/22/2006		5 to 40 years
New Orleans	LA				1,220		4,805		83		1,220		4,888		6,108		450		2000		6/22/2006		5 to 40 years
St Louis-Meramec	MO				1,113		4,359		190		1,113		4,549		5,662		414		1999		6/22/2006		5 to 40 years
St Louis-Charles Rock	MO				766		3,040		111		766		3,151		3,917		282		1999		6/22/2006		5 to 40 years
St Louis-Shackelford	MO				828		3,290		141		828		3,431		4,259		315		1999		6/22/2006		5 to 40 years
St Louis-W.Washington	MO				734		2,867		555		734		3,422		4,156		328		1980/01		6/22/2006		5 to 40 years
St Louis-Howdershell	MO				899		3,596		180		899		3,776		4,675		350		2000		6/22/2006		5 to 40 years
St Louis-Lemay Ferry	MO				890		3,552		208		890		3,760		4,650		338		1999		6/22/2006		5 to 40 years
St Louis-Manchester	MO				697		2,711		96		697		2,807		3,504		258		2000		6/22/2006		5 to 40 years
Arlington-Little Rd	TX		1,951		1,256		4,946		159		1,256		5,105		6,361		463		1998/03		6/22/2006		5 to 40 years
Dallas-Goldmark	TX				605		2,434		58		605		2,492		3,097		228		2004		6/22/2006		5 to 40 years
Dallas-Manana	TX				607		2,428		115		607		2,543		3,150		233		2004		6/22/2006		5 to 40 years
Dallas-Manderville	TX				1,073		4,276		62		1,073		4,338		5,411		398		2003		6/22/2006		5 to 40 years
Ft. Worth-Granbury	TX		1,751		549		2,180		90		549		2,270		2,819		210		1998		6/22/2006		5 to 40 years
Ft. Worth-Grapevine	TX				644		2,542		52		644		2,594		3,238		238		1999		6/22/2006		5 to 40 years
San Antonio-Blanco	TX				963		3,836		55		963		3,891		4,854		357		2004		6/22/2006		5 to 40 years
San Antonio-Broadway	TX				773		3,060		106		773		3,166		3,939		293		2000		6/22/2006		5 to 40 years


								Cost Capitalized														Life on
								Subsequent to		Gross Amount at Which												which
				Initial Cost to Company				Acquisition		Carried at Close of Period												depreciation
						Building,		Building,				Building,										in latest
						Equipment		Equipment				Equipment										income
		Encum				and		and				and				Accum.		Date of		Date		statement
Description	ST	brance		Land		Improvements		Improvements		Land		Improvements		Total		Deprec.		Construction		Acquired		is computed
San Antonio-Huebner	TX		2,177		1,175		4,624		118		1,175		4,742		5,917		424		1998		6/22/2006		5 to 40 years
Chattanooga-Lee Hwy II	TN				619		2,471		62		619		2,533		3,152		228		2002		8/7/2006		5 to 40 years
Lafayette-Evangeline	LA				699		2,784		1,885		699		4,669		5,368		310		1995/99		8/1/2006		5 to 40 years
Montgomery-E.S.Blvd	AL				1,158		4,639		304		1,158		4,943		6,101		433		1996/97		9/28/2006		5 to 40 years
Auburn-Pepperell Pkwy	AL				590		2,361		152		590		2,513		3,103		214		1998		9/28/2006		5 to 40 years
Auburn-Gatewood Dr	AL				694		2,758		111		694		2,869		3,563		237		2002/03		9/28/2006		5 to 40 years
Columbus-Williams Rd	GA				736		2,905		118		736		3,023		3,759		263		2002/04/06		9/28/2006		5 to 40 years
Columbus-Miller Rd	GA				975		3,854		129		975		3,983		4,958		333		1995		9/28/2006		5 to 40 years
Columbus-Armour Rd	GA				0		3,680		98		0		3,778		3,778		324		2004/05		9/28/2006		5 to 40 years
Columbus-Amber Dr	GA				439		1,745		63		439		1,808		2,247		155		1998		9/28/2006		5 to 40 years
Concord	NH				813		3,213		1,919		813		5,132		5,945		337		2000		10/31/2006		5 to 40 years
Buffalo-Langner Rd	NY				532		2,119		442		532		2,561		3,093		171		1993/07		3/30/2007		5 to 40 years
Buffalo-Transit Rd	NY				437		1,794		76		437		1,870		2,307		142		1998		3/30/2007		5 to 40 years
Buffalo-Lake Ave	NY				638		2,531		242		638		2,773		3,411		219		1997		3/30/2007		5 to 40 years
Buffalo-Union Rd	NY				348		1,344		108		348		1,452		1,800		108		1998		3/30/2007		5 to 40 years
Buffalo-Niagara Falls Blvd	NY				323		1,331		64		323		1,395		1,718		104		1998		3/30/2007		5 to 40 years
Buffalo-Young St	NY				315		2,185		118		316		2,302		2,618		147		1999/00		3/30/2007		5 to 40 years
Buffalo-Sheridan Dr	NY				961		3,827		101		961		3,928		4,889		280		1999		3/30/2007		5 to 40 years
Lockport-Transit Rd	NY				375		1,498		253		375		1,751		2,126		142		1990/95		3/30/2007		5 to 40 years
Rochester-Phillips Rd	NY				1,003		4,002		63		1,003		4,065		5,068		289		1999		3/30/2007		5 to 40 years
Greenville	MS				1,100		4,386		116		1,100		4,502		5,602		360		1994		1/11/2007		5 to 40 years
Port Arthur-9595 Hwy69	TX				929		3,647		123		930		3,769		4,699		279		2002/04		3/8/2007		5 to 40 years
Beaumont-Dowlen Rd	TX				1,537		6,018		224		1,537		6,242		7,779		460		2003/06		3/8/2007		5 to 40 years
Huntsville-Memorial Pkwy	AL				1,607		6,338		171		1,607		6,509		8,116		436		1989/06		6/1/2007		5 to 40 years
Huntsville-Madison 1	AL				1,016		4,013		151		1,017		4,163		5,180		285		1993/07		6/1/2007		5 to 40 years
Gulfport-Ocean Springs	MS				1,423		5,624		45		1,423		5,669		7,092		373		1998/05		6/1/2007		5 to 40 years
Huntsville-Hwy 72	AL				1,206		4,775		69		1,206		4,844		6,050		324		1998/06		6/1/2007		5 to 40 years
Mobile-Airport Blvd	AL				1,216		4,819		132		1,216		4,951		6,167		339		2000/07		6/1/2007		5 to 40 years
Gulfport-Hwy 49	MS				1,345		5,325		42		1,345		5,367		6,712		354		2002/04		6/1/2007		5 to 40 years
Huntsville-Madison 2	AL				1,164		4,624		52		1,164		4,676		5,840		314		2002/06		6/1/2007		5 to 40 years
Foley-Hwy 59	AL				1,346		5,474		95		1,347		5,568		6,915		380		2003/06		6/1/2007		5 to 40 years
Pensacola 6-Nine Mile	FL				1,029		4,180		92		1,029		4,272		5,301		307		2003/06		6/1/2007		5 to 40 years
Auburn-College St	AL				686		2,732		85		686		2,817		3,503		197		2003		6/1/2007		5 to 40 years
Gulfport-Biloxi	MS				1,811		7,152		47		1,811		7,199		9,010		472		2004/06		6/1/2007		5 to 40 years
Pensacola 7-Hwy 98	FL				732		3,015		34		732		3,049		3,781		217		2006		6/1/2007		5 to 40 years
Montgomery-Arrowhead	AL				1,075		4,333		35		1,076		4,367		5,443		294		2006		6/1/2007		5 to 40 years
Montgomery-McLemore	AL				885		3,586		19		885		3,605		4,490		244		2006		6/1/2007		5 to 40 years
San Antonio-Foster	TX				676		2,685		135		676		2,820		3,496		194		2003/06		5/21/2007		5 to 40 years
Beaumont-S.Major	TX				742		3,024		113		742		3,137		3,879		181		2002/05		11/14/2007		5 to 40 years


							Cost Capitalized														Life on
							Subsequent to		Gross Amount at Which												which
			Initial Cost to Company				Acquisition		Carried at Close of Period												depreciation
					Building,		Building,				Building,										in latest
					Equipment		Equipment				Equipment										income
		Encum			and		and				and				Accum.		Date of		Date		statement
Description	ST	brance	Land		Improvements		Improvements		Land		Improvements		Total		Deprec.		Construction		Acquired		is computed
Hattiesburg-Clasic	MS			444		1,799		73		444		1,872		2,316		99		1998		12/19/2007		5 to 40 years
Biloxi-Ginger	MS			384		1,548		46		384		1,594		1,978		84		2000		12/19/2007		5 to 40 years
Foley-7905 St Hwy 59	AL			437		1,757		34		437		1,791		2,228		93		2000		12/19/2007		5 to 40 years
Ridgeland	MS			1,479		5,965		85		1,479		6,050		7,529		297		1997/00		1/17/2008		5 to 40 years
Jackson-5111	MS			1,337		5,377		61		1,337		5,438		6,775		267		2003		1/17/2008		5 to 40 years
Cincinnati-Robertson	OH			852		3,409		75		852		3,484		4,336		90		2003/04		12/31/2008		5 to 40 years
Richmond-Bridge Rd	VA			1,047		5,981		0		1,047		5,981		7,028		0		2009		10/1/2009		5 to 40 years
Construction in progress				0		0		9,846		0		9,846		9,846		0		2009
Corporate Office	NY			0		68		11,167		1,616		9,619		11,235		7,819		2000		5/1/2000		5 to 40 years

			$	225,290	$	875,528	$	286,765	$	237,684	$	1,149,899	$	1,387,583	$	245,178


(1)		These properties are encumbered through one mortgage loan with an outstanding balance of $41.5 million at December 31, 2009.

(2)		These properties are encumbered through one mortgage loan with an outstanding balance of $28.4 million at December 31, 2009.


	December 31, 2009						December 31, 2008						December 31, 2007
Cost:
Balance at beginning of period				$	1,366,615					$	1,300,847					$	1,115,255
Additions during period:
Acquisitions through foreclosure	$	—					$	—					$	—
Other acquisitions		—						18,454						136,653
Improvements, etc.		22,135						47,507						51,363

					22,135						65,961						188,016

Deductions during period:
Cost of real estate sold		(1,167	)		(1,167	)		(193	)		(193	)		(2,424	)		(2,424	)

Balance at close of period				$	1,387,583					$	1,366,615					$	1,300,847


Accumulated Depreciation:
Balance at beginning of period				$	212,301					$	179,880					$	151,138
Additions during period:
Depreciation expense	$	33,096					$	32,556					$	29,523

					33,096						32,556						29,523

Deductions during period:
Accumulated depreciation of real estate sold		(219	)		(219	)		(135	)		(135	)		(781	)		(781	)

Balance at close of period				$	245,178					$	212,301					$	179,880