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EX-31.1 - EX-31.1 - SOVRAN ACQUISITION LTD PARTNERSHIPl38687exv31w1.htm
EX-10.5 - EX-10.5 - SOVRAN ACQUISITION LTD PARTNERSHIPl38687exv10w5.htm
EX-21.1 - EX-21.1 - SOVRAN ACQUISITION LTD PARTNERSHIPl38687exv21w1.htm
EX-31.2 - EX-31.2 - SOVRAN ACQUISITION LTD PARTNERSHIPl38687exv31w2.htm
EX-32.1 - EX-32.1 - SOVRAN ACQUISITION LTD PARTNERSHIPl38687exv32w1.htm
EX-12.1 - EX-12.1 - SOVRAN ACQUISITION LTD PARTNERSHIPl38687exv12w1.htm
Table of Contents

 
 
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: 0-24071
SOVRAN ACQUISITION LIMITED PARTNERSHIP
(Exact name of Registrant as specified in its charter)
     
Delaware   16-1481551
     
(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
     
Not applicable   Not Applicable
Securities registered pursuant to section 12(g) of the Act:
Units of Limited Partnership Interest
(Title of Class)
     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. þ
     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 February 15, 2010, 27,966,979 Units of Limited Partnership Interest were outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
     Portions of the Definitive Proxy Statement for the Annual Meeting of Shareholders of the Company to be held on May 26, 2010 (Part III).
 
 

 


 

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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 Operating Partnership 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 Operating Partnership’s ability to evaluate, finance and integrate acquired businesses into the Operating Partnership’s existing business and operations; the Operating Partnership’s ability to effectively compete in the industry in which it does business; the Operating Partnership’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 Operating Partnership’s outstanding floating rate debt; the Operating Partnership’s ability to comply with debt covenants; any future ratings on the Operating Partnership’s debt instruments; the Operating Partnership’s reliance on its call center; the Operating Partnership’s cash flow may be insufficient to meet required payments of principal, interest and distributions; and tax law changes that may change the taxability of future income.
Item 1. Business
     Sovran Acquisition Limited Partnership (the “Operating Partnership”) is the entity through which Sovran Self Storage, Inc. (the “Company”), a self-administered and self-managed real estate investment trust (“REIT”), conducts substantially all of the Company’s business and owns substantially all of the Company’s assets. 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 ®.
     At December 31, 2009, the Company is a 98.5% economic owner of the Operating Partnership and controls it through Sovran Holdings, Inc. (“Holdings”), a wholly owned subsidiary of the Company incorporated in Delaware and the sole general partner of the Operating Partnership. This structure is commonly referred to as an umbrella partnership real estate investment trust (“UPREIT”). The Board of Directors of Holdings, the members of which are the same as the members of the Board of Directors of the Company, manages the affairs of the Operating Partnership by directing the affairs of Holdings. The Company’s limited partner and indirect general partner interests in the Operating Partnership entitle it to share in cash distributions from, and in the profits and losses of, the Operating Partnership in proportion to its ownership interest therein and entitle the Company to vote on all matters requiring a vote of the limited partners.
     The Operating Partnership’s other limited partners are persons who contributed their direct or indirect interests in certain self-storage properties to the Operating Partnership. The Operating Partnership is obligated to redeem each unit of limited partnership (“Unit”) at the request of the holder thereof for cash equal to the fair market value of a share of the Company’s common stock, par value $.01 per share (“Common Shares”), 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. With each such redemption or acquisition by the Company, the Company’s percentage ownership interest in the Operating Partnership will increase. In addition, whenever the Company issues Common Shares, the Company is obligated to contribute any net proceeds therefrom to the Operating Partnership and the Operating Partnership is obligated to issue an equivalent number of Units to the Company.
     The Operating Partnership may issue additional Units to acquire additional self-storage properties in transactions that in certain circumstances defer some or all of the sellers’ tax consequences. The Operating Partnership believes that many potential sellers of self-storage properties have a low tax basis in their properties and

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would be more willing to sell the properties in transactions that defer Federal income taxes. Offering Units instead of cash for properties may provide potential sellers partial Federal income tax deferral.
     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 Operating Partnership, 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 Operating Partnership 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 Operating Partnership credits this program in achieving higher yields and controlling discounting;

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    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 us.
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 Operating Partnership, 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 Operating Partnership-owned Properties in an amount that we believe to be adequate.
Federal Income Tax

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     The Operating Partnership does not pay federal income taxes because we qualify as a partnership for federal and state income tax purposes and our partners are required to include their respective shares of profits and losses in their income tax returns.
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 the Company’s 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 the Company’s 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 unitholders. 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 the Company’s qualification as a REIT, the Company must make annual distributions to shareholders of at least 90% of the Company’s 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 distribution from $0.64 per unit to $0.45 per unit, for an annual rate of $1.80 per unit.

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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 the Company’s 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 Operating Partnership’s previous line of credit that was to mature in September 2008, the Operating Partnership’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 Operating Partnership 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 the Company’s 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,

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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 Operating Partnership. 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 the Company’s 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 unitholders, 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 unitholders. 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 unitholders.
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,

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limitations on additional indebtedness and distribution 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 the Company’s 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 unitholders. 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 unitholders 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;

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    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 unitholders could be adversely affected.
There Are Limitations on the Ability to Change Control of Sovran
     Limitation on Ownership and Transfer of Shares. To maintain the Company’s qualification as a REIT, not more than 50% in value of its 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, the Company’s Amended and Restated Articles of Incorporation include ownership limits and transfer restrictions on shares of its stock. The Company’s Articles of Incorporation limit ownership of its issued and outstanding stock by any single shareholder to 9.8% of the aggregate value of its outstanding stock, except that the ownership by some of its shareholders is limited to 15%.

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     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 the Company’s shareholders; and
 
    Limit the opportunity for the Company’s shareholders to receive a premium for shares of its 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 the Company’s 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 Company’s status as a REIT under the Code or in the event it determines that it is no longer in the Company’s best interests to be a REIT. Waivers have been granted to the former holders of the Company’s Series C preferred stock, FMR Corporation and Cohen & Steers, Inc. A transfer of its 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 the Company’s outstanding common stock might receive a premium for their shares of the Company’s 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 the Company’s 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.
The Failure of Sovran Self Storage, Inc. to Qualify as a REIT Would Have Adverse Consequences
     The Company intends to operate in a manner that will permit it 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 the Company’s continuing ability to meet various requirements concerning, among other things, the ownership of its outstanding stock, the nature of its assets, the sources of its income and the amount of its distributions to its shareholders.
     In addition, a REIT is limited with respect to the services it can provide for its tenants. In the past, the Company has provided certain conveniences for its tenants, including property insurance underwritten by a third party insurance company that pays it commissions. We believe the insurance provided by the insurance company would not constitute a prohibited service to the Company’s tenants. No assurances can be given, however, that the IRS will not challenge our position. If the IRS successfully challenged our position, the Company’s qualification as a REIT could be adversely affected.
     If the Company were to fail to qualify as a REIT in any taxable year, the Company would not be allowed a deduction for distributions to shareholders in computing its taxable income and would be subject to federal income tax (including any applicable alternative minimum tax) on its taxable income at regular corporate rates. Unless entitled to relief under certain Code provisions, the Company also would be ineligible for qualification as a REIT for

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the four taxable years following the year during which its qualification was lost. As a result, distributions to the shareholders would be reduced for each of the years involved. Although the Company currently intends 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 its Board of Directors to revoke its REIT election.
We May Pay Some Taxes, Reducing Cash Available for Unitholders
     Even if the Company qualifies 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 the Company’s 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 the Company receives or accrues certain amounts and the underlying economic arrangements among its taxable REIT subsidiaries and it are not comparable to similar arrangements among unrelated parties, the Company 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 the Company is 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 unitholders.
We May Change the Distribution Policy in the Future
     In 2009, our board of directors authorized and we declared quarterly distributions of $0.64 per unit for the first fiscal quarter; the equivalent of an annual rate of $2.56 per unit. 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 distribution to $0.45 per unit, for an annual rate of $1.80 per unit. A $0.45 per unit distribution 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 distributions in the future.
     A recent Internal Revenue Service revenue procedure allows the Company to satisfy the REIT income distribution requirements with respect to its 2010 and 2011 taxable years by distributing up to 90% of its dividends for such years on its common stock in shares of its common stock in lieu of paying dividends entirely in cash, so long as the Company follows a process allowing its shareholders to elect cash or stock subject to a cap that the Company imposes on the maximum amount of cash that will be paid. Although the Company may utilize this procedure in the future, it currently has no intent to do so.
     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 distributions in the future, as well as the timing, amount and composition of any such future distributions, 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 distribution policy could have a material adverse effect on the market price of the Company’s common stock.
The Company 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, the Company sold an aggregate of 653,757 shares of common stock under its 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 its registration statement covering the DRSPP. Some or all of those sales, which resulted in proceeds to the Company 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, the Company 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.

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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.
Item 1B. Unresolved Staff Comments
     None.

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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 %
 
                       

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     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 Operating Partnership 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
     There is no established public trading market for Units. As of February 15, 2010, there were 11 holders of record of Units.
     The following table sets forth the quarterly distributions per Unit paid by the Operating Partnership to holders of its Units with respect to each such period.
         
History of Distributions Declared on Units        
March 2008
  $0.630 per unit
June 2008
  $0.630 per unit
September 2008
  $0.640 per unit
December 2008
  $0.640 per unit
March 2009
  $0.640 per unit
July 2009
  $0.450 per unit
October 2009
  $0.450 per unit
January 2010
  $0.450 per unit
     The partnership agreement of the Operating Partnership (the “Partnership Agreement”) provides that the Operating Partnership will distribute all available cash (as defined in the Partnership Agreement) on at least a quarterly basis, in amounts determined by the general partner in its sole discretion, to the partners in accordance with their respective percentage interest in the Operating Partnership. Distributions are declared at the discretion of the Board of Directors of Holdings, the general partner of the Operating Partnership and a wholly-owned subsidiary of the Company, and will depend on actual funds from operations of the Operating Partnership, its financial condition, capital requirements, the annual distribution requirements under the REIT provisions of the Internal Revenue Code of 1986, as amended, and such other factors as the Board of Directors may deem relevant. The Board of Directors of Holdings may modify the Operating Partnership’s distribution policy from time to time, subject to the terms of the Partnership Agreement.
     The Operating Partnership’s line of credit contains customary representations, covenants and events of default, including covenants which restrict the ability of the Operating Partnership to make distributions in excess of stated amounts. In general, during any four consecutive fiscal quarters the Operating Partnership may only distribute up to 105% of the Operating Partnership’s funds from operations (as defined in the related agreement). The line of credit contains exceptions to these limitations to allow the Operating Partnership to make any distributions necessary to allow the Company to maintain its status as a REIT. The Operating Partnership does not anticipate that this provision will adversely affect the ability of the Operating Partnership to make distributions, as

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currently anticipated.
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     outstanding     remaining available  
    options, warrants     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       0  
2009 Outside Directors’ Stock Option and Award Plan
    9,500     $ 23.15       137,044  
1995 Outside Directors’ Stock Option Plan
    25,505     $ 46.23       0  
Deferred Compensation Plan for Directors (1)
    29,390       N/A       27,671  
Equity compensation plans not approved by shareholders:
    N/A       N/A       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.

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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 unit 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 unitholders
    20,294       38,120       38,741       35,003       31,706  
Income from continuing operations per common unit attributable to common unitholders— diluted
    0.87       1.63       1.73       1.80       1.72  
Net income per common unit attributable to common unitholders — basic
    0.84       1.72       1.81       1.90       1.87  
Net income per common unit attributable to common unitholders — diluted
    0.84       1.72       1.81       1.90       1.85  
Distributions declared per common unit (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  
Limited partners’ redeemable capital interest
    15,005       15,118       16,951       24,575       22,512  
Partners’ capital
    650,054       505,029       536,880       533,283       396,827  
 
                                       
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 distributions in March, July, and October (see Item 5). On January 4, 2010 we declared a distribution of $0.45 per common unit, and therefore it is not included in the 2009 column.

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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 Operating Partnership’s ability to evaluate, finance and integrate acquired businesses into the Operating Partnership’s existing business and operations; the Operating Partnership’s ability to effectively compete in the industry in which it does business; the Operating Partnership’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 Operating Partnership’s outstanding floating rate debt; the Operating Partnership’s ability to comply with debt covenants; any future ratings on the Operating Partnership’s debt instruments; the regional concentration of the Operating Partnership’s business may subject it to economic downturns in the states of Florida and Texas; the Operating Partnership’s reliance on its call center; the Operating Partnership’s cash flow may be insufficient to meet required payments of principal, interest and distributions; 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:
  A.   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.

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

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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: The Company operates, and intends to continue to operate, as a REIT under the

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Code, but no assurance can be given that we will at all times so qualify. To the extent that it continues to qualify as a REIT, the Company will not be taxed, with certain limited exceptions, on the taxable income that is distributed to the Company’s shareholders. If the Company fails 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 Operating Partnership 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:

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    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 the Company’s common stock offering in October 2009;
 
    At March 31, 2009, the Operating Partnership had violated the leverage ratio covenant contained in the line of credit and term note agreements. In May 2009, the Operating Partnership 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 Operating Partnership 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 Operating Partnership 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 Operating Partnership 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,

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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 Operating Partnership 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 Operating Partnership 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 distributions from 2007 to 2008 was a result of the conversion of all remaining 1,200,000 shares of the Company’s 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 unitholders
  $ 20,294     $ 38,120     $ 38,741     $ 35,003     $ 31,706  
Net income attributable to noncontrolling interests
    1,360       1,563       1,848       1,529       490  
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  
 
                                       

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    For Year Ended December 31,  
(dollars in thousands)   2009     2008     2007     2006     2005  
Casualty gain
                (114 )            
Loss (gain) on sale of real estate
    509       (716 )                  
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 unitholders
  $ 55,442     $ 72,203     $ 72,722     $ 60,220     $ 52,403  
 
                             
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 distribution payouts. At December 31, 2009, the Operating Partnership 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 Operating Partnership 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 Operating Partnership had violated the leverage ratio covenant contained in the line of credit and term note agreements. In May 2009, the Operating Partnership 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 Operating Partnership 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 distribution for the remainder of 2009 from $0.64 per unit to $0.45 per unit. In addition to the reduction in the distribution, in the second quarter of 2009 we changed our policy of declaring the distribution from the last week in the quarter to the first week following the quarter end. As a result of this date change, no distribution was declared in the three months ended June 30, 2009. A distribution of $0.45 per common unit was declared on January 4, 2010 and paid on January 26, 2010. The distribution paid amounted to $12.4 million. In 2010, we expect to declare and pay four distributions 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 Operating Partnership after deducting underwriting discounts and commissions and estimated offering expenses were approximately $114.0 million. The Operating Partnership used the net proceeds from the offering to repay $100 million of the Operating Partnership’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 Operating Partnership 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 Operating Partnership has taken, including but not limited to the equity raised from the Company’s common stock offering of approximately $114.0 million, the pay down of $100 million of our term notes, and the reduction in the quarterly distribution, 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 the Company operates as a REIT. In order to maintain its REIT status, a substantial portion of the Company’s operating cash flow must be used to pay dividends to its 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, distributions 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

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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 the Company’s 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 Operating Partnership entered into a $250 million unsecured term note maturing in June 2012 bearing interest at LIBOR plus 1.625% (based on the Operating Partnership’s December 31, 2009 credit rating). The proceeds from this term note were used to repay the Operating Partnership’s previous line of credit that was to mature in September 2008, the Operating Partnership’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 the Company’s 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 Operating Partnership’s credit rating at December 31, 2009), and requires a 0.25% facility fee. The interest rate at December 31, 2009 on the Operating Partnership’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 the Company’s 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 Operating Partnership’s rating on its revolving credit facility and term notes to non-investment grade (BB+) in May 2009. As a result of the Company’s 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

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    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 Operating Partnership 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, the Company issued approximately 1.4 million shares via its Dividend Reinvestment and Stock Purchase Plan and Employee Stock Option Plan. We received $32.6 million from the sale of such shares. The Company’s Dividend Reinvestment and Stock Purchase Plan was suspended in November 2009. The Company plans to reinstate its Dividend Reinvestment and Stock Purchase Plan in 2010 and expects to issue shares when its share price and capital needs warrant such issuance.
     During 2009 and 2008, the Company did not acquire any shares of its 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, the Company has reacquired a total of 1,171,886 shares pursuant to this program. From time to time, subject to market price and certain loan covenants, the Company 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:
                                         
Contractual   Payments due by period  
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

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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 the Company’s 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 the Company’s 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 Operating Partnership 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 Operating Partnership’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

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$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 Operating Partnership
  $ 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 )
Operating Partnership 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 )      

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DISTRIBUTION REQUIREMENTS OF THE COMPANY AND
IMPACT ON THE OPERATING PARTNERSHIP
     As a REIT, the Company is not required to pay federal income tax on income that it distributes to its shareholders, provided that the amount distributed is equal to at least 90% of its taxable income. These distributions must be made in the year to which they relate, or in the following year if declared before the Company files its 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 the Company’s 2009 distribution requirement. The Company’s source of funds for such distributions is solely and directly from the Operating Partnership.
     As a REIT, the Company must derive at least 95% of its total gross income from income related to real property, interest and dividends. In 2009, the Company’s percentage of revenue from such sources exceeded 98%, thereby passing the 95% test, and no special measures are expected to be required to enable the Company to maintain its REIT designation.
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 Operating Partnership would realize in a current market exchange.

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    Expected Maturity Date Including Discount              
(dollars in thousands)   2010     2011     2012     2013     2014     Thereafter     Total     Fair
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 unitholders.
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.

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Item 8.   Financial Statements and Supplementary Data
Report of Independent Registered Public Accounting Firm
The Board of Directors and Partners of Sovran Acquisition Limited Partnership
     We have audited the accompanying consolidated balance sheets of Sovran Acquisition Limited Partnership as of December 31, 2009 and 2008, and the related consolidated statements of operations, partners’ capital 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 Operating Partnership’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 Acquisition Limited Partnership 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 Operating Partnership retrospectively adjusted the consolidated financial statements as a result of the Operating Partnership’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 Acquisition Limited Partnership’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

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SOVRAN ACQUISITION LIMITED PARTNERSHIP
CONSOLIDATED BALANCE SHEETS
                 
    December 31,  
(dollars in thousands, except unit 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       23,701  
Deferred revenue
    5,060       5,570  
Fair value of interest rate swap agreements
    11,524       25,490  
Accrued distributions
          14,359  
Mortgages payable
    81,219       109,261  
 
           
Total Liabilities
    520,142       692,381  
 
Limited partners’ redeemable capital interest (419,952 units in 2009 and 2008)
    15,005       15,118  
 
               
Partners’ Capital
               
General partner (219,567 units outstanding in 2009 and 2008)
    3,495       3,650  
Limited partner (27,327,460 and 21,796,781 units outstanding in 2009 and 2008, respectively)
    644,742       513,459  
Accumulated other comprehensive income
    (11,265 )     (25,162 )
 
           
Total Controlling Partners’ Capital
    636,972       491,947  
Noncontrolling interest- consolidated joint venture
    13,082       13,082  
 
           
Total Partners’ Capital
    650,054       505,029  
 
           
Total Liabilities and Partners’ Capital
  $ 1,185,201     $ 1,212,528  
 
           
See notes to financial statements.

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SOVRAN ACQUISITION LIMITED PARTNERSHIP
CONSOLIDATED STATEMENTS OF OPERATIONS
                         
    Year Ended December 31,  
(dollars in thousands, except per unit 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 unit distributions
                (1,256 )
Net income attributable to noncontrolling interest
    (1,360 )     (1,563 )     (1,848 )
 
                 
Net income attributable to common unitholders
  $ 20,294     $ 38,120     $ 38,741  
 
                 
 
                       
Earnings per common unit attributable to common unitholders — basic
                       
Continuing operations
  $ 0.87     $ 1.63     $ 1.73  
Discontinued operations
    (0.03 )     0.09       0.08  
 
                 
Earning per unit — basic
  $ 0.84     $ 1.72     $ 1.81  
 
                 
 
                       
Earnings per common unit attributable to common unitholders — diluted
                       
Continuing operations
  $ 0.87     $ 1.63     $ 1.73  
Discontinued operations
    (0.03 )     0.09       0.08  
 
                 
Earning per unit — diluted
  $ 0.84     $ 1.72     $ 1.81  
 
                 
 
                       
Distributions declared per common unit
  $ 1.54     $ 2.54     $ 2.50  
See notes to consolidated financial statements.

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SOVRAN ACQUISITION LIMITED PARTNERSHIP
CONSOLIDATED STATEMENTS OF PARTNERS’ CAPITAL AND COMPREHENSIVE INCOME
                                         
                            Accumulated        
    Sovran     Sovran Self             Other     Total Controlling  
    Holdings, Inc.     Storage Inc.     Preferred C     Comprehensive     Partners’  
(Dollars in thousands)   General Partner     Limited Partner     Partners     Income (loss)     Capital  
Balance January 1, 2007
    3,905       480,467       30,000       2,128       516,500  
 
Proceeds from issuance of Partnership Units
          12,759                   12,759  
Redemption of Partnership Units
          (117 )                 (117 )
Exercise of stock options
          425                   425  
Earned portion of non-vested stock
          1,224                   1,224  
Stock option expense
          183                   183  
Deferred compensation
          161                   161  
Conversion of Series C Units to partnership units
          30,000       (30,000 )            
Conversion of partnership units to shares of common stock
          167                   167  
Net income
    409       38,805                   39,214  
Change in fair value of derivatives
                      (3,496 )     (3,496 )
 
                                     
Total comprehensive income
                            35,718  
Distributions
    (563 )     (53,479 )                 (54,042 )
Adjustment to reflect limited partners’ redeemable capital at balance sheet date
    72       7,047                   7,119  
 
                             
Balance December 31, 2007
    3,823       517,642             (1,368 )     520,097  
 
Proceeds from issuance of Partnership Units
          10,658                   10,658  
Redemption of Partnership Units
          (69 )                 (69 )
Exercise of stock options
          72                   72  
Earned portion of non-vested stock
          1,444                   1,444  
Stock option expense
          279                   279  
Deferred compensation
          112                   112  
Net income
    375       37,024                   37,399  
Change in fair value of derivatives
                      (23,794 )     (23,794 )
 
                                     
Total comprehensive income
                            13,605  
Distributions
    (562 )     (55,128 )                 (55,690 )
Adjustment to reflect limited partners’ redeemable capital at balance sheet date
    14       1,425                   1,439  
 
                             
Balance December 31, 2008
    3,650       513,459             (25,162 )     491,947  
 
Proceeds from issuance of Partnership Units
          146,534                   146,534  
Exercise of stock options
          62                   62  
Earned portion of non-vested stock
          1,379                   1,379  
Stock option expense
          321                   321  
Deferred compensation
          114                   114  
Net income
    184       19,732                   19,916  
Change in fair value of derivatives
                      13,897       13,897  
 
                                     
Total comprehensive income
                            33,813  
Distributions
    (338 )     (36,704 )                 (37,042 )
Adjustment to reflect limited partners’ redeemable capital at balance sheet date
    (1 )     (155 )                 (156 )
 
                             
Balance December 31, 2009
  $ 3,495     $ 644,742     $     $ (11,265 )   $ 636,972  
See notes to financial statements.

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SOVRAN ACQUISITION LIMITED PARTNERSHIP
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 )
Distributions paid
    (53,139 )     (57,889 )     (55,973 )
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  
Distributions declared but unpaid at December 31, 2009, 2008 and 2007 were $0, $14,359, and $13,922, respectively.
See notes to consolidated financial statements.

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SOVRAN ACQUISITION LIMITED PARTNERSHIP — DECEMBER 31, 2009
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. ORGANIZATION
     Sovran Acquisition Limited Partnership (the “Operating Partnership”) is the entity through which Sovran Self Storage, Inc. (the “Company”), a self-administered and self-managed real estate investment trust (“REIT”), conducts substantially all of its business and owns substantially all of its assets. On June 26, 1995, the Company commenced operations, through the Operating Partnership, 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 Operating Partnership’s revenue is derived from stores in the states of Texas and Florida.
     As of December 31, 2009, the Company was a 98.5% economic owner of the Operating Partnership and controls it through Sovran Holdings, Inc. (“Holdings”), a wholly owned subsidiary of the Company incorporated in Delaware and the sole general partner of the Operating Partnership (this structure is commonly referred to as an umbrella partnership REIT or “UPREIT”). The board of directors of Holdings, the members of which are also members of the Board of Directors of the Company, manages the affairs of the Operating Partnership by directing the affairs of Holdings. The Company’s limited partner and indirect general partner interests in the Operating Partnership entitle it to share in cash distributions from, and in the profits and losses of, the Operating Partnership in proportion to its ownership interest therein and entitle the Company to vote on all matters requiring a vote of the limited partners.
     The other limited partners of the Operating Partnership are persons who contributed their direct or indirect interests in certain self-storage properties to the Operating Partnership. The Operating Partnership is obligated to redeem each unit of limited partnership (“Unit”) at the request of the holder thereof for cash equal to the fair market value of a share of the Company’s common stock (“Common Shares”) at the time of such redemption, provided that the Company at its option may elect to acquire any Unit presented for redemption for one Common Share or cash. The Company has, in the past, elected to pay cash to acquire Units presented for redemption, but may issue Common Shares in the future for such redemptions. With each such redemption the Company’s percentage ownership interest in the Operating Partnership will increase. In addition, whenever the Company issues Common Shares, the Company is obligated to contribute any net proceeds therefrom to the Operating Partnership and the Operating Partnership is obligated to issue an equivalent number of Units to the Company. Such limited partners’ redemption rights are reflected in “limited partners’ redeemable capital interest” in the accompanying balance sheets at the cash redemption amount at the balance sheet date. Capital activity with regard to such limited partners’ redemption rights is reflected in the accompanying statements of partners’ capital.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
     Basis of Presentation: Our consolidated financial statements include the accounts of 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. 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.
     In June 2008, the Operating Partnership made an additional investment of $6.1 million in Locke Sovran I, LLC that increased the Operating Partnership’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 Operating Partnership 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

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balance sheet as a component of equity. The additional guidance does not significantly change the Operating Partnership’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 unitholders as previously reported and net income attributable to common unitholders 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 limited partners’ redeemable capital interest. 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 limited partners’ 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 Operating Partnership 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 general and limited partners’ capital. Accordingly, in the accompanying consolidated balance sheet, limited partners’ redeemable capital interests 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 Operating Partnership’s historical basis of accounting at those dates.
                 
(Dollars in thousands)   2009     2008  
Beginning balance limited partners’ redeemable capital interest
  $ 15,118     $ 16,951  
Redemption of Operating Partnership Units
          (115 )
Redemption value in excess of carrying value
          70  
Net income attributable to limited partners’ redeemable capital interests
    378       721  
Distributions
    (647 )     (1,070 )
Adjustment to redemption value
    156       (1,439 )
 
           
Ending balance limited partners’ redeemable capital interest
  $ 15,005     $ 15,118  
 
           

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     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  
 
                       
Net income
    38,120       1,563       39,683  
Net income attributable to noncontrolling interest
          1,563       1,563  
                         
    For the Year Ended December 31, 2007:  
    As Previously              
    Reported adjusted              
    for discontinued              
    operations     Adjustments     As Adjusted  
 
                       
Net income
    39,997       1,848       41,845  
Net income attributable to noncontrolling interest
          1,848       1,848  
Balance Sheet:
                         
    December 31, 2008:  
    As Previously Reported     Adjustments     As Adjusted  
 
                       
Minority interest — consolidated joint venture
    13,082       (13,082 )      
Noncontrolling interest — consolidated joint venture
          13,082       13,082  
Total partners’ capital
    491,947       13,082       505,029  
 
                       
Statement of Cash Flows:
                         
    For the Year Ended December 31, 2008:  
    As Previously Reported     Adjustments     As Adjusted  
 
                       
Net income
    38,120       1,563       39,683  
Minority interest
    1,563       (1,563 )      
 
                       
                         
    For the Year Ended December 31, 2007:  
    As Previously Reported     Adjustments     As Adjusted  
 
                       
Net income
    39,997       1,848       41,845  
Minority interest
    1,848       (1,848 )      
     Cash and Cash Equivalents: The Operating Partnership 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 Operating Partnership 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

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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 Operating Partnership’s property may not be recoverable, the Operating Partnership’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 Operating Partnership’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 Operating Partnership 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 Operating Partnership’s experience with customer turnover. The Operating Partnership 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 Operating Partnership 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 Operating Partnership’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 partners’ capital. 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 Operating Partnership 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 Operating Partnership 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 Operating Partnership’s use of derivative instruments is limited to cash flow hedges of certain interest rate risks.

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     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 Operating Partnership 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 Operating Partnership adopted ASC Topic 718, “Compensation — Stock Compensation” (formerly, FASB Statement 123R) and uses the modified-prospective method. Under the modified-prospective method, the Operating Partnership 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 Operating Partnership 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 Operating Partnership 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 Operating Partnership uses historical volatility based on daily closing

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prices of the Company’s 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 Operating Partnership’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 UNIT
     The Operating Partnership reports earnings per unit 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-unit pursuant to the two-class method. The codification update requires retrospective restatement of all prior period earnings per unit data to conform with its provisions. The Operating Partnership has calculated its 2009 basic and diluted earnings per unit using the two-class method. The Operating Partnership has also calculated its basic and diluted earnings per unit amounts for 2008 and 2007 under the two-class method and it resulted in no change in basic and diluted earnings per unit as previously reported. The following table sets forth the computation of basic and diluted earnings per common unit utilizing the two-class method.
                         
(Amounts in thousands,   Year Ended December 31,  
except per unit data)   2009     2008     2007  
Numerator:
                       
Net income from continuing operations attributable to common unitholders
  $ 21,078     $ 36,240     $ 37,080  
 
                       
Denominator:
                       
Denominator for basic earnings per unit - weighted average units
    24,207       22,184       21,381  
Effect of Dilutive Securities:
                       
Stock options and warrants and non-vested stock
    10       21       49  
 
                 
 
                       
Denominator for diluted earnings per unit - adjusted weighted average units and assumed conversion
    24,217       22,205       21,430  
 
                       
Basic Earnings per Common Unit from continuing operations attributable to common unitholders
  $ 0.87     $ 1.63     $ 1.73  
 
Basic Earnings per Common Unit attributable to common unitholders
  $ 0.84     $ 1.72     $ 1.81  
 
                       
Diluted Earnings per Common Unit from continuing operations attributable to common unitholders
  $ 0.87     $ 1.63     $ 1.73  
Diluted Earnings per Common Unit attributable to common unitholders
  $ 0.84     $ 1.72     $ 1.81  
     Not included in the effect of dilutive securities above are 333,072 stock options and 125,871 unvested

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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 Operating Partnership 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 Operating Partnership did not acquire any storage facilities in 2009. During 2008, the Operating Partnership 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 Operating Partnership’s operations since the respective acquisition dates.
5. DISCONTINUED OPERATIONS
     During 2009, the Operating Partnership 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 Operating Partnership 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  
 
                 

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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 Operating Partnership. It should be read in conjunction with the financial statements of the Operating Partnership. 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 Operating Partnership 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 unit data)   December 31, 2007  
Pro forma total operating revenues
  $ 199,569  
Pro forma net income
  $ 42,582  
Pro forma earnings per common unit — diluted
  $ 1.92  
7. UNSECURED LINE OF CREDIT AND TERM NOTES
     On June 25, 2008, the Operating Partnership entered into agreements relating to new unsecured credit arrangements, and received funds under those arrangements. As part of the agreements, the Operating Partnership entered into a $250 million unsecured term note maturing in June 2012 bearing interest at LIBOR plus 1.625% (based on the Operating Partnership’s December 31, 2009 credit rating). In October 2009, the Operating Partnership 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 Operating Partnership’s credit rating at December 31, 2009), and requires a 0.25% facility fee. The interest rate at December 31, 2009 on the Operating Partnership’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 Operating Partnership 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 Operating Partnership’s credit rating at December 31, 2009).
     The line of credit and term notes require the Operating Partnership 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 distribution payouts. At December 31, 2009, the Operating Partnership was in compliance with its debt covenants. At March 31, 2009, the Operating Partnership had violated the leverage ratio covenant contained in the line of credit and term note agreements. In May 2009, the Operating Partnership 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 Operating Partnership’s rating on its revolving credit facility and term notes to non-investment grade in May 2009. In October 2009, Fitch Ratings adjusted the Operating Partnership’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.

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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 Operating Partnership 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 Operating Partnership’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 Operating Partnership would realize in a current market exchange.

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    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 Operating Partnership 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 Operating Partnership 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 partners’ capital 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 Operating Partnership 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,

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held by the Operating Partnership. 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 Operating Partnership 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 Operating Partnership prepaid $100 million in variable rate term notes. In October 2009, the Operating Partnership 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 address 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

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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.

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     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

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     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  
            average           average     Non-     average  
    Non-vested     grant date fair     Non-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 Operating Partnership qualifying under certain age and service requirements are eligible to be a participant in a 401(k) Plan. The Operating Partnership contributes to the Plan at the rate of 10% of the first 4% of gross wages that the employee contributes. Total expense to the Operating Partnership 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 Operating Partnership 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 Operating Partnership. The carrying value of the Operating Partnership’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 Operating Partnership 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 Operating Partnership’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 Operating Partnership 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 Operating Partnership 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 Operating Partnership’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 Operating Partnership $0.2 million for payments made by the Operating Partnership on behalf of the joint venture.
     The Operating Partnership also has a 49% ownership interest in Iskalo Office Holdings, LLC, which owns the building that houses the Operating Partnership’s headquarters and other tenants. The Operating Partnership’s investment includes a capital contribution of $49. The carrying value of the Operating Partnership’s investment is a

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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 Operating Partnership’s share of Iskalo Office Holdings, LLC’s income (loss) was $7,000, ($6,000), and $80,000, respectively. The Operating Partnership 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 Operating Partnership
  $ 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 )
Operating Partnership 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 Operating Partnership does not guarantee the debt of Sovran HHF or Iskalo Office Holdings, LLC.
14. PARTNERS’ CAPITAL
     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 Operating Partnership after deducting underwriting discounts and commissions and offering expenses were approximately $114.0 million.
     During 2009, the Company issued 1,430,521 shares via its Dividend Reinvestment and Stock Purchase Plan. The Operating Partnership received $32.6 million from the sale of such shares. During 2008 and 2007, the Operating Partnership 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. The Company’s 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.

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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 unit 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 unitholders
  $ 7,780     $ 6,402     $ 7,630     $ (1,518 )
Net Income (Loss) Per Unit Attributable to Common Unitholders
                               
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 unitholders
  $ 9,127     $ 10,745     $ 9,711     $ 8,537  
Net Income Per Unit Attributable to Common Unitholders
                               
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 Operating Partnership’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 Operating Partnership recorded $8.4 million in interest expense related to the termination of two interest rate swap agreements.
16. COMMITMENTS AND CONTINGENCIES
     The Operating Partnership’s current practice is to conduct environmental investigations in connection with property acquisitions. At this time, the Operating Partnership is not aware of any environmental contamination of any of its facilities that individually or in the aggregate would be material to the Operating Partnership’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 Operating Partnership would recognize a loss of approximately $0.1 million on the disposal of these properties in the first quarter of 2010.

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17. SUBSEQUENT EVENTS
     On January 4, 2010, the Operating Partnership declared a quarterly distribution of $0.45 per common unit. The distribution was paid on January 26, 2010 to unitholders of record on January 14, 2010. The total distribution paid amounted to $12.4 million.
     In January and February 2010, the Operating Partnership 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 Operating Partnership would recognize an aggregate gain of approximately $7.7 million.

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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 Operating Partnership’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 Operating Partnership; (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 Operating Partnership 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 Operating Partnership’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 Operating Partnership’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
Chief Executive Officer
  David L. Rogers
Chief Financial Officer

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Report of Independent Registered Public Accounting Firm
The Board of Directors and Partners of Sovran Acquisition Limited Partnership
     We have audited Sovran Acquisition Limited Partnership’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 Acquisition Limited Partnership’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 Acquisition Limited Partnership 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 Acquisition Limited Partnership as of December 31, 2009 and 2008, and the related consolidated statements of operations, partners’ capital and comprehensive income, and cash flows for each of the three years in the period ended December 31, 2009 of Sovran Acquisition Limited Partnership and our report dated February 26, 2010 expressed an unqualified opinion thereon.
/s/ Ernst & Young LLP
Buffalo, New York
February 26, 2010

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Part III
Item 10. Directors, Executive Officers and Corporate Governance
     Through Holdings, a wholly-owned subsidiary of the Company and the sole general partner of the Operating Partnership, the Company controls the Operating Partnership. The Board of Directors of Holdings, the members of which are the same as the members of the Board of Directors of the Company, manages the affairs of the Operating Partnership by directing the affairs of the general partner of the Operating Partnership. The Operating Partnership has no directors, or executive officers. Consequently, this information incorporated by reference reflects information with respect to the directors and executive officers of the Company and Holdings.
     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 Operating Partnership has adopted a code of ethics that applies to all of its directors, officers, and employees. The Operating Partnership has made the Code of Ethics available on its website at http://www.sovranss.com.
Item 11. Executive Compensation
     Through Holdings, a wholly-owned subsidiary of the Company and the sole general partner of the Operating Partnership, the Company controls the Operating Partnership. The Board of Directors of Holdings, the members of which are the same as the members of the Board of Directors of the Company, manages the affairs of the Operating Partnership by directing the affairs of the general partner of the Operating Partnership. The Directors and Officers of Holdings receive their compensation from the Company and are not separately compensated by Holdings. Consequently, the information incorporated by reference reflects compensation paid to the Directors and executive officers of the Company.
     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 Operating Partnership has no directors or officers. No director or officer of the Company or Holdings beneficially owns any Units.
     At December 31, 2009, the Company beneficially owns 27,547,027 Units which constitute 98.5% of all outstanding Units. No other person holds more than a 5% beneficial ownership in the Operating Partnership.
     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.
RECENT SALES OF UNREGISTERED SECURITIES
     During 2009, the Operating Partnership issued Units in private placements in reliance on the exemption from registration under Section 4(2) of the Securities Act of 1933, as amended, in the amounts and for the consideration set forth below:
    On January 2, 2009, in connection with the Sovran Self Storage, Inc. 2005 Award and Option Plan, the Operating Partnership issued 5,000 Units to the Company.

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    On January 22, 2009, in connection with the Sovran Self Storage, Inc. Dividend Reinvestment and Stock Purchase Plan, the Company transferred $525,834 to the Operating Partnership in exchange for 19,306 Units.
 
    On February 23, 2009, in connection with the Sovran Self Storage, Inc. Dividend Reinvestment and Stock Purchase Plan, the Company transferred $394,956 to the Operating Partnership in exchange for 17,386 Units.
 
    On February 25, 2009, in connection with the Sovran Self Storage, Inc. 2005 Award and Option Plan, the Operating Partnership issued 9,482 Units to the Company.
 
    On March 23, 2009, in connection with the Sovran Self Storage, Inc. Dividend Reinvestment and Stock Purchase Plan, the Company transferred $371,718 to the Operating Partnership in exchange for 19,379 Units.
 
    On April 24, 2009, in connection with the Sovran Self Storage, Inc. Dividend Reinvestment and Stock Purchase Plan, the Company transferred $12,364,541 to the Operating Partnership in exchange for 586,022 Units.
 
    On May 21, 2009, in connection with the Company’s director’s compensation plan, the Operating Partnership issued 3,456 Units to the Company.
 
    On May 29, 2009, in connection with the Sovran Self Storage, Inc. Dividend Reinvestment and Stock Purchase Plan, the Company transferred $2,500,020 to the Operating Partnership in exchange for 106,552 Units.
 
    On June 19, 2009, in connection with the Sovran Self Storage, Inc. Dividend Reinvestment and Stock Purchase Plan, the Company transferred $14,100,101 to the Operating Partnership in exchange for 592,098 Units.
 
    On June 26, 2009, in connection with the Sovran Self Storage, Inc. Dividend Reinvestment and Stock Purchase Plan, the Company transferred $373,817 to the Operating Partnership in exchange for 16,610 Units.
 
    On July 27, 2009, in connection with the Sovran Self Storage, Inc. Dividend Reinvestment and Stock Purchase Plan, the Company transferred $383,354 to the Operating Partnership in exchange for 20,221 Units.
 
    On August 26, 2009, in connection with the Sovran Self Storage, Inc. Dividend Reinvestment and Stock Purchase Plan, the Company transferred $386,669 to the Operating Partnership in exchange for 14,172 Units.
 
    On September 25, 2009, in connection with the Sovran Self Storage, Inc. 2005 Award and Option Plan, the Operating Partnership issued 41,651 Units to the Company.
 
    On September 28, 2009, in connection with the Sovran Self Storage, Inc. Dividend Reinvestment and Stock Purchase Plan, the Company transferred $349,316 to the Operating Partnership in exchange for 11,351 Units.
 
    On October 1, 2009, in connection with the Sovran Self Storage, Inc. 1995 Award and Option Plan, the Operating Partnership issued 500 Units to the Company for $10,188.
 
    On October 5, 2009, the Company transferred $113,971,150 to the Operating Partnership in exchange for 4,025,000 Units.
 
    On October 15, 2009, in connection with the Sovran Self Storage, Inc. 1995 Award and Option Plan,

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      the Operating Partnership issued 200 Units to the Company for $4,320.
 
    On October 26, 2009, in connection with the Sovran Self Storage, Inc. Dividend Reinvestment and Stock Purchase Plan, the Company transferred $472,051 to the Operating Partnership in exchange for 15,602 Units.
 
    On November 4, 2009, in connection with the Company’s director’s compensation plan, the Operating Partnership issued 11,798 Units to the Company.
 
    On November 27, 2009, in connection with the Sovran Self Storage, Inc. Dividend Reinvestment and Stock Purchase Plan, the Company transferred $377,991 to the Operating Partnership in exchange for 11,822 Units.
 
    On November 30, 2009, in connection with the Sovran Self Storage, Inc. 1995 Award and Option Plan, the Operating Partnership issued 750 Units to the Company for $16,200.
 
    On December 1, 2009, in connection with the Sovran Self Storage, Inc. 1995 Award and Option Plan, the Operating Partnership issued 1,375 Units to the Company for $29,700.
 
    On December 14, 2009, in connection with the Sovran Self Storage, Inc. 1995 Award and Option Plan, the Operating Partnership issued 1,000 Units to the Company for $21,600.
 
    On December 22, 2009, in connection with the Sovran Self Storage, Inc. 1995 Award and Option Plan, the Operating Partnership issued 400 Units to the Company for $8,640.
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:
1.   The following consolidated financial statements of Sovran Acquisition Limited Partnership 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 Partners’ Capital 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.

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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.
3.   Exhibits
     The exhibits required to be filed as part of this Annual Report on Form 10-K have been included as follows:
3.1   Agreement of Limited Partnership of Sovran Acquisition Limited Partnership (incorporated by reference to Exhibit 3.1 on Form 10 filed April 22, 1998).
 
3.2   Amendments to the Agreement of Limited Partnership of Sovran Acquisition Limited Partnership dated July 30, 1999 and July 3, 2002 Association (incorporated by reference to Exhibit 3.2 to Registrant’s Form 10-K filed February 27, 2009).
 
10.1+   Employment Agreement between the Registrant and Robert J. Attea (incorporated by reference to Exhibit 10.1 to Registrant’s Form 10-K filed February 27, 2009).
 
10.2+   Employment Agreement between the Registrant and Kenneth F. Myszka (incorporated by reference to Exhibit 10.2 to Registrant’s Form 10-K filed February 27, 2009).
 
10.3+   Employment Agreement between the Registrant and David L. Rogers (incorporated by reference to Exhibit 10.3 to Registrant’s Form 10-K filed February 27, 2009).
 
10.4   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).
 
10.5*   Promissory Note between Locke Sovran II, LLC and PNC Bank, National Association.
 
10.6   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).
 
10.7   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).
 
10.8   $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).
 
10.9   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).
 
10.10   Indemnification Agreement dated September 25, 2009 between Registrant 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).

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12.1*   Statement Re: Computation of Earnings to Fixed Charges.
 
21.1*   Subsidiaries of the Company.
 
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.

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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 ACQUISITION LIMITED PARTNERSHIP
 
 
  By:   Sovran Holdings, Inc.    
  Its: General Partner   
 
         
February 26, 2010 By:   /s/ David L. Rogers    
    David L. Rogers,   
    Chief Financial Officer   
 
     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 Sovran Holdings, Inc., as general partner 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        

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Sovran Acquisition Limited Partnership
Schedule III
Combined Real Estate and Accumulated Depreciation
(in thousands)
December 31, 2009
                                                                                                 
                                    Cost Capitalized                                
                                    Subsequent to   Gross Amount at Which                           Life on
                    Initial Cost to Company   Acquisition   Carried at Close of Period                           which
                            Building,   Building,           Building,                                   depreciation
                            Equipment   Equipment           Equipment                                   in latest 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  

61


Table of Contents

                                                                                                 
                                    Cost Capitalized                                
                                    Subsequent to   Gross Amount at Which                           Life on
                    Initial Cost to Company   Acquisition   Carried at Close of Period                           which
                            Building,   Building,           Building,                                   depreciation
                            Equipment   Equipment           Equipment                                   in latest 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  

62


Table of Contents

                                                                                                 
                                    Cost Capitalized                                
                                    Subsequent to   Gross Amount at Which                           Life on
                    Initial Cost to Company   Acquisition   Carried at Close of Period                           which
                            Building,   Building,           Building,                                   depreciation
                            Equipment   Equipment           Equipment                                   in latest 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  

63


Table of Contents

                                                                                                 
                                    Cost Capitalized                                
                                    Subsequent to   Gross Amount at Which                           Life on
                    Initial Cost to Company   Acquisition   Carried at Close of Period                           which
                            Building,   Building,           Building,                                   depreciation
                            Equipment   Equipment           Equipment                                   in latest 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  

64


Table of Contents

                                                                                                 
                                    Cost Capitalized                                
                                    Subsequent to   Gross Amount at Which                           Life on
                    Initial Cost to Company   Acquisition   Carried at Close of Period                           which
                            Building,   Building,           Building,                                   depreciation
                            Equipment   Equipment           Equipment                                   in latest 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  

65


Table of Contents

                                                                                                 
                                    Cost Capitalized                                
                                    Subsequent to   Gross Amount at Which                           Life on
                    Initial Cost to Company   Acquisition   Carried at Close of Period                           which
                            Building,   Building,           Building,                                   depreciation
                            Equipment   Equipment           Equipment                                   in latest 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  

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Table of Contents

                                                                                                 
                                    Cost Capitalized                                
                                    Subsequent to   Gross Amount at Which                           Life on
                    Initial Cost to Company   Acquisition   Carried at Close of Period                           which
                            Building,   Building,           Building,                                   depreciation
                            Equipment   Equipment           Equipment                                   in latest 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  

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Table of Contents

                                                                                                 
                                    Cost Capitalized                                
                                    Subsequent to   Gross Amount at Which                           Life on
                    Initial Cost to Company   Acquisition   Carried at Close of Period                           which
                            Building,   Building,           Building,                                   depreciation
                            Equipment   Equipment           Equipment                                   in latest 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