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NEW YORK CITY-The senior unsecured debt rating for Sovran Acquisition Limited Partnership, the principal operating subsidiary of Sovran Self Storage, has been affirmed at BBB- by Fitch, the international rating agency headquartered here and in London. It also affirmed its BB+ rating for its outstanding $30 million 9.85% cumulative preferred stock. A real estate investment trust, Sovran, headquartered in Buffalo, NY, owns and manages self-storage rental properties.

Favorable factors that influenced the rating include good portfolio diversity (226 properties in 21 states) moderate single-market concentration and manageable use of financial leverage at approximately 40% of book capital. The majority of Sovran’s portfolio is not encumbered by mortgage debt, mitigating refinancing risk for unsecured lenders.

The company’s primary rating concern is Sovran’s reliance of bank financing for most of its borrowed funds, which results in higher refinancing and interest rate risk. The dependence reduces the firm’s flexibility compared with REITs that balance their capital structures with a mix of short- and long-term debt. In addition, the firm’s portfolio is largely situated in the East, which provides lower growth compared to similar operations in the western US.

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