CubeSmart (CUBE) 2009 Q1 法說會逐字稿

Hello and welcome to the U-Store-It Trust first-quarter 2009 conference call. (Operator Instructions). Please note this conference is being recorded. Now I would like to turn the conference over to Mr. Dean Jernigan, CEO. Mr. Jernigan?

Thank you. Good morning. The Company's remarks will include certain forward-looking statements today regarding earnings and strategy that involve risks, uncertainties and other factors that may cause the actual results to differ materially from these forward-looking statements. The risks and factors that could cause our results to differ materially are provided in documents that the Company files with the SEC, specifically Form 8-K together with our earnings release filed with the Form 8-K in the Business Risk Factors section of the Company's annual report on Form 10-K.

In addition, the Company's remarks include reference to non-GAAP measures. A reconciliation between GAAP and non-GAAP can be found on the Company's website.

Good morning, everyone. I have with with me this morning, Chris Marr, our President and Chief Investment Officer, and Tim Martin, Chief Financial Officer. We will start with Chris. Tim will follow up Chris with some comments. I will come back around with my comments, and then we will go to Q&A. Chris?

Thanks, Dean. I am feeling very optimistic that the credit markets are thawing, particularly as it relates to our product type, and I believe the sun is starting to pick out from behind the clouds and that we will be able to continue to close deals and access capital throughout the year. The entrepreneurs who are purchasing our for sale assets are able to source their debt requirements aided by the fact that the cash flow from the self-storage product continues to hold up very nicely on a relative basis compared to other real estate asset classes and the relatively low dollar amounts of their loan requirements. The larger financial institutions who typically participate in the REIT term loan and revolver markets have moved from a position of desiring to be repaid in full to working with companies to blend and extend while maintaining their existing commitments.

Our focus on the local and regional banks and the life companies to source secured loans on our $764 million unencumbered asset pool is bearing fruit as evidenced by the deals outlined in our press release. We have a very full pipeline of secured loan term sheets and small portfolio dispositions that we are aggressively working towards converting to commitments in the case of loans and contracts in the case of asset sales. We were at the forefront of taken the right action and reducing our dividend, and as a result, we have been retaining capital to reduce leverage since the beginning of 2008.

As Tim will expand upon, we remain fully in compliance with our credit facility covenants and expect to continue to be able to fully utilize the entire $450 million facility and remain comfortably covenant compliant. Raising capital continues to be top priority for our management team, and as we have said in past discussions, we are continuously evaluating every opportunity regardless of the size or structure.

To sum it up, I'm very encouraged by what I see and confident in our success moving forward to address our capital needs between now and 2012. Right now I would like to turn it over to Tim for comments on our operational and financial performance for the quarter. Tim?

Thanks, Chris, and thanks to everybody listening for joining us for this morning's call. I'm going to take just a few minutes and provide an overview of our first-quarter results and then provide some comments on our earnings guidance for the second quarter and the balance of the year.

Last evening we reported first-quarter FFO per share of $0.25, which was a bit ahead of our guidance range of $0.22 to $0.23 per share. The results for the quarter are very straightforward. Total revenues for the quarter were in line with our expectations. Same-store revenues were down 0.8% as compared to the first quarter of 2008. Rental revenue declines were offset by increases in other operating income, including tenant insurance income. During the quarter we continued to benefit from our focused efforts over the past year or so on increasing our tenant insurance penetration. Tenant insurance penetration for the quarter was 86% of new renters, bringing our overall tenant insurance penetration to 37% as of March 31, 2009. Property level expenses on our same-store portfolio were down 0.2% over the first quarter of 2008. Our operations team has been very focused of controlling expenses at every opportunity and, frankly, outperformed our own expectations entering the quarter. Property level expensive things during the quarter were across the board, but the biggest savings were in marketing and repair and maintenance expense.

It is fair to say that some of these expense savings are simply timing-related as we expect property level expenses for the year to remain within our annual guidance range. These savings were the primary driver of our FFO per share outperformance versus our guidance. We recognized a gain of $500,000 on a property disposition that closed during the quarter, which we do not include in FFO. We utilized the sale proceeds, along with cash generated from operations, to reduce debt levels by $12 million. Since the end of the first quarter of 2008, we have reduced our outstanding debt by $76.2 million.

As Chris mentioned, we remain comfortable in compliance with the covenants of our unsecured credit facility and expect to remain in compliance through the term of the facility.

Now switching gears to guidance, we have affirmed our full-year 2009 earnings guidance and have introduced second-quarter 2009 FFO per share guidance of $0.19 to $0.20. As Dean will touch on in a few minutes, our debut television advertising campaign launched in early April. We expect our overall marketing spend in 2009 to increase slightly over 2008 levels and our same-store expenses in total to grow between 1.5% and 2.5%. However, the shift to media advertising that is heavily weighted to the beginning of our prime rental season will have a material impact on our second-quarter results.

As outlined in our release, we anticipate spending approximately $2.9 million in media advertising during the quarter. As we had no comparable expenditure in the second quarter of 2008, our same-store expense and same-store NOI comparisons next quarter will be significantly impacted. Accordingly you should expect to see double-digit same-store expense growth and same-store NOI declines when we report second-quarter results, primarily as a result of our media spend.

Implicit then since our annual expectation is for same-store expense growth between 1.5% and 2.5% is that we anticipate negative expense growth during the second half of the year. Without question the self storage sector and our portfolio are not immune to the impact of the current prolonged recession. Our team works hard every day to capture more than our share of the existing demand, but clearly that demand has softened over levels from a year ago. Our 2009 earnings guidance that we provided 10 weeks ago contemplated the softening economy, and as we prepare for our peak rental season, our outlook remains unchanged. May and June are traditionally peak rental months, and the results during those months will provide increased visibility into the remainder of 2009.

Thanks again for your interest in our Company, and at this time, Dean, I will turn the call over to you.

Okay. Thanks, Tim. I would just like to comment on a couple of different things this morning -- one specific to our Company and the other I would like to comment or talk a little bit about the sector.

Specific to our Company, I want to talk about revenue versus occupancy. Over the last few days, I don't recall exactly who it was, but I read one headline for one REIT who reported, and it read something like this. Revenue down, FFO miss, but occupancy up. And I have to ask, what difference does it make? If occupancy is up, you have missed your FFO target and your revenue is down. We have a fascination in the real estate world and really a preoccupation in our sector I think as it relates to occupancy. We cannot make payroll with occupancy. We need revenue. When I think about other sectors and specifically retail sector, let's pick Nordstrom. You can take any of them, but the analysts who cover those companies they don't count the customers that come through the door. They don't count report how many shirts Nordstrom sells on a quarterly basis. Obviously they count revenue. Well, that is our focus at U-Store-It. We are focused squarely on revenue, not occupancy.

So let me talk about some of the benefits of doing that. During Q1 we did our very best to hold up pricing. Pricing, of course, underlies all revenue. And in the first quarter, for the first time in my career, we made a major adjustment in GPI because we really could not hold the line on pricing because our competitors were bringing their prices down so dramatically. So during the first quarter, we brought our GPI down -- it was toward the end of the first quarter -- by 5.2%, and we basically gave back all of our GPI growth of the previous 12 months because of yield. You can notice in our news release, our GPI level of $12.31 for Q1 '09 is level with Q1 '08.

So we made this adjustment of 5.2% in GPI in the first quarter to try to get our rent a little bit in line with some of our competitors. But, quite frankly, some of our competitors are much more dramatic with their decreases in rents because they still think our customer is so sensitive to our rates. Now granted our customer today is more sensitive than they have been in the past, in fact, in my whole career. But still yet people show up expecting to pay a fair amount for their unit. They think there is a certain amount of pricing efficiency in the marketplace which there is. And there are some of our companies who are reducing rates at 30% to 40%.

You know, I think that is really going to impair them long-term. If you just take the lower end of that, if you reduce your asking price on a unit by 30% and you rent that unit to a long-term customer, it is going to take you five, six years to get back to that rate that you previously had before you reduced it by 30% if you raise that customer 5% or 6% a year. So I have learned over the years that holding pricing is very important, and it is okay to lose a little bit of occupancy if you can hold your pricing.

At the same time you are holding pricing, you need to do a few other things, and we are doing all this at our Company. Minimizing discounts is one. By holding pricing, you normally use promotions, and you normally use free rent on the front end in order to hold your pricing. But at the same time, there is nothing wrong with trying to minimize your discounts, and we are doing that at this Company. I'm happy to report in the first quarter 40% of our rentals paid full price. No discount, no promotion, full-price rentals to 40% of our customers in the first quarter.

Minimizing bad debts. Keeping your receivables in line, and I'm happy to report that our receivables and our bad debt are at all time lows for this Company. Extremely, extremely good results in that area. What else can we do? We can sell more of anything to the customers that we do capture. In the case with us, we are selling more insurance as Tim mentioned. We are selling more boxes and more locks to those customers, up 5% over last year. So you have got a customer. You try to get the best pricing you can out of that customer, and by the way, while you're here, let me sell you a few more things.

What else can you do? We can look for other income opportunities. That is something we have just initiated in this company yesterday as a matter of fact. We are now charging people a small fee. We call it a convenience fee. I'm sure all of you have run across it from time to time in your daily lives. If you want to pay online, we are starting to charge a daily convenience fee -- I'm sorry, a one-time convenience fee of $1.95 for you to make your payment online and for us processing that payment through our website. If you want to call us on the telephone and you want to pay by credit card, we will switch you to a service, an outsource service that does this for us, and that charge to the customer is $7.95. We think that by finding additional ways to create income opportunities with our existing customer base is very important. Other things that you can do, you can improve efficiencies that you have within your own organization. We have done that in the first quarter. I don't think we have even talked about it on the call previously now, but we have built our call center. We have built a call center during Q1. It went operational April 8. We have a manager with 14 years experience in the call center. We have 28 people in the call center now here in our Wayne, Pennsylvania office, just directly across the hall from my office as a matter of fact. Those 28 people have 128 years experience in the call center business. We were very fortunate here to be starting a call center at the same time QVC was shutting one down, and we captured 24 of our 28 call center reps from that QVC shutdown.

So we are improving our conversion rate. Those telephone calls that are coming in we feel like -- in fact, we know from the numbers that we are experiencing so far, we are capturing more customers through our call center than we were previously. I listened to the EXR call the other day, and they are very happy about their new call center. We are equally happy.

The other thing we have done -- this is starting in April -- we did not do it in Q1, but we were out there and I know you know about it, and that is our TV advertising campaign. During the month of April, we rolled it out slowly in 23 markets across the country, and we advertised on 116 network affiliates during the month of April. We are very pleased with the results, early results in from that program. I will not get into numbers today because it is way too early and this is Q2 -- these are Q2 numbers, and we will cover this in the Q2 call. But TV, as you can guess, does work because public storage uses it extensively, and we are moving dollars that we were spending on Yellow Pages to television and radio advertising. We rolled out radio advertising just this week as a matter of fact in 19 markets across the country -- radio to support TV.

So we think we are getting smarter on our spend of existing marketing dollars. The Yellow Pages are all but dead. The Verizon book went into bankruptcy a couple of weeks ago, maybe three, maybe four weeks ago now. The others will follow shortly in my opinion. I challenge each of you on this call to just think to yourself, do you even know if you own a Yellow Pages book, and if you think you might, can you possibly put your hands on it? And I would be willing to bet it is almost unanimous that you cannot put your hands on it, and most of you don't know if you even have one in your house or your office. We are all going to yellowpages.com, whitepages.com, Google, Yahoo, MSN to seek information now days that the Yellow Pages once provided.

So it is a new day at this Company as far as how we spend our advertising dollars. We are spending more in the digital world as well. We're very excited about that, and these are some ways we're approaching our business here at U-Store-It. As I said, the ways of capturing the customer is changing. How you treat that customer, how you are able to capture more income out of that customer has changed, and it is all about revenue. So I don't think you're going to see any time in the future a headline for this Company to reach anything like revenue down, FFO miss but occupancy is up. We are totally focused on revenue.

Going to my second area of comments, I want to talk about the sector for a minute. I continue to be amazed about this sector, even though I have been in it for 25 years now. I think now that we have shipped Ken Woolley off to Siberia or someplace in Russia, I now get elder statesman status in the sector. And I want to talk about the fact that we just experienced two quarters of the recession that have been as great as any almost in my lifetime. 51 years ago as a matter of fact, we experienced two quarters down as dramatic as these last two have been. 6.3 and 6.1, total GDP down 12.4% over the last 180 days through Q4 last year and Q1 of '09. If you think about that, down over 12% and you look at YSI revenues up 1%, and I will quickly hasten to add that the other companies have similar -- other storage companies have similar results. Revenue flat to marginally up when the recession was down 12%. I stand by my comments that I made back in 1994, and I think I was the first one to make this comment in the self storage sector, that we are a recession-resistant business.

When I was out on my first roadshow, I was part of the roadshow. I did have the audacity to suggest at that point in time that the storage business storage sector is a recession-resistant sector, and I stand by those comments as we look back over the last 180 days.

So with that said, we still have headwinds. The economy is a headwind right now as we all know. I look back over all my years in the business, and the only headwind that we have had that compares is the headwinds of the late 80s, and that really had nothing to do with the economy. It was all about supply growth. That was the SNL debacle, followed by the sorting through of the RTC, and those headwinds were very dramatic in those days, and it took us five, six years to really come out of it because we overbuilt our sector so dramatically during that period of time. This time around, though, the headwind is the economy, and it is not oversupply. Our supply is hardly worth mentioning. There is virtually no supply growth of any consequence out there in any markets across the country.

So I think at this point in time our recovery will be quicker. I don't expect a v-bounce, if you will, but I do expect the recovery to be quicker than what we suffered through in the early 90s. But if you look back at the early 90s, I think it is instructive because that is when the REIT world really came into its own and that is when storage really came into prominence, and I think we will have some similar opportunities coming out of this recession that we had in the early 90s. I think the four public companies that we have today will get bigger. I think they will become consolidators of the sector as those companies gain access to the capital markets again.

I think we have a tremendous opportunity ahead of us because I think the small players will continue to fall by the wayside, have to sell to larger companies. You have heard me talk about the main reason why is because the marketing budgets. With the demise of the Yellow Pages, we now have to use multimillion dollar marketing budgets, capturing our customers through the Internet and through other advertising mechanisms or means like television and radio.

So the headwind has died down considerably for us. The job report out this morning was very encouraging. The stress test out last night was very encouraging. I think banks are back in business, as Chris mentioned in his remarks, and so I'm excited about the future again. Make no mistake about it, we still have some headwinds, but we will get through this. I do look forward to some exciting times ahead.

Okay. With that, if you will queue up some questions for us, we are happy to go there.

(Operator Instructions). Jordan Sadler, KeyBanc Capital Markets.

This is Todd Thomas on with Jordan. I was wondering if you could provide an update on occupancy for April and maybe into May in terms of how that is trending?

I tell you I am just -- I mean we have been going on the slippery slope for some time, and I don't want to do it this time. I mean we will cover Q2 results in the Q2 call. I will tell you -- I will give you some general -- obviously we anticipated this question. But we are not going to get into numbers. April was challenging, but we are now going into our rental season. And I am not going to make any guesses as to how good or maybe not so good our rental season is going to be. May, June and July you will hear -- we will give you all the numbers you need with Q2 results, but we are not going to report on Q2 today.

Okay. So no like leasing or move-in/move-out comp for April? Has occupancy kicked higher? A couple of your peers said that at the end of April, though, they saw a noticeable increase in leasing activity. Is that something that you have seen also?

Well, of course, it is the rental season I mean you know. But in order to have meaningful dialogue, you have to compare this rental season with last rental season, and we are just now getting into it. So, of course, we're doing more calls and more hits to the website because we are going into our rentals season. Students are getting out of school and starting to rent units, but don't read a whole lot into that. I mean it is the rental season.

Okay. Moving over to concessions, you said that you had 40% of your new customers paid full price. What kind of concessions right now are you running? I know that you had rolled out one or two different forms. I was just wondering if you could kind of talk about what you are doing right now and kind of how they have trended through the quarter?

I would be happy to. We did last year and even into the first quarter test some different promotions and did not find any too exciting. And the only promotion that we are using is a first month free. We are using it on our television and our radio ads and driving people to our website, and they see it on our website. But if you don't go -- if you don't see a TV ad or hear a radio ad, if you don't go to our website and you walk in the door, you are quite likely to pay full price because we have no first month free promotions. The banners are up at our facilities, and our managers are trained not to offer it unless as a last resort it takes it before the person leaves the office. So first month free, and again only 60% of our customers during Q1 took advantage of it.

This is Jordan. I just had a question on the advertising. Does the Yellow Pages actually show up in the advertising line on your income statement?

It does. Both our Yellow Pages advertising and all of our media advertising that will come in the second quarter all show up on the same line item.

So just roughly close to -- just trying to estimate how much in terms of dollars will be shifted from Yellow Pages into TV spending, you know, '09 versus '08. Can you quantify that for us?

I would estimate that the $2.9 million that we have guided that will be spent in media advertising, the majority of that will be the result of reducing Yellow Pages spend from prior year. It won't quite be dollar for dollar. We do anticipate that our marketing expenditures go up a little bit, but largely our marketing budget is unchanged from '08 to '09. It is just a shift almost dollar for dollar for dollars away from Yellow Pages and towards the media.

Okay. And then Dean, I appreciate your commentary on revenues instead of occupancy. But looking at a 75.6% occupancy print at period end seems pretty startling relative to where we have been in the industry over the course of -- well, as long as I have covered it. I'm just serious if that is representative of anything in particular in terms of strategy marketing-wise. Because we view that as a potential indicator of what could happen to revenue on a forward-looking basis.

Yes, and I think that is somewhat fair. But let me answer this, and Jordan and Todd, if you don't mind, after this one, let's let some other people ask some questions and you can get back into queue if you want to.

Clearly when we took away our first month free in Q1 and almost entirely in some cases, we don't want the customer who is only going to spend 30 days or less with us. We want them to go on down the street and rent from someone else. We know about 13% of our customers last year only stayed 30 days or less with us, and another 12% only stayed 60 days -- or another 30 days -- or 60 days or less. So 25% stayed 60 days or less. Those customers are a lot of trouble to capture, and in some cases you're only getting an admin fee out of them. In a lot of cases, they become delinquent in that second month. And so it is by design.

We know we are going to have a greater drop in occupancy than our peers because we are not giving a first month free to every person who walks through the door. And that is by design, and that is the reason I caution you to not get so preoccupied with occupancy. Your statement is correct, and you will see that our occupancies will not get that far out of line, but to be 150 basis points lower than someone else is not that meaningful if, in fact, we are outcompeting on the revenue line.

David Toti, Citigroup.

Michael Bilerman is on the line with me as well. My first question is around some of the assets that you are marketing for sale. I know I have asked you this before, but can you just remind us if there are any common threads between the assets? Are their market-specific exit strategies? Are they underperforming or overperforming? What is the thought process around which assets you are listing?

The process continues as it has all through '08 and into '09, and it is a bit of everything. We do look at markets, and we look at markets where we may not have the efficiencies. We don't own a concentration of properties in the most simplistic way we may own in a market. It is then somewhat difficult for us to gain efficiencies, difficult from a management perspective, and we look to dispose. In other instances we look to prune assets that are in market. Last year's program was primarily geared towards assets that we looked at their long-term growth potential and where we thought rents could go, and we would parse through certain ones in markets. I think we cleaned out a lot of that last year. We cleaned out a lot of whole markets last year in terms of exiting the Gulf Coast. So this year it is a little more selective, but they are -- again, on a one-off basis, they tend to be pretty much spread throughout the United States, and it is more back to the individual asset and/or kind of one-offs in a market type disposition strategy.

Great. Thanks, Chris. Are you able to speak about your pricing expectations in a general sense?

Sure. I mean if you look at the asset we closed on, which was embedded in the $17 million of proceeds we had since the end of the quarter, plus the assets that are in the $23.6 million under contract, these are spread throughout the United States. They literally range from East Coast to West Coast. Generally smaller market type assets are not infill, not urban, and we continue to see cap rates on an individual basis that blend out for those two pools of assets in the 7.5% range on trailing 12, still less a management fee and a CapEx reserve. On a per square foot basis, again, kind of indicative of the kind of smaller market assets that we are exiting, those came in around $72 a foot.

Great. And then I'm just moving over to some of the financing that you are doing, can you describe some of the terms relative to your discussions with some of the regional banks? (multiple speakers)

Sure. I would be glad to. And for those of you who have heard me on these calls for the last 15 years, I'm sure some of you fell out of your chairs in my opening remarks wondering, who is that optimistic guy speaking for Chris Marr and what did you do with the real Chris Marr? But I do believe and I see it every day and we are incredibly active across the life companies, the regional banks, local banks, you know the money center banks, that things are getting better. And what we are generally seeing from -- for example, we closed a loan yesterday. The regional banks if you can develop a depository relationship, if you can present them with stable cash flowing properties in their market ring, they have deposits, and they are looking to develop relationships and make loans.

So for the deals we have closed and when you look at the commitments of $37.2 million that we have with closings hopefully this quarter, they kind of hover around call it a 6.75% rate. Sometimes that is quoted floating; sometimes that is fixed with caps rates for the computation of an LTV in the 8.25% range and LTVs right around 60%. And that seems to be the sweet spot for those lenders.

From a life company perspective, again it depends upon what your objective is. There are five year money, there are seven and 10-year money. There's higher LTVs, and higher meaning 65%. There are lower LTV lenders at around 50 trade-off in coupon. But similar caps rates may be pushing up closer to 8.5%, and rates between say 6.5% and 8% depending upon how far out you want to go.

[Stephen Quinn], Macquarie.

This is [Don Keeban]. I know you did not want to comment on specific numbers for a street raised in April and May, but could you at least give some kind of trajectory guidance on it? Has it been like materially better than April rates?

I don't think I can say any more than what I did before. I mean April was not a good month. We did not expect a good month. The telephone is ringing and people are coming in, but we expected that in May. And we will give good guidance -- we will give good results at the Q2 call. But we are just starting our rental season, guys. There is no -- we cannot guess at it at this point in time.

Alright. And if you could just kind of give an update on your unsecured debt maturity kind of strategy? Are you guys planning to do a specific spend and deal with the maturity next year, or are you just going to comp everything into works right now?

Well, I guess -- this is Chris. Everything on the table has been our mantra and continues to be. We are working across a variety of different concepts and structures both on the -- with the existing lenders, as well as to obviously raise capital in other places. Right now our anticipation would be to extend the $450 million and the $57 million secured facility to November of 2010. Tim has talked about the $675,000 plus or minus of fee that we would pay to do that. But we are also working because, as I said in my opening remarks, I do feel much more optimistic today than certainly 90 days ago to come up with a solution that will extend that maturity meaningfully beyond November of 2010, and we would certainly take advantage of that and get that done sooner rather than later.

All right. Thanks. And just one last thing. Could you provide some details around where your street rates or versus in-place rents?

Sure. If you look at, as Dean commented, the $12.31 a foot asking rent for new customers coming in, right now and reflective of the changes that Dean talked about in areas where we have seen dramatic reductions by our competition and have had to take some action to remain competitive, we are about flat. Our existing customers are currently paying about 1% I would say more than what we are asking new customers to pay who are coming in.

Michael Knott, Green Street Advisors.

Chris, among your menu of capital raising options, can you give us an update on your thoughts about the joint venture you talked about for several quarters?

Sure. We continue to be very active in that space and continue to have a dialogue with the potential partner that we had talked about now for several quarters, as well as looking at some new possibilities. We have yet found that match between what we think makes sense for us and our shareholders and what can make sense to bring a deal to fruition. But again, I think we are starting to see the same theme as I said about the local regional and national banks. We are starting to feel it on the investor side. I think a little more comfort around where things are going to be, a little more comfort around the debt markets. And, as a result, I think we are in my view at least moving closer together, and also I think to be fair many, many investors were reluctant to call capital from their sources. They were reluctant to make -- catch that falling knife. I do here again feel like perhaps that knife night is completely fallen, and people are willing now to say, let's step back and see if we can figure out something that will take advantage of the opportunities that Dean described in his comments.

And your stock is up a lot from its low. I'm just curious how you guys are thinking about the possibility of raising equity to try to resolve some of the uncertainty with respect to your debt maturities next year?

Right. We again -- I think -- I just want to -- and I know, Michael, that you completely understand this, and for the sake of others on the call who keep coming back to this, well, the $450 million that matures in November of 2010 assuming we take the extension option, I think those who look at that and make the assumption that we need to repay $450 million in November of 2010 are going to be on the wrong side of that bet. And so, as we look at all forms of capital, equity is clearly on the table. We recognize a need for equity in this Company, and we evaluate different ways of going at that whether it be through an aftermarket type program that we put in place. However, we have not used that at this point in time or in a more traditional offering. All of those concepts are on the table and part of our thought process. I think we've got a bit of a runway still here, and we are going to use that runway to try and find the lowest cost of capital we can for our shareholders. I think the disposition side presents some very intriguing opportunities at arguably a lower cost of capital for us to delever than equity even at the prices where we are.

Okay. And then my last question is, can you just help me reconcile -- I think last quarter on the call you mentioned a pipeline of financings and sale candidates of about $575 million. I just curious to how that compares to the $100 million you mentioned in the press release. Obviously you have done some deals since then, but can you just help me reconcile those two?

Yes, I think -- well, I was prepared to answer this question, but I will go at it a little different way because the $575 million I think is not a good number. We had talked about having $125 million or half of kind of a $250 million bogey that we had in one phase or another. And if you went through the pieces there, the dispositions that we had under contract in Q1, one of them closed earlier this month. The other one remains under contract and should close prior to the end of June. That was plus or minus $8.8 million. The dispositions that we had under letter of intent, which we talked about in the Q1 call of around $21 million, they are -- they remain under LOI. Nothing has fallen out. We have put the bulk of those -- I'm sorry, they don't remain under LOI. We have put the bulk of those under contract. Nothing has fallen out, and then we have a new group of potential dispositions that are under letter of intent that exceed $100 million. So we are -- versus where we were in Q1 on the dispo side, we are up -- in terms of deals we are working, we are up over $100 million in terms of deals that we are working versus where we were 90 days ago.

On the debt side, a similar story. The regional banks and the life companies that we had been working through we had had a total of around $95 million or so of deals that we were working in one form or another. We closed one for $14 million, and we have a pipeline that is about constant to where we were there in terms of things that are in the commitment stage. And then on top of that, we have sourced about another $32 million or so of term sheets. So everything all-in-all is well in excess of where we sat at the end of March, although the pieces have shifted forward in a positive way.

[Lindsay Gal], Robert Baird.

Just going back to the acquisitions, Chris, you had mentioned that entrepreneurs who are purchasing the assets were focused on the cash flows. Is the interest coming in for these sales still coming mainly from entrepreneurs, or has that changed at all?

It has changed a bit. We have a good pipeline of those kind of one-off type sales. But kind of in our forward pipeline, we are seeing some institutions and some small portfolio type buyers moving in. They are less sensitive to the debt, and the way we are looking at it is they are cash buyers who can close, have a good certainty to closing, and we are again looking at that as a very low relative basis cost of capital for us. We are aggressively pursuing those potential acquirers as well.

Okay. And then just changing topics to the new fees that you guys have instituted, do you guys have an estimate for how much of an impact that will have?

We do, but we are not ready to share that yet. Let's get a little history under our belts, and we'll share that with you.

Okay. That is reasonable. And then just finally, before you had mentioned with the bank refinancing and deleveraging at the end of 2010, that banks just were not ready to discuss anything yet. Has that changed at all?

Yes, we are having very active dialogue with all of our line banks, and I would say the conversations are very productive. If you compare it to 120 days ago, we have come light years in how productive they are.

(Operator Instructions). David Harris, Aurora Capital.

Just following on from that earlier question regarding institutional involvement, I mean if we think about the sector over the last couple of years, the acceptance of self-storage as an institutionally acceptable area of the property market was one of the marked features I think. Kind of just where do we stand now in that? Do you think we have gone back a little bit, or are we kind of holding steady? Is it still possible to talk to folks about forming joint ventures?

I cannot imagine why you would think we have gone backwards. I mean the sector has much more visibility in my opinion today than ever before since I came into the public sector with it in 1994. We have many more institutional investors interested in the sector from my perspective, and so I think clearly we have gone forward.

Okay. My only thought was that it was a sector that had been ignored. There was a focus historically on the big two or three areas, and I just wondered with the shocks that we have all been through, that the institutions may have sort of retranched back to a rather narrower menu than as had the two existed. But it is good to hear that they have maintained a broad spread.

I have never felt ignored, David, and looking at the participant list as we speak of people on this call and on our website, and I can tell you from looking at this list, we are for from being ignored.

Are you in active negotiations around joint ventures at all today?

As I said, we are exploring all alternatives and have been active in that marketplace since the beginning of last year. So we do spend time there, and I would say I think the level of interest remains very high.

At this time we show no further questions. I would like to turn the conference back over to management for any closing remarks.

Okay. Thanks, again, for your interest in our Company. We look forward to seeing many of you at the Waldorf, I guess, in June at NAREIT and talking to the rest of you next quarter. Good day.

The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.