CubeSmart (CUBE) 2011 Q1 法說會逐字稿

Good day and welcome to the U-Store-It Trust first quarter 2011 earnings conference call. All participants will be in listen-only mode.

(Operator Instructions).

After today's presentation, there will be an opportunity to ask questions.

(Operator Instructions).

Please note this event is being recorded. I would now like to turn the conference over to Dean Jernigan, Chief Financial -- Executive Officer of U-Store-It. Please go ahead.

Good morning. The Company's remarks will include certain forward-looking statements 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. Risks and factors that would cause our actual results to differ materially from forward looking statements are provided in documents the Company files with the SEC, specifically Form 8-K together with our earnings release filed with the Form 8-K and the business risk 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 measures can be found on the Company's website. Again, good morning to all, thanks for joining us. Our line up today starts with Chris Marr, our President and Chief Investment Officer. Chris?

Thanks, Dean, good morning everybody. We are pleased to be reporting a very positive quarter as evidenced by strong 3.7% growth in same-store revenue, 170 basis point increase in quarter end physical occupancy, and a 20 basis point increase in sequential occupancy. That positive momentum continued into April with sequential gains in both occupancy as well as revenues on a same-store basis. This quarter clearly validates the bullish forecast we provided just 60 days ago. 10 weeks ago when we introduced the highest internal growth expectations of the public companies in our sector, we had some insight into the fact that the first quarter would be a very solid one. Today, we are encouraged heading into the leasing season and see very little downside risk to our projections. We look forward to continuing our conversation today but we are already looking forward to speaking with all of you after we report 2Q earnings as we are very optimistic about the opportunity within our existing portfolio and believe the probability is greater that we will perform to the higher end of our annual expectations.

On the investment front, we continue to execute on our strategy of improving the quality of our cash flows. We have closed on $51 million of acquisitions thus far in the year -- one in the DC suburb in January and two post-quarter end in the Westchester suburbs of New York City and in Miami across the street from the Aventura Mall. Each is a Class A plus asset in a prime location in our targeted markets. Yields across the lower end of the product spectrum tightened a bit over the last five months, helping us on the disposition side of the strategy. We are actively marketing assets for sale in a continuation of our execution through both direct and brokered transactions. We currently have assets listed with brokers in the southwest and along the Gulf Coast. All signs point to us achieving our disposition objectives in 2011 and we intend to use those proceeds as a component of funding for our acquisitions.

This spigot of third-party management opportunities is flowing and we remain confident in achieving our 2011 objective. The program has added to three new stores thus far in 2011. As it relates to our balance sheet strategy, so far in 2011 we have not utilized our at-the-market equity program. As you will recall, we funded our acquisitions in 2010 without using any leverage. We remain focused on achieving an investment grade rating and, as Tim will elaborate on, we will recycle disposition proceeds into our acquisitions, lengthen our maturity profile, and improve our metrics through internal growth in EBITDA. So at this point, I would like to turn it over for Tim for a few more details on our strategy.

Thanks, Chris and thanks to everyone joining us for today's call for your continued interest and support of U-Store-It Trust . As Chris highlighted, we had a very good quarter and our results were in line with our expectations, our -- our reported $0.14 of FFO was at the high end of our guidance range of $0.13 to $0.14. Top line operating performance on our same-store portfolio continued in the first quarter as we reported 3.7% revenue growth, which is the strongest revenue we've reported in ten quarters. Our net move-ins were positive for the first quarter, a real good sign that we haven't seen since the first quarter of 2007. Industry reports continue to indicate that smaller operators are not faring as well with average year-over-year occupancy declines of 3.5%. Our revenue growth, in light of what continues to be a challenging environment for the broader industry, clearly shows the benefits of having the tools that come with a larger platform.

The sources our first quarter revenue growth were balanced as occupancy gains of 170 basis points, as well as realized annualized rent per foot growth of 1.1% had nearly equal contributions to the year-over-year same-store revenue growth. Same-store expenses grew 5.6% over prior year levels. Increased marketing spend and snow removal costs were the drivers of the increase. Our marketing spend is largely focused on Internet strategies and digital media and while we do anticipate increasing our overall levels of marketing spend in 2011, the first quarter was heavily impacted by the timing of that spend. It's important to note that we include these Internet marketing costs in our same-store expense results but for comparison purposes, I'll point out that not all of our competitors do. Exclusive of the increases in marketing and snow removal costs, all other expenses combined to decline 0.7% compared to prior year levels.

During the quarter, as Chris mentioned, we closed on the acquisition of one facility in suburban Washington, DC for $14 million. We assume mortgage debt as part of the acquisition of $7.5 million and funded the balance with available cash. No other items of note on the balance sheet, as we ended the quarter with $209.5 million of availability on our revolving line of credit and have a very modest $2.7 million of debt maturities for the remainder of 2011. As we've discussed over the past several quarters, our balance sheet objectives include extending our maturity profile and maintaining or improving our leverage levels, primarily through growing cash flow from our portfolio and by funding our growth on a leverage-neutral or leverage-reducing basis.

On our earnings guidance, we provided second quarter FFO guidance of $0.13 to $0.14 per share and affirm the full year guidance and assumptions that we provided during our last call about 10 weeks ago. What we have seen in our portfolio over that time is very much what we expected to see when we provided that initial guidance. We're certainly seeing additional positive signs heading into our prime rental season, and while we are maintaining our prior guidance, we think there are now more opportunities and less risks associated with that guidance. To wrap it up, it was a solid first quarter. Our team is excited as we're entering our prime rental season, we continue to execute our business plan, and we look forward to posting more good results in the second quarter. Thanks again for taking the time to join us this morning and at this point, I will turn the call over to Dean for his comments.

Okay, thanks, Tim. I'll -- I'll make it rather brief this morning but a couple of points I want to make. One, I want to follow up on something that Tim just threw out there and give you a little bit more data around it and that 3.5% loss of occupancy that our friends in the storage world out across the country suffered during first quarter. We get that from Self Storage Data Services. A Company's been providing a quarterly data for our space for a long time now out of Los Angeles. They keep a survey going of about 17,000 storage facilities in the 50 largest metropolitan areas in the United States. And that quarterly report did show that year-over-year Q1 was down 350 basis points. And that of course to be compared with our plus 170 basis points, that is a significant variance in -- in occupancy trends as it relates to our Company and for that matter, the -- the public companies versus the small players. Not only is it in occupancy, though. That same report suggest that the smaller players across the country had [RevPASF] down 0.6%, revenue per available square foot, and -- and ours is up 3.0%.

So not only are the smaller players suffering in occupancy but they are also suffering in getting fair rents. So what does that mean? I think it speaks volumes to Chris and his team, what they are seeing on a daily basis now as far as smaller players determining this might be a good time to sell their assets. I think we are going to see a pipeline that continues to get more robust as the year goes on. Typically it's Q3 and Q4 where we see the greatest number of properties coming into the pipeline. And we are encouraged at this point, with what we are seeing now, as to what Q3, Q4 will actually look like. So we are excited from a consolidation standpoint.

You've heard me talk before about this is an opportunity for the larger players to consolidate the sector and I think we are seeing the very early stages of that now. The other point, well, to follow up on -- on the smaller players, let me make one other point there. That also indicates what we've been seeing for quite some time as far as taking market share. Clearly there has been a vast difference between a Company -- public Company with a marketing department with a sizable marketing budget competing in today's environment versus a smaller player. So we have talked a lot about that so I won't bother to beat that too much but we clearly see it playing out on a quarterly by quarterly basis. This quarter and in fact for the past three or four quarters.

The other point I want to make is our revenue growth for the quarter. 3.7%. We were extremely pleased with that. But I -- but I think something never gets asked in our sector for some reason and I'm going to give an answer today. And perhaps it's something we should focus on going forward but in corporate America when you report revenue gains, and I've suggested this before, everyone always asks, okay, well how much came from pricing and how much came from volume? In our case it would be how much comes from pricing and how much comes -- comes from occupancy. And just to share some numbers with you for this quarter. The make-up of our 3.7% in revenue growth, 1.9% came in occupancy and 1.8% of that came in revenue. So basically 50/50.

And the point I want to make there, and you've heard me talk about it for quite some time, is we've got this inventory on the shelf that we are going to be able to continue to rent for many, many quarters to come. And so, you should be able to see us continuing to gain revenue with a large component of that coming from occupancy. And not to be -- well to contrast this I guess with some others who tend to trade on occupancy and peak out at a high 80s or low 90s occupancy number and for all intents and purposes, that's full occupancy because of our turnover, of about 8% or 9% a month. That is going to be very difficult for any component of those revenue streams to be coming from occupancy. Almost impossible. So, I point that out because we are going to be pointing it out on a -- as we go forward on a quarterly basis as to our revenue gains, how we -- how we get them.

But again, about half and half this quarter, half in occupancy and half in revenue. And of course obviously the reason I want to point it out is to make the point clear to all that we are going to continue to grow revenue with occupancy where some of our friends perhaps will be not -- will not be able to do that. So that's just a point to make as to why I think our -- our story is a good one. I look forward to it playing out over the year. You saw we -- we pushed some dollars and marketing into the first quarter. We'll talk some more about that I'm sure. But we set ourselves up, I think for a very good year from a gaining occupancy, pushing revenue standpoint. And I look forward to it playing out. With that I will pause and we will start taking questions.

Will now begin the question and answer session. (Operator Instructions) At this time, we will pause momentarily to assemble our roster. The first question comes from Ki Bin Kim of Macquarie. Please go ahead.

Thank you. If you had to split out your same-store NOI growth, the 6% number, what would it have been if you just excluded the snow removal cost?

Ki Bin, why don't you ask your next question, I will come back to you with an answer.

Okay, so, just can you give a update on what is happening in April? You said it was -- the strength was continuing but if you could put some numbers around it? It looks like in the first quarter your occupancy was up 140 basis points year-over-year and the quarter before that was up 110. What would that look like in April?

Good morning, Ki Bin. April, this April is better than last April, considerably better. I think it might have been you, Ki Bin, that kind of push me this time last year to start to tell you about what we thought the rental season was going to be. I really was very hesitant in forecasting anything because it hadn't started to happen yet. Well this year, it's already happened. The rental season really started this year the last week of April. And I don't know if that's maybe students getting out of a bit early this year or in fact we're just having good results with marketing or what. But April was up considerably over the last year, in move-ins, net move-ins. So, we are anxiously looking forward to the rental season with high expectations this year.

If I can -- let me just ask you a different way, so is that 140 going to be better, is it higher in April? Or to the extent you want to say?

Well, yes, I don't -- I mean, there is no need for us to start giving results for -- I mean, I like to try to stay at a high level. But the simple answer is yes. But yes, to answer your question.

Okay.

But, rather not get into the numbers if you don't mind.

Okay thank you.

Hello, Ki Bin, it's Tim. On your first question, if you were to assume that snow removal costs would have been flat from first quarter '10 to first quarter '11. Our same-store expense growth, instead of being up 5.4% would have been up 3.8%.

And what would that mean for same-store NOI?

From a same-store NOI perspective, the 2.6% NOI growth would have been 3.6%.

Thank you. And last question. You guys lost some properties under the third-party management program. I was just wondering if you could give commentary on that, especially when you compare it to EXR which gained a few properties.

Yes, hello, Ki Bin, this is Chris. So for 17 years, you know I've been in the public company world, so I am painfully aware of the need to report and manage on a every three month basis. And you know you just can't really look at life like that. We continue to acquire stores that we manage, that's a positive. One of the stores that we acquired in the first quarter was a third-party managed store. We had some relationships left over from the Wells Fargo deal that we did last year where the buyers of the properties asked us to stay on an interim basis, post year-end to just aid in the transition. We agreed to do that and our assignment was up in the first quarter. So, it 's an ebb and flow. We are not seeing contracts go away on performance. Largely it tends to be because we either had a interim assignment and it ended or we bought the facility. I still am very, very bullish on the prospects and have no change in our expectations that we'll see meaningful growth in the same -- in the third-party management business throughout 2011.

No, that's helpful. And just to that point, is the same-store NOI growth under the third-party managed properties, is that keeping pace with YSI or better, given that they are maybe mismanaged?

Yes, it's at or better again depending upon the individual market and the nature of the asset. We have a decent amount of assets that I would say that were in development, lease-up mode. Those are performing quite nicely. The portfolio has a whole is performing very well, at or above the YSI levels.

Thank you.

The next question is from Gaurav Mehta of MBR, please go ahead.

Good morning, guys. A couple of questions, one on your acquisition. Given that you mentioned that you have a strong acquisition pipeline. Who were the sellers in the market and what kind of cap rates are you seeing for your acquisition, as well as dispositions?

Sure, this is Chris. Thanks for asking that. To put some specificity around all of that, give you a little bit of additional color. Since the beginning of the year, we've logged 106 assets into our tracking model that are new opportunities for us to look at. So ,the deal flow continues to be very strong. And to Dean's point that is a little bit unusual for this early in the year. It's clearly happening more rapidly than I would've expected for the January to April time frame, you do tend to see that activity pick up once you get through the summer. So, that's a positive. From a pipeline perspective, we've obviously announced the closing of the $51 million on those assets. We have assets under contract or under LOI that would bring that $51 million up to $95.5 million, if complete.

So, said a different way, we've got $44.5 million in that stage, and so we would expect by the next time that we speak to you, we should have $95.5 million complete. From a cap rate perspective, and again just to give you a little color on that. They continue to be assets in our targeted markets of the highest quality and are consistent with our strategy and the themes of continuous improvement in the quality of the cash flows coming out of our portfolio. From a cap rate perspective, broadly across the country, things have gotten a little bit tighter as I said on the lower end product. That's very helpful to us on the dispositions. Where we're we are buying, we see things in the 7% to high 7% range. I used to say 7% to 8%, I think that 8% has come in a bit. And for the deals that we did thus far this year and closed, the cap rate on those is right at 7%. On the disposition side, we see strong demand for the product that we have in the market. We traded last year assets in that 8% to 8.5% range. I think that has tightened up and would expect to do our activity this year, certainly at that 8% if not tighter based on how the loosening of the credit market continues.

That's helpful. Going back to your acquisition volume. If you anticipate that you'll probably have $95 million by second quarter and I think on your last call you mentioned that you're investment objective is to require somewhere between $75 million to $125 million. Do you expect to earn higher than that range by the end of the year?

Right as we sit here today, I think thematically on internal growth, acquisition volume, disposition volume, we feel very good about the upper end of our expectations. I think again based on the fact that the assets we've seen thus far this year are at a greater volume than we would have expected, it would not be surprising if we're in front of you in a few months raising our expectation of full-year acquisition volume.

That's helpful. And what's the range of occupancy level for properties that you are looking at?

On the buying side or the selling side or both?

Both, I guess.

On the sales side, they tend to be -- it's really unique to the markets. The assets in the southwest are fairly well occupied in the low 80%s. But those markets tend to have very low rents. Gulf Coast assets, same thing. On the buying side, the assets that we've acquired thus far this year are kind of mid 80% occupancy type assets. We have a few in the pipeline that are in the later stages of lease up and would be in the high 60%, low 70% occupancy range.

That's helpful, thanks.

You're welcome.

The next question is from Todd Thomas of KeyBanc Capital Markets. Please go ahead.

Hello, good morning, I'm along with Jordan Sadler, as well. As a quick follow-up on April's activity, I was just curious if you think there was any impact this year since there are five Saturdays in the month?

Sure. Absolutely. And last Saturday was a good one. And I -- we look at those Saturdays throughout every month and every quarter. But yes is the answer to your question.

Okay. And then Dean, to your comments where you broke out the increase in revenue growth from occupancy gains and also from rental growth. I was just wondering if you could put some context around that break-out, historically, throughout the last several years.

Well that's a broad question. No, is the answer that question. I tell you what I'll do. I'll -- we will do some work on that for you and start showing you some trends. But it's hard, Todd, to look at the last several years with any kind of meaningful comparisons. Not only with this Company but just with all of us with the Great Recession. But, we will start trending it for you and give you better perspective on that.

Well I guess, if I think about occupancy gains and rental increases, I was just wondering, what you think is more powerful in terms of your revenue growth overall?

Well, I like it the way the quarter came in. About 50/50 I think is just about right. I mean, I think you can see from our supplemental that we had great increases to our new customers coming in at about 2.4%. In other words our street rates were up about 2.4% year-over-year. We actually -- we obviously have to discount off of that but we realized 1.1%. So, we are still very aggressively pushing rates as best we can. Not only to our existing customers, and I know you are starting to get more visibility from some of the other companies giving you, how bullish we are on raising rates to our existing customers. We have been doing that for years. We just really haven't been giving you numbers on it. But we clearly have the ability to raise rates to your existing customers in a substantial manner. But the one that we do give you more visibility on are the street rates as we show that to you in the supplemental and also our Rev per available foot. And you can see that we are continuing to push rates there, as well. So, I hate to forecast but I enjoyed this quarter, where we did have our cake and eat it too, say -- so to speak. And that we were able to raise our occupancy 170 bps by the end of the quarter and get rate increases to existing customers and push rates to new customers all across the board.

Okay that's helpful. And then, EXR has implemented a solar program. And I was just wondering what your thoughts are about that and whether you're exploring a similar program?

We have solar panels. You know, if you are a taxpayer. And I understand they are and they're TRS, it might make some sense to offset some taxes with solar panels. They are -- that industry is still yet trying to get its legs. And you've got to be very careful of how you invest your dollars. We have many solar panels out in the southwest part of the United States. It's something that people come to us on all the time and the numbers still don't make sense. And we will add solar panels when it makes sense but it's certainly not a capital item that is on our horizon at the moment.

Okay. Thank you.

The next question is from Jana Galan of Bank of America Merrill Lynch, please go ahead.

Hello, good morning. I wanted to thank you for the comments on the market share gains versus the smaller private or single-asset owners. And I was wondering if -- that is on a national level -- are there any particular markets where they -- you are seeing them compete better or -- I guess another way of saying it is -- are there any markets where concessions are higher than the, kind of, national average?

You know, we don't get it so much on a city basis. We only get it in regions of the country. And it's really unique in that right now, what we're seeing in our Company and what I glean from the SSDS report, is that there aren't really any markets that stand out either in a positive or a negative way. If you look at year-over-year comparisons, Florida and Arizona are standing out. But other than that, there's really no markets that are suffering any worse than have been suffering. I mean you know, Las Vegas continues to suffer. The Inland Empire continues to be a very challenging market. But all the markets that we've talked about in the past, everything has remained very consistent. And I think that's true not only with our portfolio but also with the 17,000 facilities that SSDS reports on.

Great, thank you.

The next question is from Michael Bilerman of Citi. Please go ahead.

Yes, Mark Montandon is on with me, as well. Tim, I wanted to start with you, just in terms of the guidance. It sounded like you were saying that you were going to achieve the higher end of the year and I was wondering if you can just walk us through getting there. You had $0.14 this quarter. You've put out guidance for the second quarter of $0.13 to $0.14. To get to the high-end, you would need your quarterly run rate to almost get up to basically $0.17. That's, call it a $3 million to $4 million increase in FFO. And the balance sheet is more of a -- if you lengthen maturities, it is not like interest expense is going to move materially down, you are talking about a pretty significant increase on the top line to get there. So, I'm just wondering if you can sort of help us bring those comments together?

Sure, sure, I mean there's lot of things that are going to -- if you go back and look at our track record over the last couple of years and you look at the relationship between quarters, all others things being equal. Our second quarter has tended to be right on top of our first quarter for a host of reasons. Part of that is timing of property operating expenses like landscaping, part of that is a lot of different things. But if you -- your model, if you pencil out the guidance ranges on the same-store portfolio that we have provided, gets you to kind of where consensus is, which is at a $0.60 or $0.61 FFO per share number for the year. So, I am not quite sure, does our guidance imply that revenues grow throughout the year? Absolutely it does.

Revenues would be expected to grow in the second quarter and then again in the third and stabilize out in the fourth. And that will translate into, that component of our FFO clearly will grow and then the balance is a lot to do with timing of expenditures. Marketing expense for instance was high in the first quarter as we've discussed in the release. And earlier, and that marketing expense, we expect to be a little bit higher into the end of the second quarter based the timing of when we spend that. And then, it ratchets down a little bit on a run rate basis, typically towards the tail end of the year. So, it's a host of different things that drive that. But I don't think that any of the individual assumptions that we provided in our guidance would lead you to believe that we wouldn't hit the FFO range at the midpoint or even the little bit more towards the higher end.

Well that's -- I guess that's where we're -- you said midpoint but in you prepared comments you guided towards the higher end. And, you know, I understand the seasonality business and 2Q -- 3Q and 4Q being higher but just as the magnitude of higher you are talking about a -- let's call it a $3.5 million of additional FFO on a quarterly basis. Assuming that's all NOI, that is a 10% sequential rise or greater and that just -- I know the seasonality of the business, but there's not that much seasonality in the business. And so I just make sure expectations are being set accordingly because it would seem to be pretty aggressive to get to $0.61, $0.62 for the year in terms of that uplift.

I guess another way to look at it. Is if you look at just expenses. You are focused on revenues and looking --

Well, I'm not -- NOI, I'm just saying NOI.

Okay, from an NOI perspective, if you look at our expense growth in the first quarter of 5.6% and compare that to our annual guidance of 2% to 3%. And obviously, there's got to be some quarters that are much, much lower than 5.6% for us to ultimately end up in that guidance range of 2% to 3%.

Okay. I guess, question just more sort of longer term, as you think about the balance sheet and you certainly have a desire to lengthen maturities and eventually obtain the investment grade rating. I guess as you think about -- and I agree, this is going to be a much better longer-term to have the investment grade rating -- have you thought about moving towards that and what that potentially could do to FFO? You are sitting there today with a balance sheet that's got an average duration of three years, 23% floating rate debt, an average cost of 5%. As you think about migrating that $630 million of debt towards a longer schedule, the dilutive impact of doing that, and I'm wondering how you've sort of thought about that and tried to calibrate it in your head?

Well, I would certainly agree that as we accomplish our objectives of lengthening our maturity profile and doing that on an unsecured basis and comparing that to, that cost of debt -- whenever we do that, compared to the debt that it would be used to refinance, there is a dilutive impact of that at some point. I think that's more than offset though by the quality improvement in our balance sheet and I think that would ultimately be reflected in how people viewed of our Company and how they thought about our multiples. So, certainly there is a trade-off in that, to accomplish the objectives of extending out the maturity profile, that certainly comes at a cost when we do it.

Okay. In terms of the acquisitions in the quarter, now obviously they were in some pretty high-priced markets and some probably, heavily supply constrained. They averaged about $200 a foot for the three -- you said was a 7% yield, which would imply $14 NOI or net of expenses or $24 gross rent. That math about seem about right?

Yes, you are probably a little bit low on your rent, but yes.

Okay and then I guess how much, as we think about the trade-off, I think you see on the dispositions, and I may have missed it. What would be the exit cap as you fund these acquisitions?

Yes, as we have looked at that spread between entry and exit. And it was about 90 basis points in 2010 and we would expect based on the activity we've seen thus far this year for it to be in that 90 to 100 basis point difference in 2011.

Okay. And then, Dean, just as a question for you, just in terms of the -- you talk a little bit about the smaller players versus larger players and getting the self storage data and how rents and occupancy declined for the industry while you been able to be the opposite of increasing occupancy and increasing rent. Do you think that at some point if the market is doing really bad that's going to limit some of the larger players pushing rent and pushing occupancy, if some of the just local and smaller guys just have -- then they have more to lease and can drop rate. And in a product that's a little bit more commodity-based, does that start to worry you of that differential growing?

Yes, let's compare it with multi-family if you want to just for a moment. But yes is the to answer your question, on part of your question. It -- when you -- it does limit you to -- in the ability of pushing street rates. If in fact you've got a competitor across the street or around the corner who is far less occupied and who is dropping rates to try to gain occupancy if in fact the customer knows what that person's rates are. And that is a big if. Except for having a sign spinning out on the corner or a message board where you put your rates up, which really no one does. The customer is going to have to walk into that store, really to find the rates because they are not going to get the rates on the Internet. So, to a small degree, yes it does impact. I'll tell you where it impacts even more is psychologically, because we know what our competitors are charging. And it's sometimes hard for us to push rates because we think that person across the street is going to undercut us. When in fact, we don't have problems in pushing rates here because we know that the customer really has very little way of knowing what the rates are across the street. So, that's the yes to part of your question.

As far as gaining occupancy, I think that's a no. Because I think we are clearly -- we being the four public companies -- are clearly in a much better benefit or position to gain occupancy without respect to what the competitor has in the way of occupancy. Just buying the -- bidding on the Google key words and being on the first page of Google from both an SEO and SEM standpoint. And branding is making a difference. When you buy a keyword and you appear at the top of the page on the first three at the top left and a customer sees a name that they have confidence in, they're more likely to go to that name than others. And so, I think there's a small no in there, MIchael, as far as pushing rates. But if we -- at this Company, we have the courage to do it anyway because we know the customer has very little knowledge of what those rates are across the street.

Great that's helpful. And just one last one, just on the third-party management business. Out of the 87 properties that you have today, how many are still in on the sort of transitional short-term contracts and then how many would you define as sort of the near-term acquisitions candidates?

Yes, this is Chris. Of the ones in place today, I would say none of them are left of that near-term transitional type nature. And, what we would ideally like to own is 80% to 90% of those properties because we try to manage in those markets and of the quality that meets our long-term criteria.

Okay, thank you.

The next question comes Lindsey Yao of Robert W. Baird. Please go ahead.

Thank you. I apologize if I missed this in the prepared remarks. But the assets that you're marketing for sale, is it still in line with the $30 million to $50 million that you provided as guidance before?

Hello, Lindsey, this is Chris. Yes, that -- those assets are clearly in line with that. And as I said in -- as I did say in the prepared remarks based on the activity to date we certainly feel very comfortable with that range, and at the upper end of that range.

Okay, thanks. And then in terms of acquisitions, can you just talk a little bit about what you're seeing in terms of the bidding for these new opportunities and a couple of your peers have announced substantial acquisitions, can you -- did you guys look at that at all and can you talk about it?

Sure, Lindsey. The market continues to be very deep in the types of properties and markets in which we are a seller, which sort of correlates with the two larger deals that some of our peers have announced in terms of the quality and markets in which those assets exist. And so there you tend to see a larger amount of interest because in an individual one-off deal, again, the price point is such that at a $2 million or $3 million asset, financing is more readily available today. So, you do tend to get a deep pool of buyers, not just local and regional operators but real estate investors who have had success in other products and our interested in investing in self storage or in commercial real estate rather than having their capital sit in the bank and earn less than 1%. I guess, specifically to the portfolios that have been talked about by some of the other public companies. Yes we did get a look at those before they came to market. And we did not you choose to pursue them because they were not consistent with our strategy of acquiring high-quality assets in our targeted markets.

Okay, and then just in terms of the larger interest because of the smaller amount of these acquisitions. Can you characterize maybe what the probability is a lot of these transactions may come back to market if some of these smaller players are not able to close or follow through on the deal?

Well, I guess, are you saying do we feel like we have properties for sale for which buyers will attempt to retrade or fall out of contract?

Or -- I mean, just in terms of, are you seeing assets that you've looked at come back to market?

Oh, that we have looked to buy. Oh, yes. Oh, God, yes. Constantly because there's a good quantity of properties that were built when they probably should not have been and in markets where the people were coming soon and soon is not happening. There's a property in the southwest I will just call it that we saw in January of 2010 and it just got sent back around in May of 2011 with a different broker. So yes, there are -- there are still some things that just keep coming back around like a bad penny.

Okay. And then just a final question. Do you have occupancy targets that you think you might hit by the end of the year?

Hello, good morning. This is Dean. Well, you know, we talked many times about trough to peak gains in the rental season. And we clearly -- and we've always talked about there being the ability to gain 300 even upwards of 400 basis points during the rental season. And so, we're kind of looking at this one right now at the low end for the time being. But I clearly expect us to hit above 80% by July 31.

Okay, thank you.

Thanks.

The next question is from Todd Stender at Wells Fargo Securities, please go ahead.

Hello thanks, guys. Would you consider that there is a difference in the competitive landscape of say Northern Virginia or Westchester County and Miami? How would you relate those to, say, what the competitive landscape is looking like in the southwest?

Competitive from what perspective?

I guess institutional quality assets and how they -- how many bids would you say are on these type assets?

Got you. Well, again, the theme has been consistent from what we would have talked about in the last several months where you are in a market with a $200 per square foot type value. There is just not the same depth of buying pool who can finance that and who feels comfortable operating those assets because they have the platform and the presence. So, you see much fewer bidders for properties like that than you would in the markets, where your price per foot tends to be more in that $45 to $55 range where there is credit available. And again, back to my comments to the previous question, you have a lot of folks who are interested in owning income producing real estate who are not necessarily just self storage operators.

Thanks.

But, Todd, I will add. As we've said before, we always try to buy these things before they hit the market. We think we are doing a pretty good job of that.

That's helpful thank you. And switching gears, I looked at the balance sheet, I might be a little bit premature, but are you looking at the 2012 debt maturities, based on where prices are now for equivalent secured debt and maybe what the penalties would be for meeting those before they're come due?

Hello, Todd, it is Tim. The two maturities in 2012 and in August and September are CMBS loans and the prepayment terms only allow us to do that without very significant penalties. Only 60 to 90 days prior to those maturities. So, we certainly look at those maturities often as we think about our strategy over the next 12 to 18 months. And current thought process is not to think about the refinancing of those by replacing that -- those secured loans with other secured loans, but rather looking at a lot of different options that we have in the market on an unsecured basis to ultimately refinance those out and then -- that's kind of the shift in getting our balance sheet and the mix between secured and unsecured assets where we'd like it to be longer-term.

Okay, thanks and finally, the assumed mortgage on the Northern Virginia asset, what were the terms on that?

It's on our supplemental package on the debt schedule on page 18. It's the loan that's referred to as YSI 51, so it's a $7.5 million loan with a 6.36% coupon that matures in October of 2016.

Okay thanks, guys.

Sure.

The next question is from Michael Knott of Green Street Advisors. Please go ahead.

Hello, guys. Good morning. Dean, question for you, do you think the smaller operators agree with your assessment that they need to sell out to you and Public and Extra Space?

Good morning Michael. Yes, every day. Seriously. We are hearing, and brokers are hearing, from those folks and it's a little bit of a slow process, it's taking a while. They are going to want to get through one more rental season. This May, June, July is really important to them. I'm afraid their results are going to be disappointing to them. So, that's the reason I am expecting our pipeline to be incredibly full in Q4 this year. But yes, every day more are waking up to their -- the challenge that they are in.

Maybe just give some contrast to maybe the mid to late '90s when you were with Storage USA and growing pretty rapidly. How does that time period differ or compare to now in terms of their eagerness to sell?

Yes, it's similar in some respects but not in all respects. There wasn't as much distress in those portfolios in the '90s as they are today. We had a -- an expanding economy in the '90s, which of course, we barely have today. Albeit the jobs report this morning was encouraging. We had tremendous jobs growth in the '90s, in the mid '90s especially towards the late '90s. So, those were different. But what people -- why people were selling in let's call it '94 to '98 is for monetization purposes. They had build those properties in the late '80s and they had suffered through and gotten through the S&L debacle. And the REITs came along with really their first big opportunity to monetize their equity,. So it's a different reason for selling. But this go around in my opinion is going to be even greater for those of us with capital than even those years because those years we started building again. And we're not going to start building again this time anytime soon. And again, I keep pushing my horizon out, but I can still see clearly I think for three years without any kind of supply of any great amount coming on board. So, I think we have a clear path for consolidating the sector over the next three years. I think those sellers are going to come out of the woodwork in Q3 and Q4 this year and I think it's going to be a great opportunity for different reasons, as I suggested earlier, Michael. But for good reasons as well.

Yes, that's helpful, thanks and then just one last question. I think in prior calls you had said you kind of expected from a big picture standpoint over the next couple of years, the next two or three or even more years, to be able to add 100 to maybe 200 basis points of occupancy every year, do you -- do you still expect that's reasonable and sort of your quest to continue with a 50/50 breakdown of revenue growth?

I sure do. In fact you -- I'm going to help you out at the low end there, I've never really said 100. I actually, can narrow that down to 150 to 200. You know, 140 to 190, something like that. But substantial opportunities to grow our occupancy for a number of years to come here because of the restraint that we held last year and the year before, I think.

Okay that sounds good, thanks.

The next question is from Todd Thomas of Keybanc Capital Markets, please go ahead.

It's Jordan Sadler, here with Todd. I just had a question regarding street rates. Relative to in-place rates. I may have missed it, but I was just curious, to get an indication of where you are today and how hard you have sort of been able to push maybe versus you know 90 days ago.

Well, it's a challenge out there, Jordan, to be too aggressive. And I started to make comparison a few minutes ago to multi-family, never got around to it, but I -- but I'll try to now. Those guys are in great shape, the multi-family guys right now. They have tremendous pricing power. The best pricing power I've seen for them since perhaps the late '70s. Seriously, '79 in Houston comes to mind when rate increases were double digits in those days. They have tremendous pricing power because they do have tremendous occupancy. And they have all these millions of households that we've talked about in the past moving from single family to multi-family housing by design and by choice. We don't have that in our sector. And so, to the extent that we are able to squeeze out some pricing on to new customers is more or less still yet by courage and understanding the premise, my premise that the competitors' pricing is not at all well known to the marketplace -- can't be seen by the marketplace, can only be found out by the marketplace by walking into the storage facility or calling that storage facility.

And we've in our surveys, have determined that the number of shopper visits that a customer will make nowadays has dropped dramatically. We are down to just over 1% now, in other words they don't shop. Years ago they -- that number was -- I'm sorry, not percent but number of visits. Years ago, the typical customer would visit three storage facilities before they would make a decision. Today, with so much visibility on the Internet, especially for the public companies, it's like 1.2%. I'm sorry, 1.2 visits before they make a decision on where they rent. And so, they are not stopping into that competitor across the street to find out that yes, you can get a cheaper rate. But to the extent that we have courage, we are going to be able to maybe have a little bit of positive scheduled annual rent growth. But we should really count on it being fairly flat.

So right now it's pretty flat and your existing customer rent increases are in the higher single digits, is that the fair way to characterize it?

Yes and I always, I always fear that I have a customer on this call listening. But yes, we pushed in -- I mean customers listening -- we push them at those rates and have been doing that since the day I got to the Company actually because you can just -- you can do it and get away with it.

And has frequency changed at all, are you experimenting with pricing at all, given sort of where we are at or not really?

Yes, no. We test -- we've tested that, we have been testing, started testing it in Q4 last year. And the reason, is simple for me is, we give these people really good bargains to go in -- to get in. And it's not a -- so much a bait and switch if you tell them on the front end that this is guaranteed for a certain period of time. But, but, yes we've tested with some success. Not so much frequency but pushing the first rate increase up earlier.

That makes sense. Lastly, I just wanted follow up on sort of the acquisition gain, but you kind of answered my question when you mentioned that you try and get these deals off market but I would imagine that your public brethren, at a minimum, but maybe even the institutions that want in kind of want the higher price per pound markets, given sort of their experiences in the products, like yours. I mean, are you not bumping up against them as much or is it just sort of relationship driven or does it come in -- what's -- where are you funneling or sourcing the opportunity?

Yes, this is Chris, as you see by the announcements from everybody this quarter, there's an awful lot of product out there to go around. And, so, to the extent that you are preoccupied with a portfolio and others are not. That tends to provide opportunities. So, it's -- there's an awful lot of product out there to go around. We certainly run into especially our larger brethren in occasion and on some transactions. And that theme has been consistent and the discipline that everybody's shown and I think that commentary fairly consistent amongst us is still there. You know, it is largely not a question of price because the price tends to be in a fairly constrained range, it still comes down to terms and relationship.

Thanks for the time.

(Operator Instructions).

The next question comes from Ki Bin Kim of Macquarie, please go ahead.

Thanks. Just a quick question. How much did you guys spend on maintenance CapEx this quarter and what's a good run rate going forward?

Yes, we don't -- we don't disclose on a quarterly basis but generally speaking our maintenance CapEx runs in the $0.25 to $0.30 per square foot range.

Okay.

Annually.

Right. And any chance of redevelopment opportunities in your portfolio?

No, we redevelop all the time. And I know, our friends in Buffalo point that out. But it's something that we are always redeveloping, moving walls, converting to climate control and it's something we do in a normal course of business and not that significant and we don't call it out. But it's -- we are always upgrading our properties and so, the answer is yes but not significant to the point we feel like it is appropriate to point it out to you.

Okay, that's fair. Thank you. Thank you, again.

Thanks.

This concludes our question-and-answer session. I would now like to turn the conference back over to Dean Jernigan for any closing remarks, please go ahead.

Okay. Let me see if I got any answers for you today that you didn't ask. We -- our insurance numbers are continuing to be good. We are at 56.4% on our total portfolio, as far as the number of our customers renting insurance from us. We continue to perform at above 92% as far as customers come walking through the door. Markets, I \ just briefly touched on it. Texas continues to be a good market but we've had year-over-year comps there that the don't make them look so great this year. Chicago, the same. But Florida is definitely back. Orlando is the only challenged market in all of Florida. Tampa and Phoenix are doing exceptionally well. Our discounts are level with last year, Q1 last year. Our -- we didn't talk about vacates, but our vacates on a per occupied unit basis, are flat. So, we're pleased with that. Let me look at my notes, here. Yes, I think that's it. We covered as most of the rest of them. Thank you very much for your interest and look forward to seeing a lot of you in New York in June. Have a good day.

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