CubeSmart (CUBE) 2012 Q1 法說會逐字稿

Good morning and welcome to the CubeSmart first quarter 2012 earnings release conference call and webcast. (Operator Instructions). I would now like to turn the conference over to the CEO of CubeSmart Mr. Dean Jernig. Please go ahead, sir.

Thank you. Good morning everyone. Today's 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. The risk and factors that could cause our actual results to differ materially from forward-looking statements provided in the documents the Company files with the SEC, specifically Form 8-K, together with the earnings release filed with the Form 8-K, and 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 measures can be found on our Company's website.

Good morning, again. Thanks for joining us today. As usual Chris Marr our President and Chief Investment Officer is here with me and Tim Martin our Chief Financial Officer. I will kick it off and make a few comments and then turn it over to Christ and Tim and then we will get to Q&A.

First of all let me start off by saying we are pleased with the healthy results that we reported last night despite the challenging economic times that we still find ourself in. We are very pleased with how we remain positioned for long-term value creation for this Company and within our business plan. I would call our results good not great during the quarter, but as we go forward we think we have our Company positioned for many, many good and some great quarters ahead. I don't often brag or talk about our robust operational platform, but that is what gives me the comfort and enthusiasm for how I see our Company moving forward.

Those of you who have the opportunity visit us here in Pennsylvania you have seen, and I want to comment , on our areas that have really caused this Company to be positioned for the future. Our revenue management department as you all now we manage the revenue not rate or occupancy. I am very pleased with the sophistication of that department as we move forward. Our call center, which we call our sales center, second to none. I would put our sales center up to compare against any sales center in the country. We are very please would those results our real time operations and financial reports that we get. And , of course, last but not least the very sophisticated Internet marketing programs that we enjoy here in the Company. This platform has been built during these last five years, and I would compare it to any in our sector and in fact any in the real estate investment trust world. I am very pleased with where we are positioned today with our platform going forward.

As far as our external growth initiatives, we have spoken many times about our Storage Deluxe acquisition but also our other properties we have been buying over the last couple of years and I am happy to report that the results are remarkably consistent with our expectations. Long-term we feel like we are very positioned to take care of the industry consolidation which is happening today and I will speak more about that in a minute. But with our healthy balance sheet and broad access to capital and our disciplined investment process and our competitive third-party management platform that consolidation opportunity is big and is real and is right before us. But more immediately we have seen demand trends in the last few weeks that have energized us and given us confidence as we head in to the rental season. A couple of years ago, I think it was , I said on this call that I really couldn't comment about what I thought the rental season was going to bring us because it was too uncertain at the time. Looking back on it, I think I was right to make that comment, but today I will tell you we do have confidence. I am sure Chris will speak to that as we move into the rental season.

But going back up to 30,000 feet for a minute and looking at the crystal ball that I continuously gaze into. I think last quarter I comment about how well I thought all storage REITs would do this year compared to the RMZ , and I still feel good about that prognostication as this quarter is played out and, of course, on into Q2. I look back this morning at some transcripts when we went into the recession and what we talked about in those days.

In Q2 2009 I jokingly talked about I felt like we were in a L shape recovery meaning, of course, no recovery, and I talked about different markets at that point in time. How we did not feel like we reached the bottom of that recovery. In Q2 2010 approximately two years ago I thought we were going into a recovery that looked like a check mark, a perceptive drop with a long tail recovery but very low and very slow. And as I look at the jobs report that we heard this morning and look at the GDP growth that we are barely enjoying between 2% and 2.5%. I think that guess a couple of years ago continue. It looks good at this time. It does look like going forwardI'm afraid it is more of the same. I think the economy has a lot of work ahead of it.

I saw Mr. Buffet on TV this morning that he thought home building would be what put us in to a much better improving GDP number, growing economy, but I don't see that happening. It was reported this week that our homeownership ratio or percentage had dropped down to 65.4%, and that is a more normalized level than what we have experience in the past few years when it peak at 69.2%, but I see that continuing to drop and go through that 65% level which is good news for the multi family guys and I think that is good news for us as well. More people moving, people down sizing in to smaller units, housing units, but it is not so good for the economy. I think there is a silver lining in that 2% to 3% GDP growth for our economy over the next two years if I am right about that . And that is the consolidation opportunity I spoke about a few minutes ago.

I think the smaller players are struggling today. They have been struggling for the last 3 or 4 years, and they have are going to continue struggle. And the public companies with healthy balance sheets and good access to capital are going to be able togrow our companies dramatically I think. This Company with our robust operating platform with our balance sheet I think we are perfectly positioned to continue to grow on an organic basis, but even more importantly as we go forward we are going to grow dramatically externally I believe over the next few years.

With that , I will put my crystal ball away and turn it over to Chris Marr.

Thanks, Dean. I'm going to use my time today to touch on operational investment and technology highlights from the first quarter. Operationally strong performance leading up to the end of the quarter and continuing on to April has provided us with a positive tailwind and does give us confidence heading into the busy rental season. As we disclosed on page 16 of our supplemental package, our 2012 same-store pool its physical occupancy was sequentially unchanged . We were at 78.7% at the end of December 2011, and at the same 78.7% on March 31, 2012. On a quarter-over-quarter basis we gained 190 basis points of occupancy comparing March 31, 2011 to March 31, 2012.

First quarter rentals were up approximately 6% over the first quarter of last year, and that momentum picked up nicely towards the end of the quarter. Vacates began the year up, but tapered off ending the quarter more in line with historical patterns. Our strongest markets in terms of both occupancy and revenue growth were in the corridor between Washington D.C. and Boston, and the Dallas, Austin, San Antonio markets, as well in our Inland Empire stores in southern California. Our weakest part of the country was Arizona with Tucson posting relatively flat occupancy and revenue compared to Q1 of 2011, and Phoenix with declines in revenue and occupancy.

We have been very pleased with the integration of the 2011 acquisitions including our Storage Deluxe assets. The NOI on this pool is running approximately 2% ahead of our underwriting . We have added disclosure on page 18 of our supplemental package that shows our Q1 yield along with other details about our non same-store assets. The debt assumption on the final Storage Deluxe pool has taken longer than we had modeled , and we remain in process to close on the final store. This pushes the impact of certain positive synergies in to Q3, and as Tim will discuss, given the last stores closing our high rent, high occupancy stores being acquired with the lowest cost of capital the delay is a bit FFO dilutive to our modeled assumptions going into the year.

From a Superstore update perspective , we have 64 Superstores opened and fully functional. The cost to implement a Superstore is approximately $47,000 per store, slightly lower than our estimate of $50,000 per stores. We have performance attributes from the 25 Superstores that were rolled out in phase 1 as this group was functional for the entire first quarter of the year. 23 of these of stores are a subset of our same-store pool. When comparing growth in rentals , occupancy, and revenue these 23 Superstores outperformed the overall same-store pool in each category. We also compared the 23 Superstore performance relative to the performance of all of our stores in their respective markets, and, again, our Superstores outperformed. From a branding update,88% of our own stores have completed their rebranding with the balance in permitting or in sign manufacturing. Costs continue to be inline with our $4.5 million to $5 million estimate. And we have also completed 15 of 44 managed property conversions to the CubeSmart brand.

Turning the to the investment front. We continue to acquire assets in core markets with strong demographics and rental rates. The assets excluding Storage Deluxe that have closed or are under contract this year have asking rents that average $19 with physical occupancies of approximately 81%. We continue to see strong yield flow and remain confident that we will be within our targeted ranges for acquisitions and of dispositions.

From a technology perspective we deployed our new customer relations management software in early April. This was a product that we developed in connection with another software company, and has been installed to replace the prior CRM system that we had in place the past couple of years. Our new system has reduced complexity , streamlined processes , and has resulted in increased efficiency and productivity in our sales center, and enhanced our ability to analyze customer behavior and trends. This system has improved integration with key CubeSmart systems including our website, billing systems, property management systems all of which is reporting in enhanced reporting and improved targeting of potential customers at a lower cost than our prior system.

Another exciting technology introduction is the (Inaudible) system we have installed at 10 of our stores. This system allows us to set and hold a peak demand level on our gas and electric usage by cycling necessary equipment and not allowing it to be active at the same time. We have been testing the system at one of our New Jersey stores, and we have now operated it through four seasons and the return on investment is a bit north of 200%.

In summary, we are confident in our people, processes, and pricing, and we are focused and well prepared to enter the prime rental season. With those comments, I will turn it over to Tim Martin.

Thanks , Chris. And thanks everyone for joining us today , and for your continued interest and support. Our financial performance for the first quarter slightly outpaced our expectations as we reported FFO per share of $0.16 and same store NOI growth of 7.4%. Same-store revenues grew by 2.7% and same-store expenses declined 4.3%. The first quarter expense reduction was due to the timing of our marketing spend and also largely due to the mild winter which resulted in much lower snow removal and utility costs this year compared to last year.

Our investment activity over the last year has lead to a larger pool of assets that are not included in our same-store results, and we have added some additional disclosures as Chris mentioned on our supplemental package on page 18 to provide some insight into the performance of those assets. During the first quarter our non same-store results were right in line with our expectations and with our underwriting at 5.4% NOI return on the weighted average investment basis. We expect the return on that portfolio to grow throughout the year and also to be impacted positively by the additional closing of the remaining stabilized Storage Deluxe assets.

We were activity during the quarter closing on the acquisition of 6 facilities for an investment of the $86.4 million. You will recall that the $560 million Storage Deluxe portfolio acquisition we announced last fall had a staged closing with 16 unencumbered assets with a purchase price of $357.3 million closing back in early November, and the remaining 6 encumbered assets valued at $202.7 million to follow in 2012. During the first quarter we closed on acquisition of 4 of the 6 remaining Deluxe assets for $74.4 million. Leaving us with 2 assets to close for a purchase price of approximately $128 million. We acquired one of those assets in late April and as Chris mentioned we continue to work through the loan assumption process on the final assets and expect to close that property by the end of the second quarter.

We funded the $86.4 million of first quarter investments through the assumption of $34.9 million of mortgages and borrowings under our revolving line of credit that had $50 million drawn at quarter end. Scent in April we drew the 100 million that was part of our new $600 million bank facility we closed back in December. Subsequent to quarter end, in April we drew the remaining $100 million 5 year unsecured bank term loan that was part of our new $600 million bank facility that we closed back in December . The proceeds from drawing that $100 million term loan were used to repay amounts drawn on the line and also to fund the closing of the additional Storage Deluxe property in April. From a balance sheet prospective we have capacity under our facility to fund all of our 2012 debt maturities. That said, as we have discussed for several quarters we remain focus on accessing the public debt markets with a debut 10 year bond issuance this year. The size, timing, and pricing of an offering remain meaningful variables to our full year earnings guidance.

Transition into guidance then. We raised the low end of our 2012 FFO per share guidance as detailed in our release. We expect full year 2012 FFO per share of $0.68 to $0.73. And we also introduced second quarter FFO guidance of $0.16 to $0.17 per share. The underlining assumptions of our guidance are detailed in the release but in summary core portfolio assumptions remain unchanged as our performance year-to-date is directly inline with our initial expectations. We continue to expect same-store NOI growth of 3% to 4%. On revenue growth of 3% to 3.75% and expense growth of 2.25% to 3.25% . Our newly acquired properties in 2011 including the Storage Deluxe assets also performed consistent with our underwriting and our expectation on the full year performance on those assets remains unchanged.

We have two areas where our assumptions have changed from last quarter that largely offset one another from an FFO perspective. Having a positive impact to earnings guidance we lowered our expectation on the coupon on a debut 10 year bond issuance to 5.5% at the midpoint. And the negative impact to our previous earnings guidance comes from the timing of the Storage Deluxe assets I mentioned, as those closings have taken longer than our previous expectation as we work through the loan assumption process.

Overall , we have a straight forward first quarter that was focused on executing on the fundamentals, and the result were consistent with our expectations. We are well positioned , confident, and energized , as Dean mentioned, as we enter our prime rental season. And our strong balance sheet continues to provide us flexibility and access to capital that will support our disciplined external growth strategy. I will pause there.

Thanks again for taking the time to join us this morning, and at this point , Dean, I will turn the call back to you.

Okay. Thanks, Tim. I think we are ready for questions, Denise, if you want to give us our first question.

(Operator Instructions). And our first question this morning will come from David Toti of Cantor Fitzgerald. Please go ahead

Thank you. Good morning everyone. I just want to go back to your comments , Dean, you said that storage REITs would do good this year. I am just wondering what that implies for pricing power in the industry as well as discounts for the year?

You wonder about what that implies for pricing power and what?

Discounts.

Discounts. Okay. I think we are starting to see some glimmer of hope there. I think from the other companies reporting I see a focus on revenue versus occupancy which is great. That means to me that we will see fewer promotions going forward. We have seen some pricing power. We aren't there yet because we still have some occupancy gains. We are using all levers at all times. We will draft in behind everyone that is pushing rates to new customers. I am encouraged is the bottom line.

Thanks. Secondly, question for, Chris. Chris, you give us some stats on the Superstore program and that is very helpful. I was wondering if you could provides us an update on if you will see any increase in commercial customers in those particular Superstores , and what services are being used more than others.

Sure. Again, we have got the 23 or 25 stores that have been open for the entire first quarter we see an increased amount of interest of many of the services from our commercial customer base , but given the fact the program has really been out there at that pool for just a quarter nothing yet where we are able to really see a material change in our commercial based versus our residential base. In terms of the types of things that we see a high interest in it relates around the logistical services we are offering . So the ability to have a UPS pack and ship station that allows commercial customer and residential customers to both have us receive goods and put them in their unit and/or package up material and ship it out has been very popular.

From a shredding prospective both commercial customers and residential users have shown a significant amount of interest in that service. And then from a use of moving services whether that be our courier service or our relationships with Two Men and a Truck , Simple Moving Labor, et cetera, that has been of high interest. Every service we have to offer has been the used and has a good amount of interest at one level or another, but the ones I touched on are the ones that are showing the most interest at the moment. .

That is helpful. Lastly, can you provide us the new and renewal rates both for first quarter and fourth quarter?

Okay. If your questions is where are we renting units for new customer coming in versus the rent the old customer was paying as they vacated. For the average for the first quarter those two were right on top of each other. There was very , very little change between the two.

Did you see the same trend in (Inaudible) as well?

Yes.

Okay. Thank you.

Our next question will come from Christy McElroy of UBS. Please go ahead.

Hi guys, good morning. I just wanted to go back to that page 18 of the supplemental that ,Tim, you mentioned ,and the yields on the Storage Deluxe portfolio and the 2011 acquisition . To get from that 5.4% in the first quarter to 6% on average for the year the NOI would have to increase about million a quarter on average and the portfolio would have to average a 6.2 yield if my math is right for the remainder of the year. I understand the lease up component, but some of the non stabilized properties in that Storage Deluxe portfolio had been open for a year or a couple of years. I am just wondering if you could be a little more specific about what CubeSmart will be doing that Storage Deluxe was not able to do to get that occupancy and those revenues higher?

Thanks, Christy. Good morning . Let me take the first part of the question. The 5.4% that is disclosed on page 18 you just need to keep in mind that that is on a weighted average investment basis of just under $500 million and it does not include the full quarter impact of the four Deluxe assets that were acquired during the quarter nor does it include the 2 assets that closed, the one that closed in April and the one that has yet to close. And all the 6 encumbered Deluxe assets that are to close in 2012 are all stabilized, so our first quarter results don't have the benefit of a full quarter of 4 of the stabilized assets nor do they have the benefit of the 2 that hadn't been acquired at all.

So I guess what would be the pro forma number?The pro forma yield including all of that stuff.

Well, pro forma for the year are expectation is consistent at 6%. Had we owned those, I don't have that right in front of me but you would have had a yield that would have been higher than 5.4% but not quite 6%, so it would have been in the mid to I would guess 5.5% to 5 .7% . And you are going to see growth in that portfolio throughout the yearpartially due to assets being leased up and partially due to the seasonality of the performance of having a rental season impacting the second and third quarter and then holding in to the fourth quarter numbers. Your math is correct in that you do need north of a 6% return on average for the following 3 quarters to get up the 6% number , but that is consistent with our underwriting and consistent with our expectations.

Okay.

Christy, from a what are we doing differently first thing we have is scale, so with the additions of these assets as well as the portfolio we had in place in the Greater New York area we clearly benefit from that . And just the operating platform as Dean touched on we bring to those assets in terms of a much larger and more sophisticated platform starting with our call center or sales center going all the way through the technology we have in place which allows us to both benefit on the revenue line as well on the synergies on the operating expenses. We are also able to market given the size of the platform we have in New York City much more aggressively both online and on the street. Those of you who move around in the various boroughs may have seen our Expect More campaign that rolled out April 1st in New York City where we are advertising CubeSmart and our presence both on subway as well as on bus, billboard , et cetera, which has created additional organic search results from a web perspective , and has in the early goings of that campaign been very beneficial in terms of rental activity.

Okay. That is helpful. And then , Dean, just wanted to follow up on your comments about growing externally. Given your obvious interest in the New York metro area, I am wondering if you have looked at the Storage Post portfolio which Acadia has expressed interest in monetizing. And how would you compare that portfolio to the assets you bought from Storage Deluxe.

Christy, this is Chris I will take that. Obviously you hit the nail on the head we are interested . We love that market. We have looked at every assets is fair to say in that market, and it is fine quality portfolio that obviously is not core to their business on a long-term basis. If and when they were ever to decide to monetise that investment, we would certainly be very interested.

Chris, lastly, you talked about vacates tapering off during the quarter, but can you actually just quantify the changes, the year-over-year changes in move outs and vacates in Q1, and how does that compare to those same metrics in 2011?

If you look at -- I touch on in my comments that we had a 6% gain in our move ins, our vacates were up just about 8% in Q1 compared to Q1 of the prior year, but that was , as I said , that started off not surprisingly to us at a higher percentage than that as we had significant move in activity 6 months prior to January and February and we knew that based on our average length of stay that was going to happen then that tapered off as that went through. We had a very, very strong March and that continued into April in terms of great increases in move in activity and that continued tapering off of vacates. As I said in my comments, it has caused us to be quite optimistic and confident as we go into the busy rental season.

Thanks guys.

The next question will come from Eric Wolfe with Citi. Please go ahead

Hi guys it is actually Nick Joseph with Eric and Michael. Given the fact that you already have $37 million of dispositions under contract you are already at the low end of your guidance , so could you see yourself exceeding the high end of guidance and redeploying the capital into core markets given the consolidation opportunities you spoke about earlier?

Yes, absolutely. We continue to look at opportunities throughout the portfolio, and as Tim eluded to we have certain CMBS pools that are maturing which is the use for debut bond offering and there are assets in those pools that are now more efficient for us to dispose of as they become more unencumbered here in the summer time.

Okay. So by the end of 2012 what percentage of your NOI do you think will come from these non core assets versus the core portfolio?

I think we are looking at 60% core is the pro forma 2012. So as we go into 2013, again, you are getting a bit of the benefit from the disposition although those are lower rent markets and assuming we efficiently deploy that capital into the core markets that will tick up. It take a large transaction to move that meaningful, so I think that 60% as we go into 2013 will move up 62% to 65% depending on what we are able to find on the acquisition side.

Okay. Finally, you mentioned that you expect to grow over the next few years. Are there any markets that you would like to enter that you are not currently in, or do you expect this growth to come in existing core markets?

I would expect it would come largely from existing core markets. We have a few markets where we are not in scale. But I can't think of any off the top of my head that we are not in at all.

Great, thanks.

Our next question will come from Todd Thomas of KeyBanc. Please go ahead.

Hi , good morning. Thanks. Chris, do you have an update on where occupancy is at the ends of April?

Yes, we are as of today 219 basis points above where we were on this day last year.

Okay. All right. Great. And then you mentioned your revenue management system and, Dean, I know in the past you discussed maintaining a comfortable 200 basis points spread year-over-year so you are there as of the end of April, but during the quarter it slipped backed below and on average it was 180 basis points. I am just wondering how comfortable you are with your revenue management system today, and whether you feel you have calibrated it properly to continue the trajectory of really increasing occupancy over the next 2 years?

Hi , Todd. I want to point out that I have always said between150 and 200. I know you have immediately gravitated to the 200, but that is okay. At the end of April we were 211 basis points ahead . I told guys sitting around preparing for this call , I think we are perfectly calibrated. To use an old term I think we are hitting on all 8 calendars right now, and I am extremely pleased going into the rental season as to where we are positioned.

Okay. And then one last questioned. You mentioned in your prepared remarks that you are happy to see that the industry is firming up on rates a bit. I'm wondering with where your occupancy is today how you are thinking about the trade off between occupancy and increasing rates in your portfolio sort of in the context is there a short term trade off that you are forgoing by trying to maximize revenue each quarter whereas in the long-term having a higher occupancy level sort of at the expense of lower revenue growth today, but in the future provide more pricing power and help improve margins. Can you comment on that balance today.

Sure. That is the age old part of retailing, right. We are focused on maximizing the bottom line in other words in this case revenue. You have those levers , we are very pleased we have the occupancy lever. All of you are pointing out in your notes that you recognize that now. We have that occupancy level. We will push rates. As you know we push rate to existing customers. We have been very aggressive at doing that not too concerned about the move outs because there is a greater benefit there, and we will continue to push rates to new customer as well. We can't get out there by ourselves though that is why I used the word draft. That is the reason I am excited to see some of the other companies starting to push rates. We will push rates to new customer, and we will also gain occupancy, and we will have lower discounting, fewer promotions as we go forward . It is an art. I can't tell you exactly what the formula is, but I am very pleased with how we are positioned going into this rental season.

Todd, this is Chris . I know you are aware , but when you look at macro numbers, you need to focus in on the fact it really is market specific in terms of how we adjust those levers. So that within those macro numbers there are certain markets where we may in fact have the opportunity to be much more aggressive on asking rents because the market as a whole is more aggressive and/or our particular assets are performing exceptionally. And then there are markets where we areless aggressive on asking rents on a daily basis because of their characteristics.

Okay. I guess the question really is what is preventing you from discounting a little bit more, lower rates, increasing occupancy would sort of come at the expense of maximizing revenue a bit in the short term, but as you look ahead to 2013 having a higher occupancy level would that benefit you in the future with pricing power and improving your margins overall. I know it is a delicate balance , but is there a short term versus long-term impact . That is what I'm thinking about.

You can take it to a extreme , Todd. You can have a short term impact. And we could have had a short term impact in Q1 for example. If we had discounted dramatically, but then what does that do for the future. This is a long life real estate assets we have here. We have to manage this Company for the long-term. We have a lot of good quarters and we have some great quarters ahead of us because of the way we have managed it in the past. Sure, you can boost some numbers early , but that is not in the best interest of our long-term shareholders and that is who we mange this Company for. It is an art.

You will see us as we go forward we will be increasing occupancy as I have described. We will always be increasing rates to existing customers, and hopefully as the markets firm up especially as those competitors of ours , who advertise on the Internet , start to give away less in the way free rent, and they start to raise rates to existing customers we will be right there with them. And you can rest assure we will be managing that result as best we can to result in the most revenue we can possibly bring in for our shareholders.

Okay. Thank you.

Our next question will comes from Ki Bin Kim of Macquarie Capital. Please go ahead.

Thanks. I want to ask just a couple of follow-ups first. If you do pursue a larger acquisition like the Storage Post deal out there how do you think about funding it given where your cost of capital is? Would it be more prudent to get a JV partner , or how do you think about potential large scale acquisitions?

Hi, Ki Bin, it is Tim. We have been pretty consistent with how we expect fund the growth of the Company whether the invested dollars are a portion of a joint venture or wholly owned we would expect to fund our growth in the manner that is consistent with the metrics that are supportive of our investment grade credit rating. If we are going to invest money to grow the Company overtime we will use free cash flow, we will use an appropriate amount of permanent financing through equity to fund a portion of the growth that maintains our leverage ratios and our debt to EBITDA and all the other metrics that would be consistent with that rating.

Does that mean 50/50?

It depends on what metric, but right now our leverage is in the high 30 low 40s is the targeted amount. Overtime we would use free cash flow as the first part of the equity that is the cheapest source of capital, and then to the extent we needed to supplement that growth with some equity raise to keep those metrics consistent that is what we would intend to do.

Okay. Going back to your quarterly same-store revenue results. I get the whole occupancy gain story, but from a revenue standpoint you still trailed your peers pretty significantly. I know it is a one quarter event but also provide some color on was it due to the timing move ins you say was up 6% year-over-year did that all happen in March where you haven't been able to clip that coupon yet in terms of rental revenue. If you could just give more color on it. If it is more of a one time phenomena. Especially as Dean said you guys are comfortable with where your pricing system are calibrated which means to me if you are up 2.7% year-over-year and you are comfortable with the calibration that is what we can expect going forward.

Ki Bin, this is Chris. If you step back and start with the fact the way we saw the year unfolding our first quarter results are consistent with those expectations. In terms then of the quarter itself as I said in my comments early on we definitely saw a build up of rental activity throughout the quarter. March clearly was our best month of the quarter and then from a vacate perspective we did see a gradual tapering off where January was our worst month of the quarter in terms of the volume of vacate.

With your comment of is this a buildup in the quarter that we have an opportunity to take the advantage of assuming the trends and length of stay are consistent in Q2 and Q3 that would be accurate. In terms of relative to peers we don't comment on others. We look at our portfolio and what we believe we can maximize in terms of revenue from our portfolio, and we appreciate the fact that we don't operate in the same markets. We don't have the same exposure in the markets in which we operate. We all have a different view on how we introduce new assets into our same-store pool . We different views on how we account for Internet marketing spends. There is a lot of difficulties that we count on you and others to work through to sort of put the companies on an apples to apples basis.

Okay . If I can ask it a different way. Can you provide what your same-store revenue was in April.

No.

Okay. What are your (Inaudible) versus last year are they up, down , flat?

We put that disclosure in our supplemental package to try and be helpful. If you look at page 16 which has the 2012 same-store pool and look back and show the results for that pool going 5 quarters back so people can compare our asking rents for the first quarter of 2012 averaged $12.37 a foot and our asking rents a year ago for the first quarter of 2012 $12.35 so our asking rents were effectively consistent to the first quarter of last year.

(Inaudible) I wasn't sure if that was only cash or if clients moved in.

That is our asking rent.

Okay. How do your rents compare if you look at all your markets compared to your competitors? Are you in any given market a little bit above competitors where you are losing some of that incremental client or tenant?

It really depends upon it is not really market. It is submarkets and it depends on who we are competing against in that particular market. Whether it be another REIT who has a presence on the Internet that we need to be cognisant of,or whether it is a local or smaller operator who doesn't. If you look at it from a macro prospective we would be at or competitive to our larger competitors in a particular markets, and where we have an opportunity to draft in behind we would take advantage of doing that. Generally speaking our pricing model contemplate us being obviously competitive to what the asking rents are in that market and we think that positions us in the best to be able to maximize both occupancy and revenues at that particular stores.

Last question what is in the other expense bucket which had a very favorable comp year-over-year?

Hi, Ki Bin. There is a host of things in there one of the line item in there that creates a favorable comp is credit card fees. A lot of the legislative changes that have been enacted to reduce the transaction fees on credit cards have helped us with the year-over-year comp. That is a probably a big driver in there and the balance on that line item is the snow removal.

Thanks guys.

Thank you.

Our next question will come from R.J. Milligan of Raymond James . Please go ahead.

Good morning guy. Tim, I was wondering I think you had mentioned that due to the timing of advertising spend that expenses were down this quarter. Do you anticipate them ramping back up next quarter and is that going to at least for next quarter affect the same-store sales NOI number?

It certainly will as comparing to the same quarter a year ago . Our expectation for marketing spend for the year is an increase over last year , but marketing is so heavily dependent upon the Internet spend and the Internet spend we really can push down on the gas pedal or pull up every day or even within a day.

We are very mindful of spending those dollars in the most effective manner . It worked out that in doing so both from a strategic standpoint that we were spending a little bit less in the first quarter and intend to spend a little bit more as we enter into April and May that creates a little bit of comparison versus last year when we had a different approach to it. We have a very favorable comp in the first quarter because we spent less. But we do expect to spend more in the second quarter from a marketing prospective than we did last year.

Okay. And then if you could you provide a little bit more detail in terms of the guidance. You maintained the same-store revenue and the same-store growth expectations. I was just wondering how you see that ramping for the remainder of the year?

Which line item NOI, revenue?

Revenues . Separately revenues and expenses.

We really don't provide that on a quarterly basis. I would characterize it as relatively consistent throughout the year from a revenue expenses. The expenses jump all over the place due to the marketing as I mentioned as well as some other line items. We don't provide quarterly guidance on expense revenue or NOI growth.

Okay. Thanks guys.

Our next question will come from Paula Poskon of Robert W. Baird. Please go ahead.

Thank you, good morning everyone.

Good morning.

Are you seeing any indication yet that these super centers are accomplishing the goal of deeper small business penetration?

Paula, this is Chris. Anecdotally yes. In terms of the services our new customer are telling us they are interested in we have a relatively small pool in terms of 25 of the stores that were open and we really had data just for the first quarter of this year. It is early, but the early signs are positive.

Thanks, Chris. Also noting the higher level of rentals you had in the first quarter, are you hearing anything anecdotally about what is driving that is it residential, individual customers moving more or more small business activity. I just wonder if you had any color on what might be driving that.

The feed back we are getting back from our managers it is all of what you describe. We are seeing some movements in certain parts of the country. We are seeing some positives from a housing prospective in terms of movement in certain parts of the country. The small contractor is again starting to show some signs of life again in Florida in particular. And then as we look at use of our product we are also seeing the affect of some of our marketing campaigns and of our Superstore concepts which to one extent or another we have rolled out at all of stores in terms of some of the offerings that are indicative of Superstore are also very relevant to other non super stores, and we are seeing that create some new demand from customers heretofore would have had a different use or found some other alternative besides our product for their short term flexible warehouse needs.

Thanks very much that is all I had.

The next question will come from Todd Stender of Wells Fargo Securities. Please go ahead.

Hi guys thanks. Just focusing on other ways to boost occupancy . Focusing on the properties teed up for sale. What is the occupancy on that group , and what kind of impact do you think these sales will have on your overall occupancy.

Todd, this is Chris. The assets that are currently under contract for disposition their occupancy are not materially different than the overall same-store pool occupancy, so that hasn't been a focus . The focus on how those assets rise to the top of the list from a disposition perspective is more related to our long-term expectations of revenue growth and yield appreciation and those particular markets given their underlying characteristic. So at the margin I would not expect that disposition activity would be a significant driver of occupancy growth.

Okay. Thanks Chris. Any timing expectations on these just for modeling purposes?

I would expect that from a closing prospective call it the midpoint would be around the later part of July assuming everything continues on pace.

Okay. How about the spread between cap rates on these sales relative to stuff you are acquiring in Houston and Atlanta?

It continues to be in that 100 basis point range that we have seen in terms of the gap between existing these stores and where we are entering in markets. That would be a little bit wider than what we would expect to enter in the Washington D.C. area or New York.

Okay. Thank you. I didn't see this did you use your ATM in the quarter to tap equity?

Todd, this is Tim . We did not.

Okay. Thank you very much.

Ladies and gentlemen this concludes our question and answer session. I would like to turn the conference back over to Mr. Dean Jernig for any closing comments.

Okay. Thanks. Thanks for joining us today. I have three take away I would like for you to get off this call with. One is we will continue to perform and provide and put up solid financial performances going forward for you. We are going to continue grow this Company with good underwriting principals, and we are excited as we move into that rental season. I hope that works for you. I look forward to talking to you next quarter. Have a good day.

Ladies and gentlemen the conference has now concluded. Thank you for attending the presentation. You may now disconnect.