Life Storage Inc (LSI) 2009 Q3 法說會逐字稿

Greetings and welcome to the Sovran Self Storage 2009 third quarter earnings. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. (Operator instructions.) It is now my pleasure to introduce your host, Mr. Ken Myszka of Sovran Self Storage, President and Chief Operating Officer. Thank you Mr. Myszka. You may begin.

Thank you, LaTaunya. Good morning and welcome to our third quarter conference call. As a reminder, the following discussion will include forward-looking statements. Sovran's actual results may differ materially from projected results. Additional information concerning the factors that may cause such differences is included in our Company's SEC filings and copies of these filings may be obtained by contacting the Company or the SEC.

In the third quarter we earned $0.68 of FFO per share which was in line with our estimates. Our same-store revenues and net operating income for the third quarter were minus 3.6% and minus 2.5% respectively. And though both are negative, each is an improvement over our second quarter's results. With visibility hazy at best, I do hesitate to claim that things have bottomed out, however we do see some stabilizing trends. Move in activity in the third quarter of this year outpaced that of the corresponding quarter in 2008. Although move out for the quarter exceeded last year's third quarter, most of the activity was confined to two distinct areas. Additionally, in October, we experienced continued positive move in activity, compared not only to October of last year, but also to August and September of this year. Our revenue management system has enabled us to optimize rents to the extent that when a customer moves out, we have an opportunity in most instances to achieve an increase in the price charged for that vacated unit.

In other matters, the Company opened its second store in Richmond, Virginia. It's a newly built 79,000 square foot store with all the amenities expected from a Class A storage facility. We made no acquisitions during the quarter, however, we did sell three non-core stores at a total price of just under $11 million. As Dave Rogers, our chief financial officer, will explain in some detail in a few moments, after the quarter's close, we strengthened our balance sheet by issuing just over 4 million shares and applied most of the proceeds to pay off $100 million of the Company's bank notes, as well as their related interest rate swap agreement. As a result, Fitch ratings upgraded our credit rating to a BBB minus, thereby reducing our annual borrowing costs by more than $3 million. This transaction also provides the Company with additional capacity to take advantage of the inevitable opportunities we expect to see over the next three to five quarters. And with, that I would like to turn the discussion over to Dave, to provide some more details.

Thanks Ken. Regarding operations for the third quarter, total revenues decreased $2.2 million or 4.2% from 2008's third quarter while property operating decreased by just under $1 million resulting in overall decrease of 3.6%. These overall results reflect the positive impact of the one store we acquired post third quarter of last year offset by a decline in same store results we'll get to in a minute.

Average overall occupancy was 82.3% for the quarter ended September 30th and average rent per square foot was $10.25. The overall occupancy rate at the end of the quarter was 81.6%. Same store revenues decreased by 3.6% from those of the third quarter of 2008. This was the result of same store weighted average occupancy declining from that of 2008's third quarter by 100 basis points and the rent on occupied dropping 3.1% to $10.15 a foot. As Ken mentioned the quarter and occupancy rate for the same store pool of 356 properties was 81.6%, about 170 basis points lower than last year's September 30 number.

Again, this quarter, we treated many of our customers to the first month's rent free, to the tune of about $4.4 million on a same-store basis. This is a 55% increase over last year's third quarter. The leasing environment remains as competitive as we have seen and we are, of course, buying occupancy. We have been able to hold the line regarding our rate structure, except for Florida and the Phoenix markets, in place rents have for the most part, been maintained or even increased.

Operating expenses on a same store basis decreased by a total of 5.3% this period, despite property tax increases of 7.2%. Except for advertising and marketing costs, all other operating expenses declined. So, overall then, same store net operating income dropped 2.5% from that of 2008's third quarter. G&A costs for the period came in at $4.6 million which is pretty much as expected. The $300,000 increase over that of last year's third quarter was primarily the result of increased costs of running the joint venture and state income taxes on the REIT.

With regard to capital matters, as you probably know, we have reached one of our loan covenants at the end of the first quarter of this year, which caused us to take a series of measures in Q2 and Q3. These included reducing our dividend by 30%, curtailing our capital expansion plans, and issuing about $25 million of shares to our DRIP and Share Purchase Plan in the second quarter. These actions fixed the covenant issues and provided a bit of operating room, but were not enough to prevent a reduction in our credit rating. That downgrade resulted in an increase in the interest rate on several of our unsecured notes, costing the Company about $3.2 million annualized in additional interest.

At quarter's end, we thought it best to take advantage of the relevant strengthening of our share price and October 5th, raised $114 million net of common equity, via the issuance of 4 million shares. That same day we terminated an interest rate swap contract and paid off $100 million of our 2012 bank term notes. The transactions had the intended effect of inducing Fitch to reinstate our credit rating to investment grade and that combined with the Standard and Poor's investment grade already in place enabled us to obtain the bonus level on our unsecured notes recovering the $3.2 million in annual interest costs we were paying with the lesser credit rating.

So at September 30th the Company had $500 million of unsecured term note debt and $108 million of mortgage debt outstanding. As mentioned, five days after the quarter end, the unsecured amount was reduced to $400 million. $26 million of the mortgage debt matures in December of this year and we plan to repay that with cash on hand. The next significant debt maturities are not until 2012. Until we draw on our line, all of our debt is either fixed rate or hedged to maturity.

Our capital position is such that our needs are discretionary. We have no forward commitments concerning JV contributions or buy outs, no construction programs to fund and no properties to acquire until we decide the time is right to buy them. We feel the steps we took in Q2 and then the successful completion of the equity offering at the beginning end of this quarter strengthened an already decent balance sheet and upped our liquidity capabilities to the full extent of our $175 million credit line. That combined with our free cash flow after dividends of about $20 million per year puts us in excellent position to capitalize on prospective investment opportunities.

Just to run down a couple key metrics post offering, our debt to enterprise value with a share price $30 is about 37.5%; our debt to book cost is 36.5%; our debt to EBITDA ratio, 4.7 times; and our debt service coverage with the enhanced rating and the lesser amount of debt will be 3.3 times.

Concerning guidance, we plan to continue with the leasing incentives and aggressive marketing programs to maintain and grow occupancy through the rest of the year and into next busy season. Nonetheless we expect same store sales to drop from 2008 levels in the fourth quarter by about 2% to 4%. As evidenced by this quarter's results, we have been successful in cutting property operating costs but we will maintain or even increase marketing, advertising, and curb appeal expenditures. Overall expenses are expected to come in a bit under last year which results in maintaining our previously forecasted net operating income of minus 2% to minus 4%. G&A costs remain targeted at between $4.3 million and $4.6 million per quarter.

We don't plan to acquire properties in the near term as we wait for the debt and capital markets to stabilize and we are waiting for more opportunistic targets. We are marketing about 15 of our own properties in non strategic markets but only the three we have sold so far have been factored into guidance. We pretty much put our expansion and enhancement program on hold, working through only on those projects that were well on their way in 2008. This quarter we spent another $2 million and we have got about $7 million to $8 million to go to wrap up the projects in process.

To give you a better handle on our interest costs we are obligated on $400 million of long-term fixed rate or hedged loans. With the improvement to the interest rate generated by the rating upgrade, our annual interest costs to carry this debt including amortization of financing costs, is $33.6 million. This will drop to an annualized $32.1 million upon payment of the mortgages in December. The only variable component in our debt structure is related to the line of credit which carries a floating rate of LIBOR plus 137.5 and presently we have no balance on the line.

We are going to incur two one-time charges in Q4 associated with the pay down of the $100 million of term loans. It cost us $8.4 million to unwind the swap contract on that amount and the unamortized financing costs on that portion of the bank note was $640,000. It's our position that these are FFO items and their impact will knock $0.33 off our Q4 results. As a result of the above listed assumptions and charges we estimate fourth quarter FFO to come at between the $0.26 and $0.28 per share, which would result in full year 2009 FFO of between $2.33 and $2.35 per share. At this point, Ken, I will turn it back to you.

Thanks, Dave. That concludes our prepared remarks. We would be pleased to answer any questions you might have out there.

Thank you. We will now begin conducting a question-and-answer session. (Operator instructions.) One moment, please, while we poll for questions. Our first question comes from Todd Thomas with KeyBanc. Please proceed with your question.

Hi, good morning. I'm on with Jordan Sadler as well.

Good morning.

First, quickly, do you have the same store occupancy update for October?

That's about square footage is 81.4 units, 80.4.

We report square footage. So I think we lost 150 customers. So it's almost flat with September 30th.

Okay. And how does that compare year-over-year?

Last year, we were at about --

11 basis points lower.

Yes, because we dropped last October more than we did this October by a long shot. So we were actually having a -- we closed the gap considerably in October.

Oh, so you closed the gap almost 160 basis points?

Correct.

Okay.

All right. And then I know you didn't give any thoughts on 2010 or anything, but when you think about the level of concessions that you are giving today and you are starting to anniversary those free month incentives, I was wondering what you think the impact could be to revenues in 2010. Do you see positive growth at all in 2010?

From a revenue standpoint, we are hoping it will. We're still going to be aggressive, though, with the free month and name your own price situation. What we're doing, though, as we anticipate next year occupancy should start improving a little bit for us. We're going to be -- and we've done it this year a little bit in those markets that we have some strength, is be a little less aggressive with the specials on the move-ins. Maybe collecting a little bit more as far as the admin fees are concerned. So, yeah, I think we're anticipating an increase in occupancy in a number of places.

To give you an example, Florida, we don't anticipate same-store revenues to be positive there next year, but certainly, a big decrease in the negative growth that we've seen over the last year or so. So we're guardedly optimistic about what is going to happen for us in the next year.

Okay. And where do you think occupancy might bottom during the winter right now?

We hit 79.5 at March, which was our -- almost our all-time low. We don't think it will be that low. It probably won't be 81.6 either. Somewhere around 80, if we had to guess right now on a same store pool. We are looking to do 80, 80.5.

And it's Jordan. You guys talked about move in activity but had a couple of areas where it hasn't been up. Can you maybe just provide some color around that for us?

Well, actually, what it is is move outs.

Move outs?

Yeah. One was in the Gulf Coast area. In the third quarter of last year, the hurricanes hit. There were two in that area, and not only did we not have -- there were almost no move outs at all, a lot of move-ins. So this year, comparatively speaking, we had the normal move outs, plus some people moving out from the hurricanes. That was well over 1,000 people there. And then the other was frankly in our college towns. We did a great job in the second quarter of this year of enticing college students to come to us, probably in the range of 1,000 to 1,500 more college students moved in in the second quarter for us this year than last year. Correspondingly, in the third quarter they are leaving. So those two things, those two factors accounted for most of the move outs for us versus last year.

So where as Texas has been pretty resilient for you following the hurricane -- the benefit that you may have seen from the hurricanes, would you expect that to weaken throughout the winter?

I think we will be stabilized. Texas is still a pretty strong market, generally speaking. Houston has been probably been the strongest performer for us. So looking forward to next year I would expect Houston to moderate somewhat but we are guardedly optimistic about the other areas in Houston, San Antonio, probably doing a little bit better next year than this year. So I think Texas will be okay for us. The Gulf Coast, you know, there's just been a strong, strong market for us over the last couple of years.

Okay. And then just one quick housekeeping item. Can you just qualify what the land sale gain was on the income statement? That's not in FFO, but is that -- was that related to the sales or --

Yeah, we had a couple of transactions that occurred this quarter. We sold three properties outright. Three non-core stores and we recognized a small loss on those. We also had a land taking at one of our Savannah stores and the taking amounted to -- actually we are still disputing it. We expect to get more but so far we booked $1 million plus on that taking. What will happen is it was a strip of land that gave us our best ingress to the property. We are probably going to take the majority of those proceeds and turn around and buy an adjacent parcel of land, which will give us equal or better ingress to the property, but, you know, so that shows $1 million -- I think it was $1.009 million gain and then we had a net loss on our properties of $855,000 -- I'm sorry, a gain on sale of $1.127 million for the Savannah properties and we had a loss on disposable of our properties of $1.009 million but when you factor in the income from operations that we discontinued, we are booking a loss of $855,000 on the income statement.

So several transactions happened, land taking that we got proceeds for. We are going to reapply to continue our good ingress to that store and then the losses. But in the end, none of it hit FFO. We don't consider any of our sales or losses/gains on anything as part of FFO.

Okay. Great. Thanks.

Our next question comes from Christy McElroy with UBS.

Hey, good morning.

Good morning, Christy.

Can you talk about where street rents were in Q3 versus Q2? So how aggressively are you starting to push asking rents here? And then to what extent are you actively raising in-place rents as well?

The in-place rents were more aggressive than we were in the first quarter where we were very tentative and sort of like everybody else, really concerned about all of the things on the economic front. So we have been pretty aggressive in many markets on raising in-place tenants. When I say that, though, I'm not talking like the good old day of 5%, every nine or ten months. We are looking at more 2.5% to 3% to existing tenants and it's done by a combined area manager and store manager looking at every tenant, making sure we are not putting that lease at risk. But we have certainly a majority, 75% plus of our in-place tenants are being raised in the 3% plus range.

With regard to street rates, we've always been very careful with that. We've made it a point to take the hit up front. We want to induce customers to come in. We found that the day number one dollars out is what really attracts the customer to a store. The less you can have that customer pay the day they move in, is sort of the ticket. And going forward, they will pay the monthly rate. Now, with the advent of the Internet posting and so forth, it's a little more competitive in terms of, you know, everybody can see what your rent is and then the incentives don't mean quite as much. But our street rates, except for some cities in Florida and Phoenix have been held and increased across the board as we go. We've managed by not being real aggressive with existing tenants we haven't gotten into a situation where our street rents are significantly lower than our in-place rents. As of a matter of fact, the opposite is true.

So when you say that you've increased them you've been able to increase them a little bit. Can you quantify that?

Increased street rates?

Yep.

It's on a unit by unit basis so we see popularity in a unit size, a ten by ten unit size, for example, we might have 100 of those in a 600 unit store and they are popular, we'll raise them 3%, 3.5%, 4%. We may have a glut of five by fives and not touch those. But I would say on average, except for Florida, our overall raise of street rates this year through the first nine months has been about 2.5%, 2.75%.

Just to clarify on one of the prior questions, you expect occupancy to bottom at around 80% to 80.5% this winter. Am I to assume that completely closes the year-over-year gap and you are actually expecting occupancy increases.

I think March will have an occupancy increase over March of '09. March '10 should be better than March 2009.

Okay. And then just following up on Florida, what causes you to be a little bit more optimistic in a turn around there?

Well, we've had negative growth there for about two and a half to three years. We are anticipating the people that we've got there now staying, and with all of these -- hopefully the money that's being spent by the government with the stimulus will begin helping the housing industry down there. We tracked the housing inventory, the number of homes that are on the market are less than what they were a year ago. So hopefully construction will start up there a little bit more, get the contractors back in there, people moving a little bit. So, you know, just a combination of different things. I can't point to anything in particular, but it's been -- you know, like I said almost three years where we've had negative growth and talking with our area managers and our regional vice presidents down there, they feel that things will start moderating a little bit.

Okay. And then just really quick lastly, obviously you are going to see the interest expense decline from the Fitch upgrade. Why wouldn't that have had a positive impact on your guidance for Q4 or was that already expected in there when you updated your guidance after the equity issuance?

When we upgraded the guidance after the equity issuance, we did not, even though we expected it, we did not factor that in. You're right we should have kicked it up a penny or two. That won't really kick in until October 26th. That's when our interest rate reset is. That's why it was so important to do that as quickly as we did. On most of our notes, our rate resets on a six-month basis and October 24th or 26th was the key date. We did get the rating in in time for that. So we will have a two month positive effect. But what we also didn't put in our guidance after the equity offering was the sale of the three stores because one of them took place right after quarter end, September 30th, and the other two were pretty late. So the gain that we are going to save on interest for this 64 days or whatever it is is almost exactly offset by the loss and the dilution of the three properties that were sold in the quarter.

Okay. Gotcha. Thank you very much.

Our next question comes from Michael Salinsky with RBC Capital Markets. Please proceed with your question.

Good morning, guys.

Hi, Mike.

Good morning Mike.

Dave, sticking on the dispositions for a second there, what were the pricings on those three transactions there? You mentioned a pipeline of something like 15 properties you were looking at potentially selling down the road non-core. Can you give us maybe a sense as to what those markets are in, you know, how aggressive you are being with them in light of having raised the equity capital?

Yes, the -- winding it from the back to the front, we never really considered the sales of the assets as part of our capital raise plan. We had actually identified these stores back at our planning session a year ago now. There are 15 stores total. We sold three so there's 12 to go. They are in non-core markets. The two we sold in Massachusetts were in Sandwich and Fair Haven. We are looking to sell one in Salisbury, Maryland. The other third one was Fayetteville, North Carolina. They are sort of outposts for us. There are a couple -- I don't want to name specific stores just yet, but there are some -- to give you a flavor, in central Virginia that are small and non-core. There are a couple that we think have peaked. They are military towns. We think they are at the top of their leased operating efficiencies right now with occupancy and so forth and then there are a couple that are going to require so much capital improvement that the markets they are in are just not worth it.

So essentially it was a stripping of the non-core stores that we don't see much more growth potential out of and there was a total of 15. We expect somewhere in the range of about $40 million to $42 million in gross proceeds, if we were able to sell all of them. So they are smaller stores in non-core markets. It really didn't have much of a -- it wasn't part of the plan to raise capital to pay down debt with these. It was just let's shed these stores because they are sort of a drag and they are not really what we want to be. The cap rate on the three that we sold was -- it was about an 8.2 average. That's about what we are looking for.

We are selling primarily to local buyers who are going to get local financing. I think we have four or five more in contract. The way it looks, none of them will close this year but we are hopeful that those four or five will close at the beginning of 2010. But it's primarily smaller operators with local financing and the cap rates -- we are not giving them away. I mean, push comes to shove. We don't want to get rid of them so badly that we are just going to just toss them out. We are looking at low rates for the most part as far as the pricing goes.

Shifting gears here to the acquisition side. You've definitely got more capacity for the storage of the line there. I wonder how you are looking at that, when you expect to begin deploying some capital and also where you are seeing pricing right now.

Well, right now there's really almost no activity out there in the acquisition market. Our acquisition people, the department there, they tracked over the last several years when we have looked at properties, many times the owners would refinance or some new properties were coming online, would finance at pretty aggressive loan-to-value ratios, and we're watching those. We anticipate over the next -- as I said in my opening remarks, probably the next two to four quarters some of these things to start coming around. At this point, there's really nothing large as far as any portfolios out there. A couple of one offs, but not much activity that we expect to lease in the first six months of next year.

Okay. You had a pretty big spike there actually in real estate taxes and insurance. Was there any particular market that drove that or catch ups in that? Can you give us kind of a sense where you expect the fourth quarter to play out?

Well, here we are into the last two months of the year and I think on 140 of our properties we still don't have the bill. So that's our -- that's our enigma, our bugaboo every fourth quarter. We estimate as best as we can throughout the year. This quarter we had some actual bills come in but we're still working on almost half our portfolio is an estimate. I think we budget enough. This quarter was a 7.2% increase in property taxes over last Q3. I don't think we are going to get a bad surprise in the fourth quarter, but come Thanksgiving, we still won't have all the bills in. We always hold our breath a little bit and sometimes that fourth quarter swing in property taxes is a nice one and as last year it happened, it wasn't so good. I think we were at 5.5% accruing all through the year last year and the taxes bills came in and just pounded us. We protested some and gained a little traction there, but I think it's -- I guess from the more I see, it's typical of a lot of real estate companies that have significant properties in Texas and Florida and a couple other states. So we're pretty sure we've budgeted enough, we have accrued enough, but we won't be sure until the end of November.

And then finally, could you talk a little bit more about the development completion during the quarter. Are there any other projects in the pipeline at this point or was that a one off opportunity.

Yes, that was a one off opportunity that frankly we started looking at. It was back in the middle part of 2006, and it had been zoned and cleared for a storage facility. The people who did all the spade work backed out. We stepped in but it's taken that long to get it going. It's a great site, if you are ever in our offices, I will show you the pictures. It has all the amenities that you can think of, but we don't have anything else in the hopper as far as development is concerned starting next year -- actually starting now, we're looking at selectively doing some expansions and enhancements of our current storage. We look at that as probably the safest development bets that we can make.

Okay. Thank you.

You're welcome.

Our next question comes from Paul Adornato with BMO Capital Markets.

Hi, this is [Mark Letinsky] with Paul. Quick housekeeping item. What is the full-year share count that you are assuming with your 2009 guidance?

27 -- oh, the end of the year share count, it is 27.5 million. I'm sorry, I don't have the -- you are looking for the average for the year?

Yeah.

I will have to call you back on that. I'm sorry. I didn't bring that chart with me. I will call you and Paul right back.

Okay. And previously you were sort of shooting for around $40 million of asset sales. Are you still targeting that amount or have your disposition volume expectations gone down since the equity offering?

As we said, a couple of questions ago, that really wasn't part of the equity offering or the capital needs were not the reasons driving those sales. Yes, we still hope to sell the 15 stores for about $40 million but as we said, we are not going to give them away. Three are down. I think five more are in hand and there's activity on the others. So, you know, perhaps by the end of March or the end of June of 2010, we will have sold them all. If we don't get something near the prices that we want, we're not going to give them away. $40 million is the target right now and we expect to hit it but it's not a given.

Got it. And can you just -- what is the cost of that Richmond store to develop?

About $6.2 million with land and -- all in $6.2 million.

Okay. What sort of signs do you need to see in order for you to start producing discounts?

Well, it's all -- it's based on demand and occupancy and it's on actually store-by-store and space-by-space basis. Every day at every store, our managers and our emanagers will look to see what to see what their inventory is, what has filled in in the preceding day and depending upon what they have available or don't, the next person coming in is going to pay a little bit more or the same as what the person who just vacated from.

Okay. Thank you.

You're welcome.

Our next question comes from David Toti with CitiGroup. Please proceed with your question.

Hey, good morning, guys. Michael is here with me as well. The first question is, just going back to the concessions topic, can you help us connect the concession levels to one of the other portfolio metrics such as turnover or occupancy level? It seems like the increases continue, but some of the underlying metrics don't really change that much from quarter to quarter. I'm just trying to understand why the numbers keep ratcheting up.

What I can tell you is we are making sure that when people move in for little or no money in the first month or two, that they are not gaming the system so to speak and then moving out right after that. So we track that in the periods before we started offering these large concessions, and comparing it to what we are doing now. And what we found is that in the first three months or so, it's almost identical with what our experience was before. After the third month, we see a drop off of around 1.5% to 2% more people moving out now than did before, but after that, it's constant. So we believe and we have done the metrics, it makes sense revenue wise for us to experience the revenue loss for that first month or two and the loss of 1% or 2% of those people after the third month because the length of stay is comparable to what we experienced before.

I think David, maybe what's happening and what you are seeing is what's been frustrating us is our traffic and our move-in volume has been terrific, and we have been looking forward to October for a few months now, if for no other reason than same-store metrics ought to be better because we started heavy up front incentives Labor Day of 2008. We've now passed the anniversary mark and presumably we will be seeing some of this high rental activity, better occupancy, translate into top line revenues.

And just going back to the type of [consistency], you are obviously doing a one-month free and then I think somebody mentioned you are doing the name your price. Is that still pretty prevalent, the name your price in the second month?

Oh, yeah. What we do, depending upon occupancy, the first month they may pay something. They may pay the admin fee, they may pay half of the prorate for that first month, and then in the second month, we work with the people, and we empower them and say name your own price. And what we are experiencing there is people are -- I think we are averaging in the range of around 20%, 25% of rent that they would normally pay being paid there. And it's worked out well for us. In fact, I don't know if you noticed but the network that has the Super Bowl, they are offering people to come in and say, name your own price for half 30 second commercial. So there's a lot of people doing the same thing, and our managers have a lot of fun with it, with the customers. The customer comes in and, you know, if they say they are not going to pay anything, the manager works with them a little bit. We trained the manager to try to get a little bit more money from the people. So it's a little bit of a gimmick, but it's working for us, and as Dave said, we are hoping that before too long, we will see this convert to more revenues to the top line.

Okay. And it's interesting because that does sort of tap into the consumer's psychology and having used one of your facilities recently and being asked to name my own price. I did feel guilty so I didn't lowball. On the issue of the consumer, can you give us some sense of maybe any changes you are seeing in consumer behavior in the last month, in terms of their sensitivity to price, you know, accelerated move outs within the season base. Any kind of change that might indicate that the consumer is behaving a little bit differently?

Not a lot. I guess the one thing, you know, I can say, which has been consistent is they are shopping for bargains. We are getting our call volume, what we are seeing is there is more shopping as far as the Internet is concerned. At the beginning of this year, we put our dollars -- you know, our pricing on the Internet, and what we're seeing is calls to our call center here were down this past quarter by about 2%. But web site inquiries were up over 30%. So we are seeing more of a sophisticated person looking for deals, but other than that I can't --

And they are probably -- that's been probably a year-long now where we've seen the repeat calls -- the tracking system we have for our call center will show us how many times a number has been called, or how many times a number has dialed us so we can see now there's two and three calls. People get our price and come back and try to negotiate with the call center operator. And, again, that's probably only 45% to 50%, 52% of our calls. The managers at the sites do a lot of bargaining and negotiating as well. That's probably the one trend, David, that we see more than anything in the past, eight or twelve months. I don't think there's anything if I heard the question right that has changed significantly in the last month or two. It's still more of same.

Okay. Thanks for the detail.

You're welcome.

Our next question comes from [Lizzie Scroll] with Bank of America.

Hi, good morning.

Good morning.

You have spoken a bit about some of your expectations for 2010 regarding certain metrics. I was wondering more generally where you think we are in the cycle.

Wow. Well, I think with respect to the storage industry, we saw at the beginning of this year one concern that a number of -- you know, we categorize a long-term customer as somebody who has been with us as more than 12 months. Earlier this year we saw there were a number -- a disproportionate number of people who have been with us for a long term moving out. What we have seen over the past six months now, though, is that has stopped. So we feel confident that the people who are going to be, you know -- they are not as nervous as they were earlier this year. People are staying, the long-term customers are staying. The discretionary people, they are going to come and they are going to go and leave, you know, as their need ends. So I think the temperament, if you will, of the customers seems to be improving. When this thing is going to be over, and -- that's a tough one.

Yeah, we talked a little bit, but we haven't finished our budgeting process. We haven't finished the input from the area managers and our supervisory team. We haven't put in place our marketing plan which is this year probably -- and last are radically changing from the way we market, but to call where we are in the cycle, it's -- pretty dark out there. It's pretty opaque.

Okay. And do you guys -- when you do you expect same store NOI metrics to turn positive on a year-over-year basis?

I don't think we're going to -- if it's positive in 2010, it won't be very positive. You know, we are looking in the zero to -- we are getting ahead of ourselves a little bit. We don't usually give guidance until our fourth quarter call because then we scrub down the budgeting process. Looking at it preliminarily, it would be nice if 2010 were positive, it will be a close run thing, though, if it is.

All right, great. Thanks so much.

You're welcome.

There are no further questions at this time. I would like to turn the call back over to Mr. Myszka for closing comments.

Thank you very much for participation in our call. I look forward to speaking to you at our next one. I hope you have a great holiday season. We won't be speaking to you, at least formally until then, take care, thank you.

Bye.

This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.