Life Storage Inc (LSI) 2012 Q4 法說會逐字稿

Greetings and welcome to the Sovran Self Storage fourth-quarter and year-end 2012 earnings release conference call. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation.

(Operator Instructions)

As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Diane Piegza, Vice President, Corporate Communications. Thank you. You may begin.

Thank you, Christine, and good morning. Welcome everyone to our fourth-quarter 2012 conference call. Leading today's call will be David Rogers, our Chief Executive Officer. Also participating are Andy Gregoire, Chief Financial Officer; Ed Killeen, Executive Vice President of Real Estate Management; and Paul Powell, Executive Vice President of Real Estate Investment. Each of you should have received a copy of our earnings release last evening.

If you did not receive it and wish to be added to our distribution list, please e-mail invest@sovranss.com. As a reminder, the following discussion and answers to your questions contain 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. Copies of these filings may be obtained by contacting the Company or the SEC direct. At this time, I will turn the call over to Dave Rogers.

Thanks, Diane. Good morning everyone, and welcome to our call. Q4 capped the year in fine fashion. As a matter of fact, it was our best quarter ever. Demand has held up nicely, the Internet marketing team, revenue management group, customer care reps and the store personnel have all been doing a terrific job. Our recent acquisitions are performing like they should, and we are pretty much hitting it on a sweet spot.

I will let Andy provide the details on the quarter's operating results in a second, but it was another good one, and we're especially pleased because we came over some pretty tough times. We bought 14 stores this quarter, all of them in a three-week rush at the end of December. We announced these in a prior release, so I will just give a quick review. Six stores were acquired in the Chicago market giving us a total of 10 Uncle Bob stores there.

Three were bought in Austin, Texas where we now have 12. One was in Phoenix, which is our 10th there, and we bought two in Fort Myers and another two in Clearwater, adding to an already big presence in southwest Florida. The properties total just over 1 million square feet and cost us $83 million. Many of these acquisitions were not even under contract as of the date of our last conference call. They were, for the most part, brought into the fold as a result of sellers concerns about increased capital gains rates.

It drove a rush at year-end, but it has caused kind of a dearth of 2013 contracts, at least as of today. We do see some opportunities on the acquisition front, but it is a seller's market and the competition for quality assets is pretty fierce. Our balance sheet and liquidity position are solid, debt to EBITDA and debt service rate coverage ratios are strong. Our maturities are, for the most part, far out and well staggered, and we have plenty of dry powder available. So we are well-positioned to capitalize on the opportunities as they do arise. So, with that, let me turn the call over to Andy who can provide some details on our quarter.

Thanks, Dave. Regarding operations, total revenues increased $7.6 million, a 13.9% increase over 2011 fourth quarter, and property operating expenses increased by about $1.6 million, resulting in overall NOI increase of 16.8%. These total Company results reflect the impact of the 29 stores we acquired in 2011, the 28 stores we acquired in 2012, the one store we opened in Richmond three years ago and the increase in the same store NOI.

The same store results for the quarter include 361 of our 391 Company-owned stores. We provided some additional detail in the press release regarding our same store revenue and expense components, but I will provide some highlights. Same store revenues were strong again, increasing 8.2% over those of the fourth quarter of 2011. This is primarily the result of a 590 basis point increase in average occupancy and a reduction in incentives offered to new customers. We also continued to see increasing in tenant's insurance commissions on a year-over-year basis.

Total operating expenses on a same store basis increased by 1.8%, as the reductions in Yellow Page costs, utilities and other operating expenses were offset by increases in repairs and maintenance and insurance. Property taxes showed a significant increase for the quarter, but the year-to-date increase of only 2.3% was lower than we had expected, mainly due to successful assessment appeals. Overall then, with same-store revenues increasing 8.2% and same store expenses increasing only 1.8%, same store net operating income improved a healthy 11.7% over that of 2011's fourth quarter.

G&A costs were $1 million higher this quarter over that of the previous year. Aside from the $194,000 increase in internet advertising, the main reason for the increase was the fact that we operated 33 more stores at the end of this quarter as compared to December 30, 2011. And, our Company-wide incentive compensation was higher due to the strong year. Offsetting a portion of the overhead cost is an increase of almost $150,000 in third-party management fees earned in this quarter. We did realize solar tax credits in 2012, which significantly reduced tax expenses of our taxable REIT subsidiary.

Regarding properties, Dave mentioned the 14 stores we purchased during the quarter for approximately $83 million. These purchases were funded by proceeds from draws on our line of credit, which has been paid down in the third quarter with funds received from our ATM issuances. During the quarter, we also sold an ancillary parcel that contained a strip center and some land for net proceeds of $3.3 million, resulting in a gain of $687,000. We may look to prune additional mature properties in 2013, as we had done in the first three quarters of 2012.

From a balance sheet perspective, we continue to maintain our conservative, flexible and staggered our debt maturity, keeping our assets almost entirely unencumbered and limited floating interest rate exposure. At December 31, we had $7.3 million of cash on hand, $70 million available on our line of credit, plus an accordion feature to add another $75 million to our capacity.

With regard to guidance, we have continued -- we have included in our release the expected ranges of revenue and expenses for the first quarter and the entire year. Same store revenue for Q1 should be in the 6% to 7% range, and expense growth 3.25% to 3.75%. For the year, we are expecting same store revenues to be between 4.5% and 5%, as we are forecasting a stronger first half of the year and are less aggressive in our assumptions for the second half.

We are expecting property taxes to increase 4.5% to 5% for the year. Core G&A expenses are projected at $34 million for 2013, including $4.4 million of internet advertising. We have not assumed any additional purchases or sales of properties in our guidance, nor have we included the related costs. Our guidance assumes a weighted average diluted share count of 31.1 million common shares. As a result of the above assumptions, we are providing initial guidance and are forecasting funds from operations for the full year of 2013 at between $3.46 and $3.50 per share, and between $0.80 and $0.82 per share for the first quarter 2013. With that, I will turn the call back to Dave.

Okay Andy. Thanks. Before we turn the call back over to the question queue, I will just make a quick observation on the self-storage sector. Overall, we see ongoing strength here. The recent themes we've been talking about are reinforced.

Scale with the large operators drives an outside impact on market share. Technology has a tremendous effect on customer reach and pricing efficiencies. The lack of new suppliers allowing solid occupancy growth, and demand for our product continues to be need driven. So our industry and our Company are in a good place right now, and we are optimistic for a healthy 2013 continuing right into 2014. With that, Christine, I will let you open the queue for questions.

Thank you. We will now be conducting a question-and-answer session.

(Operator Instructions)

Jana Galan, BofA Merrill Lynch.

Thank you, good morning.

Good morning, Jana.

I wanted to follow up -- right now you're benefiting from the lack of new supply, but are there any markets where it would make sense to start seeing development pick up, and are you considering starting new development?

Good morning. This is Paul. Yes, we are not seeing a lot of development, per se, especially since the development that we saw in the mid-2000s. But there is -- we are seeing a few of our markets, some development happening. But we are not too concerned at this point. I think you will see development in some of the major markets -- Chicago, Atlanta, out west on the West Coast. I think if any development gets going, it's going to be in these core markets where there is a high demand.

So, again, I don't foresee anything coming out of the ground within the next two to three years that's going to be of any significant impact to us and our operations. We are very pleased with seeing that limited supply.

Thank you. Then just, maybe Andy, can you let us know what the ATM activity was in 4Q and January?

Hi, Jana. We didn't have any ATM activity in the fourth quarter or in January. We do expect a match fund going forward, and have some ATM activity in 2013, but we did not have any in the fourth quarter or January.

Okay. And then, just in the guidance, are there any dispositions included in that?

No, there is not.

Thank you.

Gaurav Mehta, Cantor Fitzgerald.

Good morning.

Morning.

The first question I have is on your operations. If you look into your 4Q results, your move-ins for the quarter was negative, and move-outs were positive. Could you provide details on what is driving that? Is it more of a reflection on the seasonal factors, or did you guys try to push rent, which drove negative move-ins and positive move-outs?

Hi, this is Ed. In fourth quarter of 2012, we are really batting up against an incredible 2011. If you recall, 2011 was quite an anomaly. It was probably the first time, I think, in the history of our Company that our outs were less than our ins. Just given that fact alone, you are going to see our outs being up just a bit. They were up 5.2% against 4Q last year, and year to date up 2.7%. So, just by, again, that fact alone, '11 was just so strong. We really consider that quite an anomaly.

Okay. Second question I have is on your guidance, specifically revenue drivers. 2012 was solid occupancy growth, so when you look into 2013, and I know in previous calls you talked about optimum occupancy level being low-90%s. How much occupancy growth and rent growth is embedded in your revenue guidance?

Hi, Gaurav. It is a combination. There is approximately 250 to 300 basis points of occupancy growth embedded in the guidance, with the rest being rate growth.

Which markets specifically have room for more occupancy gains?

Gaurav, hi, this is Ed. We have had some really strong quarters in the Georgia markets, North Carolina. We were a little bit weaker in the Northeast, but we don't expect in 2013 we are going to get those same occupancy gains. But frankly, looking at 2013, it is difficult to identify exactly what markets we are going to see the occupancy gains. Right now, as Dave and Andy said, we are certainly looking at occupancy gains overall, but it is real difficult to say this year going forward, what markets specifically are going to be stronger than others.

I think what we will see is probably more activity in the younger stores, the stores we bought in 2010, 2011, and last year. They were, for the most part, a little bit earlier on the occupancy curve. So, it is not so much markets as such, as it -- well, Florida, I think probably Florida has been that way; we saw some nice growth in 2012 in Florida. But there is room in Florida, and probably in the pockets that we bought in the last 2.5 years.

That is very helpful. Thank you.

Ross Nussbaum, UBS.

Hey, guys. Good morning, I'm here with Christy McElroy. Couple questions -- first, can you quantify how much contribution incentive reductions had in the fourth quarter, and what you are looking at for 2013?

Hi, Ross. The incentives year over year -- we reduced the incentive given per customer by 16% fourth-quarter year over year. It went from $82 per customer to $68. We saw a significant increase -- or decrease, from the previous year's quarter, but it actually upticked a little bit from 3Q. 3Q we were about $65 average free rent per customer; we are $68 in the fourth quarter.

Is that seasonal, or was that in response to changing traffic other than seasonality?

It was seasonal. We would expect that to dip. We are not going to get the big concession swings that we have had in the past, but we do expect concessions will dip second quarter and third quarter.

So, as you look forward to 2013, are you expecting continued double-digit percentage reductions on the incentive front?

No, I would not -- they will be in the single-digit reductions.

Okay. On the occupancy commentary you just provided, 250 to 300 basis points of upside in 2013. If it was straight-lined across the year, that would push you above 90% during the peak [tower] months. Is that the right way to think about it?

Correct.

Why, and as you think about balancing revenue growth here, how are you thinking about pushing street rents with respect to balancing those expected occupancy gains?

We are still going to be pretty conservative, Ross. We still see the move-outs when we push, and we pushed hard early in the fourth quarter. We saw more move-outs than we'd like to see. We backed off in December and January. We will push again March and April. But there is not as much gain there as it looks because of the move-outs that occur.

That is interesting comment to me, because I guess I wondered, historically, the highest occupancy rate we have really ever seen out of any self storage company has been in the low-90%s at PSA. I am just sort of wondering -- at what point do you reach the upper bounds of occupancy? And if there is not a lot of traction in raising street rents, is this the last hurrah, 2013, for the industry, if you can't get pricing power?

I think, Ross, what we have thought, certainly for the 20-some years we have been in the business, is a sort of a ceiling at 90%. I think notwithstanding -- watching what PSA did, because they do things a little differently, we felt that with the technology gains that we have and some of the things we're trying, even to the extent in some markets in some parts of the year, over-booking on reservations, we see the opportunity, primarily because of the technology, to get into the 92%, 93% peak range. I think that's now -- the upper limit has moved, let's say, from that old-fashioned 90% to that. I'm not saying we're going to get there right away, but I think we do have more room because of the efficiencies and the technology to bump that and make better use of the space we have. (Multiple speakers)

Sorry. Why do you think that the industry isn't having as much success pushing the street rents? Is it because the private players have occupancy rates in the low-80%s, and therefore, the public guys just can't get the traction in pushing the street rents?

Hey, Ross, this is Ed. I think, just touching on what Dave had said with technology driving our performance, driving our success. What we do with web marketing, that in essence is giving up the ability, in a very micro way, to increase asking rents. Because we are actually able to drive customers to particular markets based on occupancy and based on what our spend is in some of the major markets in paid search and even organic search.

So, I think that we have mentioned over the past few quarters that there is a little bit of separation between the REITs and the rest of the world. And that is truly because of the use of technology. And you can take what we do in web marketing, and really look at it and say that it directly impacts what we are able to do with asking rates.

Okay. Last question for me. Dave, this is sort of a sore point for me. If I look at your general and administrative expenses as a percentage of your NOI, in 2012 it was running, let's call it, in the 20% range. You are now forecasting a pretty decent jump in G&A expense for 2013. I'm going back and looking at your G&A expense 10, 15 years ago, and Sovran was running 8%, 9%, 10% G&A as a percentage of NOI. I'm struggling here with -- how has G&A as a percentage of NOI doubled over the last decade? Where is the scalability here?

There's a whole host of factors, Ross. The business has changed quite a bit. 10 years ago was when we put in our call center, which started out as a rollover basis, and then grew to what it is now -- a fully functional and totally -- all inbound calls are answered. So, the call center went from $0 to about $2.4 million, almost $3 million.

We put Internet advertising in there. We try to break it out -- I don't know if your number -- if you took that into account. But I think, for the year, '13 guidance over '12s actual, we're talking about 4.4% growth. And in there is -- a good part of that is the Internet advertising.

But also, as we talked about on a couple other calls, we brought in some product lines here that drop right into G&A. For example, the whole idea of third-party management. The margin on that is abysmal compared to what we get when we run the stores. So, if we're talking about knocking down a 6% management fee and a 1% call center fee, we are paying pretty long dollars on that to earn that 7%; [we've got a stab in it]. All of those costs go in the G&A. So, there's a pretty big skew.

We look at it, of course; it has grown, we know that. But a lot of the things we're doing here made sense on the FFO basis; they made sense on the business lines business. It just maxed the crap out of G&A.

Thanks. Appreciate it, guys.

Our next question comes from Todd Thomas with KeyBanc Capital Markets.

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

Morning, Todd.

First, in terms of acquisitions, I know there is nothing embedded in guidance. You talked about increased competition, but there continues to be an increasing number of trades, and the public REITs are coming off a pretty solid year of investment activity in 2012. What do you think could be a reasonable expectation for 2013? Do you think you could at least match last year's volume based on what you're seeing today?

Good morning, Todd. We knew, coming into 2013, that the opportunities were light. I think we did a 14-store acquisition in the last three weeks of 2012. Because I think there were a lot of sellers wanting to sell before the so-called fiscal cliff kicked in. So, we knew -- we just didn't see a lot coming into 2013.

As January has come and gone, we have seen an uptick in some opportunities that we are looking at, and talking with brokers within the industry. We are hearing that they're going to be bringing some decent portfolios to the market. Right now, I would say we hope to do $100 million this year. I know that is kind of the guidance that we gave at the beginning of 2012. Fortunately, we had higher activity. At this point, I think we're pretty comfortable with saying we will do about $100 million this year.

Todd, a lot of the stuff that we're looking at, and that we like, is kind of opportunistic. So, even if we do $100 million to $150 million, I hope we do, we don't see it right now sitting here in February, but some of that stuff is going to be in the 3.5%, 4% yield range going in at, say, 50% occupancy. A lot of the stabilized, good-quality assets in good markets are not really bubbling up as much as you might think. The stores that are having difficulty, they're on the market. But solid stores, the mom-and-pops, have not -- a good store is a good store still. And I think to crack them and to get them to sell has been challenging.

Okay. You have about $70 million of availability on the line. You talked about some issuance with the increased share count under the ATM. But how should we think about funding investments throughout the year?

We are going to match fund those, Todd. Like we did in the third quarter, if we see it coming, we will get ahead of it a little bit with the ATM. But we are going to match funds, try to do a 60%, 70% equity on acquisitions.

Okay. Lastly, a question on the FFO guidance itself. If I look at the full-year nominal same-store NOI, which includes only 333 properties -- it's on page 12 of the release. If I grow that by the 5.25% midpoint for your same-store NOI forecast, the incremental NOI is almost $0.24 a share. That, added to the normalized FFO result of the year, [$3.28], that gets you to about [$3.52] right there. I guess the share count increase is a few pennies. But that leaves almost 60 non-same-store properties where we are not really accounting for any growth or any new investment activity. Are there some other assumptions acting as an offset to the FFO guidance that I am missing here, that you can help me reconcile a little bit?

I think the expenses that are really going to hurt us, which it should be covered in the guidance. The property taxes, we had some benefits in 2012 where we actually had some refunds that knocked our property taxes down. That is why you are seeing that big number next year. I think this year, 2012 I should say, was underscored by some refunds, and next year is going to look them higher. That is a big chunk of our expenses on the property tax line.

In the acquisitions, you get a pretty good pop on the property taxes. That year two, sometimes those municipalities don't get to year one, but year two, you are going to see a pretty big pop in property taxes. The snow removal, bank charges, utilities, we expect pops in all three of those in 2013 compared to 2012. But other than the share count, I think you have got it.

Okay. So, sounds like the non-same-store properties, you're expecting there to be increased real estate taxes and some other operating expenses on that pool of properties that would offset any incremental growth from the non-same-store segment?

Correct. The cost on those properties will be a bit heavier weighted than our same-store pool.

Okay. Thank you.

Paul Adornato, BMO Capital Markets.

Hi, good morning. I'd like to pose a follow-up question on the guidance. In talking about the full-year 2013, you said you are expecting a strong first half with a slower second half. Is there anything specific to point to that gets you to a slower second half, or is that just because it is less visible further out there?

It is a combinations of a few things, Paul. It is less visible. We had two 8% revenue growths third and fourth quarter. Those are tough comps to bump against. Our insurance kicks in March 1. We have about a 10% bump in insurance costs that renews March 1, and we just signed up for that. It is a tough insurance market for us out there right now. So, those are the drivers.

Okay. Looking at acquisitions versus cost of capital, I was wondering if you could walk us through the math these days? That is, cap rate compression -- is that more than offset by improvements in cost of capital, or how is the math expected to work this year?

I will let Andy get into the details, but the idea that we've had for the last couple of years has been to buy the properties in an opportunistic [bent]. Look for stuff that's in our markets, we know the markets, we know that the properties are underperforming, and with some of our platforms put in place, we can grow those from 3.5%, 4% over a period of three years, to a pretty healthy, say, 8%, 8.5% yield. So, that's the going in part. But you're stuck in that first year with a pretty low yield. We want to keep our balance sheet conservative. So, the idea of the match funding, doling out shares in addition or in conjunction with that issuance, is sort of how we looked at it.

I think, Paul, the big picture we look at, step back and say -- our cost of capital, let's look at the preferred market and see what a true long-term cost of capital is. Yes, we can fund it with 2% money today, but you're in mid- to high-6%s preferred market out there now. And that is what we look at. We have got to make sure we can get past that long-term cost of capital. And we do that -- right now, we're using the ATM to match fund in the line, but we see that long-term cost of capital being [above] 6.5%.

Okay, and finally, was wondering if you could just touch on your third-party management business? What are your expectations for 2013 in terms of adding properties, and what kind of opportunities do you see in that platform?

Good morning, Paul. In 2012, we added 17 properties to our management platform, brought it to about 71, including our JV partners. We are moving full steam ahead with our third-party management platform. We are out quite a lot meeting with owners. We are being a little more selective on the properties that we bring into management because these are typically properties we'd want to acquire at some point. We are somewhat conservative there.

So, it is hard to say. I know our UBM team has been very active traveling over the last few months. We have brought in a couple already this year. So, I would say we would hope to bring in another 20 to 25 this year, and hopefully it is more. But that is what we think we will do this year in 2013.

What is the marketing efforts? You guys call on property owners or is it incoming calls?

No, it is some incoming calls, but we are very proactive. We network with a lot of brokers and mortgage brokers out there that work within the industry. We get a lot of referrals that way. There is a lot of cold calling, and actually word of mouth now has been very beneficial to us. People that we have taken on their properties, they have been very pleased. So, we are getting some referrals in that regard. So, we really expect it to step up, especially this year and going into 2014.

Okay. Thank you.

Eric Wolfe, Citigroup.

Hi, good morning.

Hi, Eric.

Just wanted to follow up on Todd's question because I am also struggling with how you get the, call it, 6% core FFO growth this year when you're doing 5% and 5.25% same-store NOI growth. Are you assuming that you are going to be terming out the line with equity proceeds? I'm just struggling with I guess the same math that he is. I don't see how you get down to 6% when you are already getting more than that from your same-store NOI growth alone.

Yes, Eric. We do not expect to term out the line. We do expect to replace a portion of it with the ATM. We do expect -- we have $100 million coming due in September. We would term that out.

We will probably go to the private market. We don't think we will have the index-eligible $250 million available at that time to do a public offering. So, we do expect there to be some ATM issuance. Again, that issuance, those shares of 3.1 million shares for the year is a good weighted to use, and I think that's what's dragging it down in your model.

Also, are you assuming any contribution, I know you are not from 2013 transactions activity, that is clear. But are you seeing any benefit from the adds that you bought in 2011 and 2012, as well as your enhancement program just in 2013? I'm just trying to understand because in the past, you've talked about buying at yields that initially were not accretive, but over time then becoming accretive as occupancies ramped up. I'm trying to understand if there's any benefit in 2013 from that activity?

Eric, regarding the expansions -- 10 million of those were completed in December. We expect a drag for the first few months of those. Come the busy season, we would expect to see some activity on those, obviously. We budget a 24-month to get to 85%. So, our guidance assumes that those expansions we have done are going to get to 85% over 24 months. That is how we determine our guidance.

With regard to the acquisitions, Eric, the 2010 acquisitions that we made popped in this year, and they were very nice. They were a group that we bought in the Carolinas, primarily Charlotte, in December of 2010. The came into the same-store pool in January of 2012, and they went from about a 53% occupancy when we bought it, to the low-70%s at the end of 2012. So, it was about a 2,000-basis-point jump in two years. That works out great.

The stuff we bought in 2011, for the most part, that was a little more mature. There was a big joint venture [part], but a lot of the 2011 stuff was pretty mature. The stuff we bought in 2012 won't enter into the same-store pool until later, especially the opportunistic stuff that we bought. But that should push us, in 4Q especially, when we bring on those in the same-store pool.

I guess the short answer to your question is, the older stuff that we bought in 2010, early '11, is working well. That's in the same-store numbers. The stuff we bought in 2012, especially the 50% that we bought the last three weeks of the year, it's going to take a little bit of ramping up to do, but by June we should be hitting it pretty good, adding some value and some NOI to those properties.

Got you. That's helpful. Last question, if I could just dig into the G&A a little bit more. It looks like your management and administrative line item went up by about 30% this year. Obviously, you guys had a fantastic year from a stock performance perspective and a growth perspective. Obviously, expect incentive comp to be up, but can you just help us understand how much of that increase was due to increased compensation versus what was due to increased personnel as a result of the acquisitions?

It was a combination of both, the incentive comp was significantly up in 2012 over 2011. There was probably another $1 million paid in 2012 on the incentive comp. The rest is really to cover those management contracts, the increase in Internet advertising, that was what was driving the G&A. Our RevMan was a total new department in '11; we added more in '12. So, that grew the G&A in '12 also.

You should know, Eric, that the incentive comp went down to about 140 people. So, it was pretty widely -- we had, as I said, the best quarter ever, and one of our very best years ever. So, the way we've compensated folks here has been pretty much, everybody in the corporate office, including the area managers out in the field, the project managers out in the field, field trainers and so forth, are incented on a overall plan. It went deep, but as Andy said, it was a little over $1 million this year that wasn't there certainly in 2011, 2010. It would be nice if it was there in 2013. We will have to see. But that was a big chunk. Most of it was -- we spread some of it out through the year, but a bunch of it hit at the end, as well.

Sure, certainly, yes, you guys had a fantastic year, so, understandable. Just for 2013, it sounds like from one of your last answers, it's mainly the major driver, and I know it's only going up by, call it, 4% or 5%, but the driver for 2013 is just Internet advertising, just that ramp there.

Correct.

Okay. Great. Thanks, guys.

You're welcome.

(Operator Instructions)

Jeremy Metz, Deutsche Bank.

Good morning, guys.

Good morning.

Just a few quick questions. First off, Andy, earlier you had mentioned possibly pruning some of the older assets in 2013. Can you provide a little more color on that? Do you have any on the market right now, or tee'd up to hit the market?

Good morning, Jeremy, this is Paul. We continually review our portfolio, and we're looking to sell assets in mature markets, or markets where we want to exit. We have got a few we have identified, but they are not actively marketed yet. So, it is going to be -- we haven't made a final decision on which ones. There will be -- we are thinking maybe 5 to 10 max this year. We should start marketing a few of these in the next month or two. Nothing has really been finalized at this point.

If you sold those 5 to 10, do you have any range of just expected proceeds from those?

We don't because we haven't decided which ones we want yet.

I think for modeling purpose, though, Jeremy, you could assume less than $50 million.

Okay. Great. Thanks. Then just going back to the expense guidance. Excluding the real estate taxes, it seems a little high at 3.5% to 4.5%. You're expecting a pretty big bump in insurance coming in March. You know, just what other line items are really driving that increase?

A few items that, remember, were really unusual in 2012, Jeremy, were the utilities, the snow removal; we are going to get hit with snow removal, definitely more than we did last year. And we've had some recent incidents that will cause that to spike. Bank charges, that went away last year, remember, so we've got some tough comps on bank charges. They are going to show like a 10% increase, utilities we are looking at a 5% to 7%, then insurance at 10%. So, there is some good bumps in those, and the property tax is a big number. That is 28% of our expense line, so property tax is dragging us down.

Another thing we're missing, and we've had a pretty big decline in Yellow Page advertising over the last 2.5 years or so. That is pretty much leveling off now. We'll have a little bit of a decline, but for the most part, the low-hanging fruit has been taken as we ease out of Yellow Pages and over to Internet.

Okay. That's helpful. Thanks. One other, and I am sorry if I missed this. You have $100 million of maturities coming due in September; you have $100 million on the line right now. Is the thought that you would just address all that with the ATM? Is that what's the assumption in guidance?

No. The assumption in the guidance, Jeremy, is we pay down some of the line with an ATM. $100 million coming due in September, we expect to term that out, we like long term, so at least 10 years you are going to see us go out. I don't think we expect to use the ATM to term out that $100 million that is due in September.

Okay. The last one for me is just -- looking at your first-quarter guidance of $0.80 to $0.82 versus $0.83 in 4Q. Is the slowdown there, especially given that you just had the acquisitions late in 4Q, so they should really be rolling in. Is the slowdown there really driven by the expenses going up, or are you expecting a little bit of a dip in occupancy?

It is really the expenses going up, Jeremy. Utilities are very high in Q1. Snow removal will be high. It is the expense line that is driving that. The revenue line is holding pretty strong.

Some of it, too, will be there's a pretty good concentration. We're just now getting those stores, those 14 that we bought in December, online. So, the start-up costs from those 14 all hit smack in January and early February.

There is a couple other unusual items, Jeremy. Software amortization for our RevMan Software, that's full-blown in 2013. We purchased some trucks in the fourth quarter, and their depreciation will hit in 2013. So, there's a couple oddball things. They are not huge, but they will hit us in 2013.

Got it. That's it for me. Thanks, guys.

Ross Nussbaum, UBS.

Thanks. Hey, Dave, do you have offhand what the occupancy of your non-same-store assets is?

That is now with the -- I don't think we have it with the '14, but I don't think we have -- I know it is considerably less than the 87% we put out at December. We will shoot that back at you. No, we don't have it broken out.

Okay, I'll follow up with you. I'm trying to figure out beyond your core same-store growth, how much true cash flow growth and how meaningful it is from those non-same-store assets.

Okay.

I will get you offline. Appreciate it.

Mr. Rogers, we have no further questions at this time. I would now like to turn the floor back over to you for closing comments.

Thank you, Christine. And then, thank you everyone for your ongoing interest in our story, and your continued support. Take care, and thank you.

Ladies and gentlemen, this does conclude today's teleconference. You may disconnect your lines at this time. Thank you for your participation, and have a wonderful day.