Public Storage (PSA) 2004 Q1 法說會逐字稿

Good morning and good afternoon. Thank you for joining us for Shurgard Storage Centers' first-quarter 2004 earnings conference call. My name is Dev Ghose. I'm the CFO designate for the Company, and I expect to take over the CFO responsibility later on in August, 2004.

With me on the earnings call today are Chuck Barbo, Chairman and Chief Executive Officer, Dave Grant, President and Chief Operating Officer, Harrell Beck, Executive VP and Chief Investment Officer, Steve Tyler, Senior Vice President of Retail Sales, and Bruno Roqueplo, President of Shurgard Europe.

Before we start, I just wanted to read the required statement which is the statements made on this call concerning the beliefs, expectations, intentions, future events, future performance, business prospects and business strategy and earnings guidance for 2004 and beyond constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act and are based on several assumptions. If any of these assumptions are not satisfied or prove to be incorrect, actual results could differ materially from those indicated in the forward-looking statements.

For a discussion of additional risks and other factors that could affect these forward-looking statements and Shurgard's financial performance, please see Shurgard's annual report on Form 10-K for the year ended December 31, 2003 filed with the SEC on May 17, 2004 and the first-quarter 10-Q for 2004 filed on July 12, 2004.

I'd now like to turn over the call to Mr. Grant. Dave?

Good morning and afternoon to everybody. Thank you for joining us on this call. We are actually very pleased to be able to have this call. It's been all the way back since November since our last earnings call, and we are now officially caught up with all of our 10-k and SEC filings, and so we're very eager to be able to talk about the business. We will keep our prepared comments fairly short today and try to provide more time for Q&A to help people in making the adjustment to our whole new look. I guess that would be the first thing that I would comment on is this first-quarter report that you have all seen is different in a couple of ways. One is it reflects our substantial increase in our investment in Europe and at the same time shows everything fully consolidated on our financial statements, including Europe. I would point out, it's not only our investment in Shurgard Europe but also fully consolidated our joint venture with First Shurgard, which we are a 20 percent owner.

A couple of things you'll see as a result of that, obviously comparing even going back to our 10-k, a significant increase in our total balance sheet size. But it's also quite a change in the profile of our portfolio. A couple of things I'd point out is we have a substantially increased amount of stores in the new store category. Roughly 20 percent of our invested cost of properties in Q1 are of the new store category, and they only account for a little less than 3 percent of our total NOI reported for that period. Naturally, we're going to have more of a growth-oriented look, going forward.

Another thing obviously to point out, something we talked about in prior releases, we've now, in the first quarter, finished the complete exit of the Storage to Go division, and you can see the final write-offs that we have relating to that, so we're back to a more-focused business platform.

If I make a few comments about actual business performance in the first quarter, starting with domestic, we had a good quarter compared to what we've been experiencing over the past, I'd say, six quarters. I would characterize our improvement in same-store results as being modest. It's certainly good by comparison to previous quarters. It's the first time in a while we've seen occupancy growth and increase in rates at the same time, and I will say, though, that we are still not seeing any significant uptick in our inquiry levels. I don't think it's appropriate for us to say that this is a fundamental uptick in demand. We are improving on our closing rates, which has been good for the demand that we are getting. Another additional factor that's been a big help is we've seen a continuous decline year-over-year in our move-out rate. Translated basically, tenants are staying a longer period of time, both commercial and residential. That certainly contributed to the occupancy gains.

Expense controls -- expense did fairly well and controlled during that first quarter as well.

This improvement is fairly broad-based. As far as improvement in revenues as you look across our various markets, virtually all of our markets with the exception of a couple showed actual quarter-over-quarter gains in revenues, so as I said, it's a fairly broad improvement. As we mentioned in our outlook, we believe we are well-positioned, given performance so far, to see that type of performance continue throughout the balance of the year.

I look over to Europe, we also had very good same-store growth but again, I would caution, this is a more volatile pool of same-stores. Unlike the U.S., you've got a much newer group in general. For those of you that have tracked us on a consistent basis, you may remember our same-store pool is only 47 stores in 2003, and that has now grown by 50 percent to 72 stores in the portfolio in this category. That obviously creates a more dramatic increase in same-store performance, and so as you try to analyze those results more closely, I direct you to the vintage tables as we call them that help you separate out the newer stores in that group. If you do that, you'll notice that we still had good, solid growth in our older properties, showing about a 4 percent improvement in NOIs before indirects and about 4.5 in revenue, so consistent with the U.S. experience.

There, we're seeing more of a mixture. Our market performance in France is particularly strong. Also seeing very good results out of our newer stores in the London area. Sweden has, through some management of rates, started to show good rebound in occupancy. A market that we are most focused on improvement-wise right now is the Netherlands where we added a lot of stores over the last three years and we have recently curtailed back our development for the time being, allowing that group to absorb some of the space, because our performance was not as strong as it had been in previous years there.

Other highlights I would mention that were covered in our releases, some of these being subsequent events to the first quarter, include -- we have come to an agreement to buy out our partner in the Chase Properties (ph) joint venture, which involves 21 U.S. stores. That's a transaction we expect to close in mid-December of this year. We had previously announced that our second joint venture, the second follow-on to First Shurgard -- which I think we will call either Second Shurgard or First Shurgard Two -- which is a very similar type of deal to build about the same number of properties in Europe, around 35. We did enter into that agreement in May, and we expect to announce shortly the actual closing of that joint venture with the debt here shortly.

As you may recall, on the earnings call from November, we talked about a plan to shift a bit of our strategy in our portfolio management and focus a little more attention on the outright sale of some properties that don't really meet our long-term strategic goals. As we've told you before, we continue to see a pretty buoyant market, a seller's market for existing properties in the U.S., and some of those early properties we identified have now started to sell. We did announce just recently the sale of four properties in Southern California and we expect to continue to see modest, selective sales as we kind of prune the portfolio, going forward.

Those would be the conclusion of my prepared remarks about first-quarter results and we'd now like to turn it over for questions.

Thank you, sir. Ladies and gentlemen, at this time, we will begin the question-and-answer session. (OPERATOR INSTRUCTIONS). Paul Adornato with Maxcorp (ph) Financial.

Good morning. Good afternoon. In the press release, you provided 2004 FFO guidance at the low end of $2.20. Just doing the math, subtracting out 39 cents, that leaves $1.81 for the rest of the year -- implies, if the quarters are flat, about 60 cents per quarter. Am I doing my math correctly? Perhaps you could provide a little bit more detail in terms of the quarterly progression for '04?

First of all, your math is right and we do expect that to not be flat. I think there'll be a couple of things that will be competing in opposite directions. As you know, seasonality Q2 and Q3 are usually our best quarters, so in that sense, you'll get better contributions from your same-store pool, or from all your stores for that matter. During those periods of time, in Q4, we will show a little burn-off as you go into the slow season. But on the other hand, as we mentioned before, you've got a much larger component of stores in rent-up now that we do expect to see period-over-period improvement that would be non-seasonal in nature, so we do expect to see a step-up as far as the progression of FFO as a result of that.

I think the only other thing you'll find when you're doing your kind of same-store comparisons, year-end and year-out, it's really not until Q3 that you start to see, in our financial statements, the comparative reflection of our increased ownership in Europe. As you may remember, we started to increase our ownership from the 7 percent level late in Q2 and really most of the transactions done in Q3 to get to the 85 percent level. So as you move into Q3, you'll begin to get at least a more apples-to-apples comparison as far as our ownership level goes.

Okay, thanks. The next part deals with the decrease in the level of new development that you guys will be undertaking. Could you tell us what the average occupancy is on the combined portfolio, that is the same-store and the new-store portfolio today, and how you expect to see that increase over the next couple of quarters as you stop starting construction on -- or as you develop fewer stores, going forward?

Are you talking about for combined Europe and U.S. together?

Either. That would be helpful, but if you want to do it in pieces, that would be fine.

Well, I think the main way that I can describe it is, really from the beginning of the year, Paul, would be the easiest for me -- is when you add in Europe, our ownership -- and obviously we refer to our portfolio quite often in total, regardless of what our ownership percentage is. But when you take the percentage of ownerships that we now have in Europe, it effectively -- when you merge that in with the U.S. portfolio, it had the effect of bringing our overall average occupancy down about 5 percentage points. So, if you can -- (multiple speakers) -- pardon me?

I'm sorry, what is the absolute level?

It was at about 80 percent blended at the beginning of the year, right at the beginning of the year. When you merged in Europe, that brought that down to about 75, to give you a sense of the impact. I don't have it off the top of my head for the end of this quarter.

Okay. In terms of modeling, could you give us a sense of the level of new development, or could you talk about how that 75 percent level should increase over the next 18 months?

Well, I can certainly give you a few data points to think about how that all translates into the model. Obviously, I will leave to your alchemy, as they say. But as we had stated before, we are on a program to do in the neighborhood of 10 to 15 new development stores in the U.S. on an annual basis. It's very selective in nature. We are mostly, for the time being, focused on the coastal markets where we find better barriers to entry and better pricing power.

Supplementing that is the continued focus we've got that started just recently on redevelopments of properties. That is something that we began to focus on in earnest about nine months ago, and we're just now starting to see some of those projects begin to move into production. They will be, I would say, in a range of anywhere from .5 million to as much as 2 million, depending on the specific project that is involved. They will begin to build up speed as we move into the subsequent quarters and as we move into those quarters, I will be able to give you better visibility of the actual speed that they are coming online. But again, I would expect something in the neighborhood of, typically, 10 to 15 of those types of projects once we are up to speed.

As far as Europe goes, we're going to continue with a pace of about 20 to 25 stores a year. Again, those are all going to be done, at least in the foreseeable future, through our joint venture relationship over there. Again, I want to emphasize that, under FIN 46 guidelines that we now comply with, we fully consolidate all of those properties, even though we have only an outright ownership percentage of 20 percent. That's our liability percent as well. So, as you try to do your analysis, remember there will be a fairly large minority interest back-out that is reflected in our earnings statements as a result of that.

As far as a rent-up speed goes, it's a bit of a mixed match. Some of the properties that are coming online recently in the U.S., we've been pleased by seeing a faster pace of pick-up and can't really nail that down to any one specific thing. Certainly, I think our pre-store marketing efforts are beginning to pay off in trying to help a booster of those.

In Europe, as I said, we've got a mixture in general, though I would say that if we are still on a pace that's more about 36-months speed, depending on the market -- some faster, some slightly slower.

Okay, just to follow-up, on the redevelopment projects, those are revenue-producing dollars being spent? It's not --?

Oh, Absolutely. These be treated just like any new development. They have to go through our real estate investment committee; they need to meet our minimum-return hurdles. Probably why we are so excited about them is they are giving us good, accretive returns while at the same time we are able to upgrade and improve some of our image on some of these older properties, some of which go back 25, 30 years.

Okay, thank you so much.

Paul, one of the other things -- this is Chuck --.

Thank you. Our next question is from Michael Knott with Green Street Advisors.

Good morning, guys. First question -- I was a little surprised with the purchase of the 80 percent interest in the development venture, just from the standpoint of when you guys reported your 10-k, you guys did not want four out of the five properties they were wanting to put to you, so I was just wondering if you could talk about sort of the apparent flip and how that appears, and then also if you can comment on what you think those properties are worth, that 80 percent interest is worth, what you paid for it compared to what it's worth?

Sure. Well, it is two different processes. What we described at the 10-k point in time, as you mentioned, is exactly right. There was a formula put in our relationship that made us account for this joint venture as a financing joint venture. While our partner had the right to put properties to us at a formula price, which was driven off an internal rate of return, we ultimately were not required to buy any of those properties. But if we did want to exercise the right to buy these, it was based on that formula.

Of the first group of properties put to us, four of them we did not see being at a value that made sense for us to buy on that formula basis, so we declined those. You will actually see that, since we declined those in the first quarter, they actually roll off of our balance sheet and financial statements in Q1; those show as a disposal of properties. We had no longer any obligation to buy those or any right to buy those either.

Subsequent to that, we did sit down with our partner and talk about an overall, global approach to coming up with a settlement and that's what we announced just a few weeks ago -- that, for a price that we felt was a good, solid market price and was a fair deal for our partners at the same time, we've agreed to buy them out of the entire partnership, including those four properties. We will step into these properties in total ownership in late December, and they will be around an 8 percent yield would be my guess in 2005 or our first year of full ownership.

Thanks, that's helpful. Second question, the California sales -- can you comment on how the pricing came out on that and sort of your rationale for selling (indiscernible) (inaudible) think it's a better time to be selling as opposed to buying, which I would probably agree with.

Well certainly, based on our luck, if I can call it that, in buying or finding properties to buy, we're certainly finding, in general, it's better to be on that side of the fence than the other.

Regarding the California sales, a couple of things -- another thing that's new is you'll see that we have an element called discontinued operations now split out on our income statements for the first quarter. That is going to be probably a regular feature, going forward, because, regardless of materiality, any time we sell a property that we no longer have an ongoing interest in, it will be pulled out of our ongoing revenues and expenses and classified as discontinued. So even those properties were not sold in Q1, they were sold in Q2, because the sale happened before we issued our statements, we went ahead and pulled them out and reflected them as discontinued ops. So it's very easy for you to go do the math but you'll see that, on our first-quarter numbers, that would be an annualized cap of about 8.4 I think it is, from our standpoint. The seller obviously looks at it a little differently because they have got to deal with a bump in real estate taxes and things like that, but I think that would give you a pretty good benchmark.

Why we picked those to sell is, you know, just because it's a good time in the market to sell doesn't mean we're looking at any kind of wholesale movement. It's purely -- when we find properties -- and we asked each of our retail vice presidents to inventory what they have and where they've got properties that are not geographically in areas that are efficient for us to manage -- and we don't see ourselves committing to growing in those outer areas in the future -- then we have to take a good, hard look at whether or not we are better off, portfolio-management-wise, to exit. We exited, for example, a store back in December in Grand Rapids, Michigan. It was a very small deal but it was the only store we had in Grand Rapids and a long way from the rest of our base.

These four in California were out in eastern -- well east of Los Angeles in places like Fontana and Colten, and they are just much older properties and we would either be looking at putting them through the paces of an upgrade and retrofit like some of these other redevelopments, or sale, because we don't see heavy growth for our network in those areas and we found them to be very competitive areas with not great barriers to entry as well. So, that was the basis for those, and they were bought by an operator who had a good, strong presence there and would fit very well with their market.

Okay, just two more quick questions -- can you comment on why domestic marketing expenses were down? I appreciate the increased disclosure on the same-store expenses, by the way.

Good. On the marketing, a couple of things -- obviously, bringing on a fairly large increase in the number of stores that we've got even in the U.S., like bringing on Minnesota Mini (ph), for example, certainly helped spread some of those costs further. Probably the biggest component of that had to do with we had two telemarketing groups; we have our main call center in Phoenix, which handles all of our backup for the stores; then we had a smaller group based out of Seattle that was handling our national accounts. In looking at that, we found that to be a very expensive setup and not overly efficient, and we had more-than-sufficient infrastructure and capacity in our Phoenix group. By consolidating those two together, we literally cut the cost of that group in half and that was the direct impact you see there.

We also made some realignments in how we handle our field sales group. We cut back on some positions we didn't find very effective and reallocated some of the net dollars closer to the actual stores that, as I mentioned before, this is a very localized business in a lot of ways and we find we get good bang for the buck by really putting a lot of pressure right around the stores that need it the most.

That 20 percent decline did not reflect a purposeful intent to cut back marketing expenses to not try to buy occupancy -- (Multiple Speakers)?

No, we certainly -- hopefully, we think we're being smarter about how we use the dollars, and you constantly experiment with what's effective and what's not but no, there's certainly no attempt to make some kind of cutback in the process.

One last question and then I will give up the floor. The European occupancy, I was interested in just a little more detail on 47 of the same-store in Europe. In the 10-k, you guys broke out the '99 from the 2000, and I was wondering if the small increase in occupancy for first quarter for those 47 in Europe, if that reflected mostly the increase of the OO (ph) and Beta (ph) group as opposed to the '99 group which in the 'K' I think had a slight decline in occupancy, '03 versus '02.

To be honest, Mike, I don't know if I can give you a good answer on that. You are right; you're pointing to about a 300 basis point uplift for the group for 2000 and back, but off the top of my head, I don't have movement of the pieces between the 2000 group and the '99.

I think you'd find it's fairly mixed. I mean, I know that, as I said before, in particular places like Sweden, it was the older stores in particular that had done very well out of the blocks, had gotten cannibalized a bit and have now benefited from some of our price cutting and maneuvering there to help build those out. So I think you'd find it fairly well disbursed.

Scott O'Shea with Deutsche Bank.

Good afternoon. I was wondering if you could comment on the bank credit agreements that come due towards the end of this year. I think you've got the Europe coming due in December and then the domestic facilities in February. Just kind of what is the thought and timing on refinancing those?

Scott, well, I've got Harrell here with me. I'll let him comment a bit on that.

Hi, Scott. How are you? The European facility that we have was extended at the end of last year and it does turn at the end of 2004. We are actively working on refinancing that as we speak and would expect to have that accomplished in the latter half of the year.

With respect to our domestic credit facility, that facility does term in February of 2005 and now that we are current with our filings, we will look to refinance a portion of that. Then in addition to that, we will look to extend and renegotiate the credit facility that we have in place.

Do you see yourself taking out the term loan with a bond offering at some point? Is that contemplated?

At this point in time, we are just evaluating all our alternatives with respect to refinancing. That certainly is one alternative.

Okay. I was also wondering if you could just comment on the First Shurgard joint venture and First Shurgard Two. I was just trying to get a sense of timing as to how these facilities will fund the European growth. Is First Shurgard basically going to fund you guys through 2004 and then number two would be through 2005? Is that a rough way of looking at it?

It's pretty close.

With bringing on the second joint venture, it will give us development financing out into early Q1 or so of '06. The first joint venture does finish off later this year as the other one picks up.

Okay, that's great. Thank you. I appreciate it.

Paul Adornato.

I was wondering if you could also comment on currency exposure, given that Europe will be a bigger part of your operations.

I will pass that to Harrell.

Hi, Paul. How are you doing? With respect to our currency positions, with respect to Europe, all of our credit facilities that we have there are hedged in with respect to local currency. The issue is more one of as between the U.S. and Europe; we do not anticipate having any repatriation of cash flows in the foreseeable future from Europe. So to the extent that there is movement, dollar versus the euro, that will impact our financial statements.

I think one of the things that we said is that, when you look at our projections, we have assumed that the euro/dollar exchange rate would remain at about 1.20. Having said that, again, because you are adjusting both the revenues and the expenses on the P&L to the average exchange rate during the quarter, one of the things -- if you look at the euro/dollar exchange rate, to the extent that the exchange rate would move by about 20 basis points, the impact currently on our financial statements would only be about 2 cents a year.

Okay. Is that a reasonable -- will that relationship hold as Europe -- (multiple speakers)?

As we go forward and as Europe contributes a greater part of our cash flow, earnings and FFO, it will obviously have a more significant impact on us, going forward.

Brett Johnson (ph) with RBC Capital Markets.

Good morning, guys. It's Brett Johnson (ph) with Jay Leupe (ph). A couple of quick questions for you -- I was wondering first if you could comment on the concessions environment in both the U.S. and Europe and how you think that environment may change over the next few quarters.

Sure. I will let Bruno Roqueplo in Europe comment on the European indictment, concession-wise, but I'll cover the domestic side first.

We have -- in our more current environment over the last few months, we have seen a bit of a drop in the amount of concessions being given in general by competitors. Our concession levels were, for the first quarter, about 25 percent of our total transaction, so one out of four sales would involve a concession that's usually either a half month free or your first full month free.

As far as where we are getting that, that is highly focused. You'll see, in our more difficult markets, some places like Chicago, Northern California, where we are trying to build occupancy, we will be taking a lion's share of some of these. But in general, we are seeing that others who have benefited from occupancy gains just like we have started to back off those.

Maybe Bruno, can you hear me okay? (Multiple Speakers) -- on that?

Yes. The (indiscernible) Europe widely different from one country to another one. So, I would say that discount is used very rarely, you know, as the tactics or promotional tactics Europe, especially because we have no real competition as such in the market, in most of our market, apart from the UK market as such. When I look at the UK market, where discounts are probably part of the tactics because of the competition, I would say that there is no downtrend or major trend towards increasing discounts or challenge from the competition on the discount front as such.

The rest of the markets, we have again -- because of the lack of competition as such in continental Europe, we don't practice discounts. We started to discount a little bit in Germany at the beginning when we started our operation there, and then we came back and decided that discounting was not the proper promotional strategy to start with, so we are closing down discounts in Germany, so there is no real movement as such in Europe other than some temporary or some adjustments in the UK market as such.

Great. So then I guess, in the U.S. -- because it sounds like there is a bit more discounting there -- going into a seasonally stronger period of time, do you expect those to come down even further as your occupancy goes up?

Well, as I say, that would certainly be a natural trend as you are in the busy part of the year but to us, it's a very tactical element to use, store by store and market by market -- (multiple speakers).

Great. One more quick questions too, following up on an earlier comment of yours about the acquisition market, I was wondering if you could comment a bit on where you see cap rates in general in the markets that you would consider buying into and how you would compare those to your expected deals on your new developments, given the increase in the cost of development and then just in general what your expectations are for acquisitions this year and next.

Well, that covers a lot of ground! You know, typically, we are looking for a 200 to 300 basis points spread in a typical development once it's stabilized, including carry costs over an acquisition. But the thing that drives us acquisition-wise as much as price is how does it fit into our existing network? Unlike a lot of real estate sites, storage is one that definitely benefits from economies of scale, both in management, in marketing and supervisory management. So, for instance, a great store opportunity could come up in a very good market that we're not in but unless it's a nice network to begin with, like we had with Minnesota Mini (ph), which is, in our mind, a prototype for what we are interested in, we had no stores in Minneapolis before and it was a market we were interested in. We were able to get 19 stores in one shot. They are the number one operator there and certainly a very good quality that fits with us. So then we become very interested in pursuing that for strategic reasons.

On the flip side, I could get something that's the 10 cap, a good store standing by itself but we just get killed buying it and then going for quite a long period of time without having a network to support it. So all of those things have got to factor in. A lot of times with cap rates, you might find there is vacancy opportunity to build on that can come into play, but we've just seen, over the past couple of years in particular -- and I don't have anything new to really add to that -- is that multiple bids coming in from a variety of parties, a lot of them private parties, those that do their underwriting with high leverage assumptions, higher ones than we can use, and we've just not been close on the economics.

Have you maintained that 200 to 300 basis point spread with new developments?

That's definitely what we target to do and as we've mentioned before, if we have developments that are getting out of the block slower than we like, then that risk premium is being paid off in the sense that it takes longer for us to get there. Clearly, with some of the stuff we rolled out in 2000, 2001 and part of '02, where a lot of the underwriting had been done in the very hot economy and obviously rolled out into the recession time, we did not have that; it was slower than targeted but as I say, the more recent underwritings have been showing better results towards that target.

Perfect. Thanks very much, guys.

(OPERATOR INSTRUCTIONS). Our next question is from Chris Brown with Banc of America Securities.

Good afternoon. A real quick question -- it sounds like you can't say a lot about your financing strategies over the next few months as you're thinking about them, but can you just give us an idea, as you look forward maybe six months, given that you are ramping up earnings a little bit because a lot of your properties are still in the new store, what are you kind of looking at from a credit ratio perspective and ratings perspective? How are you targeting what you'd like your company to look like, say, six months from now?

Hi, Chris. This is Harrell. How are you doing? When you talk about the credit statistics, I'm not exactly sure what you mean. If you look at currently where we are, you know, our debt-to-total assets today are about 48 percent; that's based on unappreciated book value. If you factor in our preferreds into that and looked at debt plus preferred, we are at about 52 percent. Clearly, from a coverage standpoint, from an interest coverage standpoint, fully consolidating all of Shurgard Europe and 100 percent of the joint venture that we have there, our fixed-charge coverage ratio today is about 2.1 percent and interest coverage is about 2.4 times. Those, we believe, are clearly the low point in terms of what we would expect for the year. As we have alluded to earlier, we would expect our earnings and FFO to grow fairly dramatically in the last three quarters of the year compared to where we were in the first quarter of the year.

The other comment to make is, if you took just a pro rata piece of Shurgard, the first joint venture that we have, and only took our 20 percent interest in that, our interest coverage goes up to about 2.7 times.

Historically, I would say that we have been very comfortable with a strong, triple-B credit. Currently, B-double-A-2 and triple-B flat. I would say that we are comfortable at that level.

For not understanding the question, you did a pretty good job! The second part of it would be just kind of looking -- where are you guys right now on kind of a fixed to floating and how would you manage fixed to floating, going forward?

You know, we currently have about $670 million, $650 million outstanding on our credit facility; that's both domestically and in Europe. The split on that is about 43 percent of that is domestic and the balance of it is in Europe. As we have said, or as we mentioned earlier, the entire credit facility that we have in Europe, we are actively working on refinancing that and would expect to have something done in the latter part of the year. The domestic credit facility -- again, now that we have filed and our current with our filings, we will be able to begin to actively look at refinancing that as well.

You know, historically, we have had a target of trying to be in the kind of 80/20 fixed to floating rate, so right now, we're probably closer to something in the high 40s with respect to what we have on our lines of credit, what floats.

That's great; that's exactly what I was looking for. Thank you.

Thank you. Mr. Grant, there are no further questions at this time. Please continue.

If the are no further questions, that concludes our call for today. I appreciate everybody's participation and we look forward to talking to you after our next Q2 release.

Thank you, sir. Ladies and gentlemen, this concludes the Shurgard Storage first-quarter 2004 conference call. If you would like to listen to a replay of today's conference call, please dial 303-590-3000 or 800-405-2236 with the access code 11002798. (Operator repeats numbers.) You may now disconnect and thank you for using AT&T teleconferencing.