Public Storage (PSA) 2005 Q3 法說會逐字稿

Good afternoon, ladies and gentlemen and welcome to the Shurgard Storage Centers Inc. third quarter 2005 earnings conference call. At this time all participants are in a listen-only mode. Following today's presentation, instructions will be given for the question and answer session. If anyone needs assistance at anytime during the conference, please press the star followed by the 0. As a reminder, this conference is being recorded, Tuesday, November 8th, 2005.

I would now like to turn the conference over to Mr. Dev Ghose, Chief Financial Officer. Please go ahead, sir.

Thank you, Operator. Good afternoon, and a very late good evening to those joining us from Europe. Thank you for joining us for Shurgard Storage Centers' third quarter 2005 earnings conference call. I'm Dev Ghose, CFO for the company.

With me on the earnings call today are Chuck Barbo, Chairman and CEO; Dave Grant, President and Chief Operating Officer; Harrell Beck, Executive V.P. and Chief Investment Officer; Steve Tyler, Senior Vice President of Retail Sales; Jane Orenstein, V.P. and General Counsel; and Steven De Tollenaere, Managing Director of Shurgard Europe.

Before we start, I will read the required forward-looking statement. The statements made on this call concerning the beliefs, expectations, intentions, future events, future performance, business prospects, business strategy, and earnings guidance for 2005 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 31st, 2004, which we filed with the SEC on March 29th, 2005; form 10-Q for the quarter ended March 31st, 2005, that be filed with the SEC on May 10th, 2005; form 10-Q for the quarter ended June 30th, 2005, that we filed with the SEC on August 9th, 2005; and lastly, form 10-KA for the year ended December 31st, 2004 that we filed with the SEC on October 14th, 2005.

On October 27th, 2005 we announced that our board of directors authorized us to explore strategic alternatives to maximize shareholder value. We are being assisted in this exploration process by Citigroup and Bank of America and by the law firm of Wilkie, Farr, Gallagher and Perkins Coie. The process of exploring this strategic alternative is now underway and we will not entertain questions about that subject on this earnings call.

At this time, I'd like to turn the call over to Chuck Barbo, Chairman and Chief Executive Officer.

Thanks, Dev. Hello, everybody.

I just want to make a few general observations before turning the call over to Dave. We've been working on some key strategic initiatives for some time here at Shurgard, and it is really gratifying to me to see the great progress we are making on all fronts that are reflected in the third quarter results.

We have been involved now in a redevelopment process on some of our older stores and we've had outstanding results out of these. We've had one that was almost a complete tear-down that is now up and doing very, very well, running way ahead of projections, and all of the other ones that we have done are running ahead of projections. And we think this is going to be a real opportunity for us to create value in the future as we go through our inventory of stores and take a look at these for opportunities for development and redevelopment.

The cost-cutting initiatives that we have been doing operationally in U.S. and Europe are definitely beginning to take hold. And we've gone a long ways toward strengthening the accounting and finance teams.

But what I really want to comment on is the -- both the U.S. and European revenue and NOI growth for the quarter. These are outstanding numbers. We've had just a wonderful, wonderful quarter.

Overall, revenues are up 7.8% and NOI is up 8%. And in Europe -- that's the overall -- in Europe the revenues are almost up 12% and the NOI is up almost 24%. And these are just outstanding numbers. And during some kind of of difficult times over the last couple of years, our operating group has really paid attention to the fundamentals in the business and have developed some outstanding numbers. And I'm really, really proud of those numbers.

And there's been a lot of questioning over the last 10 years about the wisdom for us going to Europe. Why are we trying in new markets? Why are we going into these things? I have been telling you all these stories, those of you who have been listening, for 10 years, about the wisdom of going over there and the huge opportunity that exists in Europe. And I think that now that we're over 83% occupied on a Same Store basis and we're getting 24% NOI growth on a quarter-over-quarter basis, that you can begin to understand my enthusiasm for this opportunity over there. We expect to have continued growth of those magnitudes into the future. And I'm really excited about it.

Now I'm going to turn the call over to Dave, who can go a little bit more in detail on the operating results.

Thanks, Chuck. Hi, everybody.

I will elaborate some on what Chuck was covering on the operating side of the portfolio first and then cover some of the real estate investment activities second.

Shurgard has a portfolio internationally in total of 624 stores in 8 countries and over 50 major markets. The combined revenue growth from this pool of total stores was in excess of 14% from the same quarter a year ago. NOI for all stores combined is up over 17%. As Chuck mentioned, a lot of this growth is coming from a variety of different areas.

As you know, we break our portfolios down into two basic segments. Those are the Same Store pool, of which we have 537 stores in that category, and the New Store pool, which is a grouping of 87 stores.

I'll start with the same-store pool first. Quickly on the global side, as Chuck mentioned, the Same Store results combined were up 7.8% on revenue for the quarter over the prior year's quarter. NOI after indirect costs were up in excess of 8%.

The New Store group, which is what we're looking to for significant growth in the future, those 87 stores represent about 18% of our balance sheet portfolio from a vested cost standpoint. And it is fairly meaningless to, frankly, talk about the improvement of the New Store group over the prior year since many of those stores have added since a year ago.

But I do think it is helpful to look at the previous quarter. And the NOI that these stores generated for Q3 of this year is over double what it was for Q2 of this year. And that is what's helped to move the New Stores' contribution to NOI from a level of 3%, which we reported in Q2, 2005, to this quarter's level of 5%. And as Chuck mentioned, we've made long-term and consistent commitment to investing in new growth stores and this group is definitely starting to generate a very positive contribution to the overall results.

I'm also pleased to state that the New Stores in this group that are developments, which is pretty much the majority of the stores in Europe, of over 40 stores, and about 17 of the stores are U.S. new developments. Over the last two years we have seen a continued acceleration in the rent up speed that we are getting from these properties compared to several years ago.

If we turn now and take a little closer look at the same store results, starting with the U.S. geographic area. The U.S. stores, which are about 440 of the properties in the same store grouping, generated a revenue growth of over 6.8% and that came from a combination of both occupancy and rates, rates being the majority portion of that of close to a 5% lift over the prior year to a current average rate of $12.24 for the quarter.

Occupancy also did move, though, from 86% average last year to 87 for this quarter. And this was a fairly broad-based growth in revenues across pretty much all of the regions that we operate in. I'll give you a brief rundown on that.

The strongest region we had continued again to be the Southeast, including the Carolinas and Florida, where we saw an average growth in revenue of approximately 14% over the prior year. And the second place in our grouping would be coming in on the West Coast, with about 7% growth, and the Northeast region was close to 6%. And our weakest regions, if I can call them that, would be the Southwest, which is about 3.5% and the Great Lakes, notably Detroit, probably our softest market in that area, up about 3.6%. So as I said, each of the regions that we work in are seeing some level of solid gain on the revenue side.

On the NOI side, this was also our best quarter of the year. For the U.S. stores, turning in an increase after indirect costs of 5.5%, and I believe that you will continue to see that level of improvement as we go into Q4. The reasons for that is that we've been able to hold our occupancy levels through October on the Same Store pool and maintaining pricing so we believe we are well positioned as we go through this quarter.

Notably, I'd also like to point out, we've been focused on the reduction of indirect costs. We did make a significant commitment to boost our field resources, starting about a year ago. And we're very pleased with the result that's we're getting. That cost in the U.S. has now stabilized and actually is down about 3% from the previous quarter, Q2 of 2005.

And we expect to run at a stabilized run rate comparable to what we've reported here for Q3. You will actually notice in our Q4 results from last year was really where this cost increase took place. So it will pretty consistently annualize, quarter-over-quarter, next quarter.

One other comment, we did mention that while we managed to dodge most of the hurricanes that have gone through the Southeast this year, we did suffer damage to a modest level in our stores in southern Florida when Hurricane Wilma came through. And we have 7 stores in that area, but they are unusual in that they are very large on average. One of them in particular is the largest store in our system, in Fort Lauderdale, with almost 300,000 square feet. But all of our stores in southern Florida are above average in size and we've estimated, and I emphasize the word, it's an estimate at this point, that we are looking at probably about 1 million to 1.2 million in repair costs that would be below our insurance deductibles for the repair of these stores.

All of the stores are back on-line and serving customers and we don't believe we'll have much disruption to our revenue streams from these stores because although we have a fair number of units that are off line due to damage, the properties are big enough that we've been able to relocate tenants and continue to service new customers that we're picking up in the area.

So as I mentioned, we believe that the 4th quarter will continue to look good as the results have accelerated in the U.S.

Turning over to Europe's side of the coin for Same Stores, this group, a much younger group in general than the U.S. stores, but it represents the first 96 properties that we built in Europe, had revenue gains of 11.8% for the quarter over the prior year. Contrary to the U.S., virtually all of the gain in revenues has come from a lift in occupancy, where the average has moved from 71% occupancy for this group last year to 81 average for this quarter. And this group actually finished September at 82.5% and has migrated somewhat north of that occupancy into October.

Much of this occupancy is due to some of our improved marketing strategies, but also notably, more aggressive pricing tactics in most of our markets. You will notice that the average rate that we were collecting on these was actually down about 2% from a year before. We will continue to use these tactics as needed, just as we do in the U.S. As we now get more and more of the stores into the high 80s, low 90% occupancies across markets, you will see pricing power restored and we will become more aggressive in rate movement in general.

But overall, we are extremely pleased with the results this has had on occupancy. The strongest occupancy gains have been in Sweden, the Netherlands, and Denmark. All markets have shown gains in occupancy.

The lowest level of gain has come in occupancy in London, which is our most competitive market that we operate in. You may recall, a year ago London was our strongest performing market, but the recent cooling in the housing market in the London area and the economy in general has had a modest impact on our operating results there this year compared to last. Belgium is the other market, one of our older, more mature markets, that had only modest gains in occupancy.

In general, I think the outlook is solid for virtually all the markets that we're operating in at this point in time. We do see in our newer stores in Germany, which is the most recent market we've entered into, that we are still experimenting with the right balance of pricing, marketing message, and people. We will continue to grow that market at a cautious pace until we get the right mix. This is very similar to the experience we had when we started in Belgium, which took us a good couple of years to get the right rhythm going before we were able to move rates at the same time as occupancy.

And finally in the Same Store results, I do want to point out, one of our biggest initiatives was to begin to cut the indirect costs we were incurring In Europe through this integration initiative with the U.S. We took, as you may remember, a significant restructuring charge in the prior quarter to kind of kick this process off. The results, I think, are very obvious. The costs for the Same Store indirects is down 10% from the prior year. And it is actually down about 19% from the prior quarter, Q2. And this is what's contributed to such a significant boost in our overall NOI growth of about 24% for the pool this year.

As I now look, going forward, I believe you will continue to see us maintain momentum. I don't expect that we'll continue to grow our occupancy in Q4, naturally. I believe you will see that stabilize and back off a little bit as we go into the winter months. But I do think as we move into the spring season we will again pick up the momentum on that, and pricing as well.

That's my view on the operating side. On the real estate investment side, we continue to have good results there. We opened four stores during the quarter, two in the U.S., one is in Portland, which was this complete rebuild that Chuck mentioned. It's shot out of the ground, occupancy-wise, very well in the first few months. And it is generating rates that are about 130% of what we had in the old store. This is the benefit of being able to upgrade from traditional drive-up space to climate controlled space. And as I say, we are very pleased with the results that we're seeing in that.

The other store is San Francisco in the U.S. As we mentioned before, opened in the Presidio, has also gotten off to a very strong start.

The two stores we opened in Europe, one in Cologne and one in London, also doing well to begin with.

We sold three U.S. properties, again continuing with our program of selectively culling stores that are not strategic in our overall long-range plans. This includes exiting markets that we don't have a long-term growth plan is, such as Spokane, which is where we had two of these stores.

Our development pipeline is -- got about 20 stores that are in construction or pending construction. Nine of those are in the U.S., eleven in Europe. We actually expect about 7 of these European stores to open by or about year-end.

And Chuck mentioned before, probably the aspect of our investment program that's the most exciting to us right now is the opportunity for redevelopment of stores in the U.S. portfolio. Obviously, we've built this portfolio over 30 years. Many of them go back 20, 30 years in age and are very much under-utilizing the real estate or the self-storage operation capability there. We have opened 8 of those now that range from a modest $0.5 million investment for putting in climate control, to a major tear-down. And all of those are moving ahead of projections as we speak. And we have another 20-some of these projects that are in various stages of development. We see this as a continuing process over several years into the future.

And on the one negative side, I will admit that I'm disappointed in our ability -- our inability to get a grip on our forecasting of expense real estate costs versus capitalized. This is something we talked about on the first quarter call, that from last year we changed our method of estimating costs to be capitalized from internal real estate groups. We shifted to a highly refined time sheet system, both in the U.S. and Europe. We have been disappointed in the speed at which we've been able to integrate this into our field teams and have not found a level of capitalized costs we would have expected. It is coming down, the expense amounts are coming down as we predicted, just not at the same rate that we hoped. And that is something we will continue to refine as we go forward.

The only other area, moving out of real estate at this point, to just general cost reduction. The other key initiative we talked about on the last call had to do with getting our general and administrative costs under control. And something we expected to achieve over the next 6 or 7 quarters. I am pleased to report, we are making good progress there as well. You'll note that we have reduced our G&A costs fairly significantly from those reported in the second quarter of this year. And personnel costs have stabled and actually decline from a quarter ago, especially as we start to move temporary employees that we needed to help us with the accounting group out and the permanent group has taken hold and moving forward with the process. So I'm very pleased with the general progress we're getting in the G&A area. And as I say, I believe you will see us continue to stay on the track that we originally planned.

So in general, very pleased with the progress our portfolio has made, our real estate initiatives and cost-cutting initiatives. I'll now turn it back over to Dev, who will talk more about the finance areas and wrap it up.

Thanks, Dave.

During the quarter we increased the size of the domestic revolving credit facility to 350 million. So together with the term loan facility we have a capacity of 700 million under the combined bank line. And we have approximately 130 million of capacity left on that. Both lines are due to expire in February 2008.

Now to earnings, the Company reported a net loss to common shareholders of 1.4 million or $0.03 a share after taking a charge of 12.7 million or $0.27 per share for costs of professional advisors that I discussed before. For the third quarter 2004, net income for common shareholders was 15.1 million or $0.33 per share.

Funds from operations before considering the takeover [inaudible] costs was $0.55 per share for the third quarter compared to $0.63 per share for the same period in 2004.

A quick breakout of the year-over-year variances are: we had strong NOI growth this quarter, contributing about $0.21. But these improvements were offset by higher borrowing costs in the U.S., about $0.12 per share, and in Europe about $0.05 per share.

We had a gain from foreign exchange in the third quarter of 2004 of approximately $0.04 per share, which did not occur this time. I'll talk more about that in a moment. But higher G&A costs due to higher audit and SOX costs, up approximately $0.02 per share; higher personnel costs as we stabilized a team of approximately $0.02 per share; higher uncapitalized real estate development costs of $0.02 per share; and lastly, dilution from stock options and other matters of approximately $0.02.

One of the items that we wanted to speak a little more about was interest expense, which has risen by about $7.5 million over the same period last year. Correction: 7.2million.

U.S. interest expense increased by nearly 5 million. Of that, we had approximately 200 million more outstanding and that contributed part of it. But the bulk of the increase had to do with higher interest rates, which were approximately 200 basis points higher.

In Europe, we converted from variable rate debt to a bond, basically a fixed -- which gave us fixed rate financing and that was approximately $0.05 per share or $2.5 million.

You will have seen in our prior income statements, we had some volatility from foreign exchange. This all related to inter-company debt, which was being marked to market each quarter. With the purchase of Fremont interest in Shurgard, Europe as of June 30th, all of that debt has been reclassified to long-term and therefore all of these interest exchange rate changes now occur through the other comprehensive income portion of the income statement.

That's all we had in our prepared remarks. I'd like to turn the call over for Q&A.

Thank you, sir. [OPERATOR INSTRUCTIONS] And our first question comes from Jay Leupp with RBC Capital Markets. Please go ahead.

Thank you. Good afternoon. Here with Brett Johnson.

First off, I know you are not taking questions on the offer outstanding, but could you at least give us some color on the run rate for legal and advisory costs with the $12.7 million charge this quarter? Is it safe to assume that your legal and advisory costs for modeling purposes are going to run 4 to $5 million a month?

And then also, could you give us some guidance with respect to Sarbanes Oxley 404, anticipated costs and timing going forward?

Jay, this is Dave, I don't mean to be uncooperative, but we are serious that we're not going to try and speculate on exactly what the costs or other aspects of this process are going to be at this time. We will be happy to try and address your question on the Sarbanes side.

Jay, in prior quarters we've mentioned that the cost for audit and SOX compliance would run in the order of about 11 million this year. It's still in that kind of a ballpark and these are costs that we are incurring as we move forward to 2004 compliance, which we have completed in 2005. We expect these costs to come down over time, as Dave has spoken to earlier.

Okay. And then with respect to, Chuck, your comments on Europe, can you also talk a little bit or give us some guidance on how you plan and expect, now that the portfolio is filling up, how you plan to support a brand name and achieve some economies of scale across borders and across languages, and what you think those costs will be, potentially, in 2006?

Well, I don't view it as an issue about costs over there. I mean, we have a platform in Europe from an operational standpoint that we've built up with high growth in mind. And so we could probably, without incurring any additional costs, we could probably double the size of our portfolio over there. The only place you'd expect an increase in cost is either at the store manager level or at the district manager level. And so it's -- it's just -- it's a very stable situation. But we have more horsepower than we need for 140 stores.

Jay, another way to think about it is the main cost increase you incur in Europe is anytime you move to a new foreign country, that is where your main structural costs come in. When we moved into Germany, the last country that we moved into a few years ago, we had to put all the infrastructure in place, both on the development and the operating side. And it obviously takes several years before that country has -- economically standing on its own feet.

But as we announced before, we felt by moving into Germany, which is the largest country in Europe, we now had representation and access to enough markets in the 7 countries we were in that we could grow comfortably within those markets for quite a few years into the future before we entertained moving to a new country. So, really, we expect that we will continue to actually be cutting costs, not increasing costs. And most of those cuts will be coming, as we mentioned before, just through the natural consolidation of the U.S. and the European plat forms. As I mentioned in the last call, because of the nature of who the main investors in Europe were before, Europe had to be treated as a completely free-standing, stand-alone company up until we acquired Fremont's interest in June. And as you see, we've fairly quickly moved to consolidate and reduce costs in quite a few areas.

You know, Jay, one other point I would have to make about that is that on the continent we own over 30% of the market share over there and our brand is very well recognized. In fact, it is probably more recognized in Europe than it is in the United States because it is diluted so much by so many other stores. And we own the finest group of -- that 140-store portfolio of properties over there is the finest group of self-storage property that exists anywhere in the world.

Okay. And then just one follow-up: Can you give us just a little bit of color domestically of what your plans are for external growth, specifically, acquisitions in the 4th quarter and in '06 and where you are seeing cap rates in your property classes and markets?

Yes, we don't ever try to speculate about acquisitions that may or may not come out, since not only are they market dependent, it is dependent also on other competitors that are bidding for those.

Our position on acquisitions remains the same. We will remain selective and opportunistic in the current environment and most of our focus will be on development of new properties and most of those development activities, as we've mentioned before, will stay focused on both the west and east coasts, which we perceive as the higher barrier to entry and higher rate markets for our industry and we will continue to keep a steady rhythm of focus on redevelopment.

Far and away, our best risk adjusted returns are coming in the redevelopment area. We underwrite a redevelopment to the same standards as a new development, expecting stabilized yields north of 11%, and obviously we see far less risk in a redevelopment property, both in a permitting standpoint as well as a rent-up, than we would in a brand-new development exercise.

Thank you.

Yes.

Thank you. Our next question comes from Michael Knott with Green Street Advisors. Please go ahead.

Hey, guys. I think you touched on this in your prepared remarks. But I was wondering if you can give a little more color. What is the European customer reaction to the lower rates? It seems like that is having a direct impact on the higher occupancy and just, can you give some color on -- are you finding that they are price sensitive for self-storage? And then also, is any of the benefit of higher occupancy attributable to the integration of the operation across the continent?

Sure. Michael, this is a very personal experience to me because when I first moved to Belgium and we started to experiment, rates is definitely a part of your marketing cost. And in the game of self-storage, it is all about hit ratio. You get a certain number of inquiries and out of that you want to close a certain percentage of the inquiries. When you're full, you can afford to take a very low hit ratio. And when you are not full and you have plenty of space available, you will work aggressively to find to what extent rates make a difference.

The band for doing that in the U.S. is much narrower now because the markets are more established. The rates have much more of a historical pattern. In Europe, you're using your rate strategy as part of your education. And when you make a decision to get aggressive on cutting rates, you are making a decision to bring in more people to learn the product, to help spread the word. It is far and away your best marketing tactic when you are trying to introduce a concept.

But that goes also hand in hand -- so there is no question that this process of selectively cutting rates helps. Now, we don't allow our managers to make rate cuts in areas where units are full or highly occupied. It is only in the areas that we feel we can make the most movement, occupancy-wise.

But you have to remember, this is also coupled with our decision to selectively back off on the pace of development in certain cities. As we've said on prior calls, you know, we believe you have to get enough penetration in a city to make it cost effective to manage, long-run. And so you will take some short-term head winds, if you will, on occupancy growth when you are bringing in a tremendous amount of supply percentage-wise in a short period of time, like we did in the Netherlands in particular. Netherlands had the biggest boost in occupancy this past quarter and it is partly because we reduced significantly the store openings in there from about a year ago.

So it's a combination of those things that clearly get you a chance to get a higher percentage of customers coming in.

In hindsight, would you have pursued this kind of pricing strategy earlier, had you seen what the results would be?

Well, as I said, when we first started in Belgium, we became very aware -- and obviously from our U.S. experience, in Belgium when we first started to experiment we cut the rates by over 50% before we found real traction and acceleration in occupancy. And today those rates are probably three times what we were at at the time we started. So, it is not that we weren't aware of it. It is just that you're at the edges, constantly experimenting.

When we moved into the Netherlands to begin with, it was a totally different experience. It shot off like a rocket and so we didn't need to do it. But as we started to put in more and more stores, that drove the need to be more creative on the rate side.

In hindsight, would I have pushed this a little faster? Yes. I'd have to say that this is something we struggled internally with for several quarters before we finally got the message to sink home. And if I could do it over again, yes. Probably a couple quarters earlier would have been right.

Well, but there is one other point that I would have to make and that is there is no difference between customers in Europe and customers in the United States. I mean, it is all a function of supply and demand. And the European -- especially in the inner cities in the European cities, it's going to be very, very difficult to overbuild those markets, because there is just not a lot of real estate available. And that's where we have been focusing our attention.

So I am not at all concerned about the fact that Europeans are more rate sensitive or will they take higher rates. Every single time we have gone through one of these processes, we've started out with relatively low rates during the very early stages of the rent-up and then slowly raised the rates up. And, as we found in Belgium, we had about four or five years of 20% per year growth in revenue out of those stores once we got them filled up. Because once the customers understood and could understand the value of the experience in self-storage, then they would be willing to pay higher rents. At the very beginning they didn't really understand the value of the experience and so they were a little bit more rate sensitive.

Also, as more and more people have become aware of the product, you don't need to be satisfying the needs of the people that are not willing to pay the going rate for the space. You know, when you're running out of space, you can raise the rents and only cater to those people who are willing to pay the price.

I have one last technical question for Dev and then I'll yield the floor. On table 18, the labeled gross book value, that implies it's an accounting value that would give effect to the price paid for acquisitions? A foot note, [inaudible] costs, is that an accounting book value or a development cost?

I believe this is the book -- gross cost.

Are you referring to the comparison between the development cost of the properties and the book value of the properties? Is that what you were saying, Michael?

I'm more interested in the original development costs as opposed to --

Yes, the original development costs you can find -- if you go to the vintage tables that we have created for Europe, if that's what you're interested in.

Okay.

If you go to table 16 or 15, because we've now provided a Euro only table as well, just so you can get rid of some of the exchange rate noise --

And that's where you see both -- you see the development costs as well as the total book costs. And this gross book value tracks to the total book cost that we have.

What that allows you to do is assess how properties are performing from a pure development standpoint and obviously this company only owned a small percentage of the European assets in the beginning. And so most of its investment is from the -- through the acquisition side, which is what's reflected in the other column.

Right. Not to dwell on this, but I just like the table 18 because you break it out by your different ownership pieces, where it is harder to get the pro rata on table 16. What you referred to. Thank you.

But that's what the connection is.

Thank you. [OPERATOR INSTRUCTIONS] At this time, I show no further questions. I'd like to turn the conference back over for any concluding comments.

Well, thanks, everybody, for participating in the call. Thank you, Operator. Appreciate it. We're all done from this end.

Thank you. Ladies and gentlemen, this concludes the Shurgard Storage Centers, Inc. third quarter 2005 earnings conference. If you would like to listen to the replay of today's conference, you may dial 303-590-3000 or 1-800-405-2236, and you will need to enter the access code of 11043936 followed by the pound sign.

Once again, thank you for participating in today's conference. And at this time, you may now disconnect.