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SELF STORAGE MARKET OVERVIEWFirst Quarter 2013 SUMMARY
• Robust revenue growth for each REIT, ranging from 5.4% to 8.1%, and net operating income growth of 7.6% to 10.8%.
• Slowfirstquarteracquisitionvolumebypubliccompaniesasestablishedprivateequitycompaniesdeploymorecapital.Publiccompaniesprefer“off-market”transactions,providingbetterpricingthanthroughabroker-marketedsales process.
• Increased Demand
U.S.homeownershipratefellduringfirstquarterto65%,thelowestlevelsince1995,frompeakof69.2%in2004,according to theU.S.CensusBureau.Theaveragehomeownermovesevery9years - about the sameoverpastdecade.Averagerentermovesevery2to3years.
“Relativeto2004,7.2millionmorerentersandonly400,000newhomeowners.” -Capital Economics
• “Our results continue to be the best I have seen in my 25 years in the business.” -Karl Haas, Chief Operating Officer, Extra Space Storage
• Publiccompaniescostofcapitalatrecord-lowlevelsrangingnear5%forequityand3%fordebt.
• Promotionaldiscountsdownover10%fromlastyear.PublicStoragediscountsdown18%
• AcquisitioncapratesforClassApropertiesinprimarymarketsinthe5’sanddriftinglower.Mid-marketpropertiesinsecondarymarketscapratesinhigh6’stolow7’s.
• Implied Cap Rates based on common share prices: PublicStorage(PSA) 4.3% Extra Space Storage (EXR) 4.7% CubeSmart (CUBE) 4.8% Sovran Self Storage (SSS) 6.0%
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SELF STORAGE MARKET OVERVIEWFirst Quarter 2013 EARNINGS RESULTS
Public Storage Extra Space Storage CubeSmart Sovran
Number of Properties: 2,103 U.S. 189 Europe
965 517 471
Third-Party Management:Joint Ventures:
35-40 236279
140 2155
RevenueQ1 2013 vs. last year:(same-store)
+5.4% +7.5% +6.8% +8.1%
Net Operating IncomeQ1 2013 vs. last year:(same-store)
+9.5% +10.8% +7.6% +10.6%
Occupancy:vs. last year:
92.4% 88.6%90.8% 85.7%
85.7%79.3%
87.6%82.9%
Rent Per Occupied Square Foot: $13.79 $13.61 $12.93 $10.61
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SELF STORAGE MARKET OVERVIEWFirst Quarter 2013 EARNINGS RESULTS
Public Storage Extra Space CubeSmart Sovran
REVENUE & NET OPERATING INCOMEQ1 2013 Versus One-Year Ago
Q1 2012 Q1 2013
PHYSICAL OCCUPANCYQ1 2013 Versus One-Year Ago
5.4%
7.5%6.8%
8.1%
9.5%
10.8%
7.6%
10.6%
0.0%
2.0%
4.0%
6.0%
8.0%
10.0%
12.0%
RevenueNet Operating Income
90.8%
92.4% Public Storage
85.7%
88.6% Extra Space
79.3%
85.7% CubeSmart
82.9%
87.6% Sovran
78.0%
80.0%
82.0%
84.0%
86.0%
88.0%
90.0%
92.0%
94.0%
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SELF STORAGE MARKET OVERVIEWFirst Quarter 2013 EARNINGS RESULTS
Public Storage Extra Space Storage CubeSmart Sovran
Market Capitalization $28.24 billion $4.84 billion $2.27 billion $2.11 billion
Funds From Operations (quarter)
$1.57/share $0.46/share(+39.4%)
$0.20/share(+25%)
$0.82/share
Dividend Per Common Share (quarter)
$1.25/share $0.25/share $0.11/share $0.45/share
Dividend Yield 3.00% 2.30% 2.60% 2.80%
Common Stock PriceMay10,2013:52-WeekRange:
$164.27$129.77 to $167.68
$43.72$27.55 to $44.50
$17.14$10.72 to $17.70
$69.41$46.93 to $70.71
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SELF STORAGE MARKET OVERVIEWFirst Quarter 2013 INVESTMENT ACTIVITY
PUBLIC STORAGE: • AcquiredtwoselfstoragefacilitiesinArizonaandGeorgiawith149,000netrentablesquarefeetinfirstquarterfortotalofapproxiomately$14million.
• Under contract to acquire one facility inArizona consisting of 80,000 net rentablesquarefeetfor$8millionincash.
• About$170millionofprojectsunderdevelopmentorredevelopment,andexpecttorampupmoreinnextonetotwoyears.
• Developmentsonaverage150to200basispointyieldpremiumoveracquisitions.
• Acquisitionscompleted in2010havegeneratedreturnsofabout10%cash-on-cash,excluding 10% insurance and merchandise. This represents 100 to 150 point spread aboveunderwritingprojections.
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SELF STORAGE MARKET OVERVIEWFirst Quarter 2013 INVESTMENT ACTIVITY
EXTRA SPACE STORAGE: • Acquired partner’s interest in two existing joint ventures in the quarter forapproximately$12.9million,onepropertyinChicagoandoneinBaltimore.
• Fiveadditionalpropertiesundercontracttopurchaseforapproximately$53.6million,expectedtoclosebyendofsecondquarter.PropertieslocatedinHawaii,Maryland,North Carolina and Texas.
• Over9%morespacethanoneyearago.
• During the quarter, added 55 properties to third-partymanagement platform - 29propertiesonbehalfofKayneAndersonwithlocationsinFlorida,California,Ohio,and Indiana. Additional properties include 10 in Texas and 5 in Chicago.
• Acquisitiontargetscapratesinmid6’sorlow7’s,acknowledgingcertainhighqualitypropertiesinprimarymarketstradingatcapratesin5’sanddriftinglower.
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SELF STORAGE MARKET OVERVIEWFirst Quarter 2013 INVESTMENT ACTIVITY
CUBESMART: • AcquiredoneassetinPhoenixmarketfor$6.9million.
• Inmarketsveryinterstedin6%to7%capratesforstabilizedassets.
• Disposition of five assets for total of $11.4millionwith locations inHouston andIndianapolismarkets.NowcompletesexitfromIndianapolismarket.
• Awarded9newmanagement contracts.Nowmanaging140properties totaling8.5millionsquarefeet.
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SELF STORAGE MARKET OVERVIEWFirst Quarter 2013 INVESTMENT ACTIVITY
SOVRAN: • Acquired three self storage properties in first quarter for $22 million, featuringlocationsinSanAntonio(14thpropertyinthismarket),Boston(4thinmarket),andLongIsland(6thinthemarket),totalingapproximately131,000squarefeet.Fundedwithproceedsof“atthemarket”(ATM)commonstockoffering.
• Inplacecapratesof6.5%forSanAntonioacquisition(occupancy in low80’s),and5.1%inplacecaprateforLongIsland(occupancyinlow80’s).GreateropportunityforBostonacquisition,anewerconversionabout3.5yearsoldwithoccupancyof68%andlowinplacemarketrentsonly$13to$14whenacquired.
• AddedsevenstorestoUncleBob’sManagementplatforminthequarter.
• Sold$4.4millionequityinterestandmortgagenoteinjointventureconsistingofonefacility.
• Marketingforsalesixpropertiesforabout$30million.
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SELF STORAGE MARKET OVERVIEWFirst Quarter 2013 BALANCE SHEETS
PUBLIC STORAGE: • Issued5.2%PreferredSharesforgrossproceedsof$225million.
• Plans to issue additional Preferred Shares in near future to fund new development andacquisitions-hopefullybelow5%barrier.
• Approximately$400millioncashonhand.
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SELF STORAGE MARKET OVERVIEWFirst Quarter 2013 BALANCE SHEETS
EXTRA SPACE STORAGE: • Percentageoffixed-ratedebttototaldebtis80.2%asofMarch31st.
• Weightedaverageinterestrateonfixedratedebtis4.6%,andonvariableratedebtis2.3%withcombinedaverageinterestrateof4.1%.
• Averageweightedmaturityofapproximately5.6years.
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SELF STORAGE MARKET OVERVIEWFirst Quarter 2013 BALANCE SHEETS
CUBESMART: • Sold100,000commonsharesthroughits“at-the-market”equityprogramataveragesalespriceof$15.30pershare,resulting innetproceedsof$1.5million.3.8millionshares available for sale under existing Sales Agreement.
• Downto$24millionofdebtmaturitiesremainingin2013.
• Approximately$270millionavailableunderrevolvingcreditfacility.
• Declareddividendfor7.75%SeriesAPreferredSharesof$0.484375.
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SELF STORAGE MARKET OVERVIEWFirst Quarter 2013 BALANCE SHEETS
SOVRAN: • Issued822,000sharesofcommonsstockviaATMprogram.Soldataveragepriceof$62.04,generatingnetproceedsof$50.2millionused to fundacquisitionsandpaydown line of credit balance.
• Allexcept$76millionoftotalcompanydebtiseitherfixedorcoveredbyrateswapcontractsthatessentiallyfixtherate.
• LineofcreditagreementatfloatingrateofLIBORplus2%.
• $6.9million cash onhand, $99million available on line of credit, plus $75millionavailable under expansion feature.
• Interest rates currentlyabout200basispoints lower than loansat current rates forSeptember maturities.
• KeyFinancialRatios:
DebttoEnterpriseValue(@$64.49/share) 24.3% DebttoBookCostofFacilities 36.9% Debt to EBITDA 4.7x DebttoServiceCoverage(DSC) 3.1x
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SELF STORAGE MARKET OVERVIEWFirst Quarter 2013 ADDITIONAL NOTES
PUBLIC STORAGE: • Net customer acquisition cost, consistingofmarketing andpromotionaldiscounts,declinedto$29pernewcustomerversus$31lastyear.
• Promotionaldiscountsdown18%.Lastyearalonegaveawayalmost$90millionofrental discounts.
• OccupancyatendofApril93%versus91.4%previousyearinApril.
• ExpectlowermediaandYellowPagesspendduetorecord-highoccupancies.
• Percentageoftenantsstayingoveroneyearis55.4%,about2,100totalmorethanoneyearago.
• Price increases expected on 70% to 75% of existing tenant base.
• BestPerformingRevenueGrowthMarkets: • Over 8% growth: • LosAngeles(largestmarket)+5.5%
Charlotte • San Francisco (second largest) +6.0% Denver NewYork
• MarketsPerformingBelowRevenueExpectations: • WashingtonD.C./NorthernVirginia +2%to3% • Philadelphia +1.5%
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SELF STORAGE MARKET OVERVIEWFirst Quarter 2013 ADDITIONAL NOTES
PUBLIC STORAGE: • WesternEuropehastotalof1,400to1,500facilities,withabout800inGreatBritain.
• EuropeanPublicStoragepropertiesinsevencountries,occupancydownto80%from83.7%oneyearago.
• U.K.marketcontinuestobenegativelyimpactedbytheVATintroducedlastOctober,resulting inNetOperating Incomedeclineof 8%.Holland slowestmarketwith 30storeoccupancydroppingto70%.
• Moratoriumdeveloping new self storage properties in certain SouthernCaliforniamarketsincludingPasadenaandLongBeachforover8years.
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SELF STORAGE MARKET OVERVIEWFirst Quarter 2013 ADDITIONAL NOTES
EXTRA SPACE STORAGE: • Pricing gap for rentals about 15% lower from internet reservations and quotes, ascomparedtowalk-insandcallers.
• StreetRatesincreased3%to4%year-over-year,discountsdownmorethan10%.
• Rateincreasesabout8%to9%onapproximately50,000customerspermonth.Incometaxincreaseshadlittleeffectonincreasingrents.
• Number of Properties:
Wholly Owned 450Joint Venture 279Third-Party Managed 236Total 965
• Increasedoccupancyto88.2%andrapidrevenuegrowthof17.66%for15Cincinnati-NorthernKentuckyassetsfromportfolioacquisitionofAmericanSelfStoragein2011.
• Chicagoarea12storesoccupancy90.9%,revenuegrowth9.41%.
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SELF STORAGE MARKET OVERVIEWFirst Quarter 2013 ADDITIONAL NOTES
EXTRA SPACE STORAGE: • CapEx Budget approximately $0.35/sq. ft., and about the same for Repairs andMaintenanceExpensebudget.
• Solarpanelinvestmentshelpreduceelectricityexpensesabout10%.
• Almosthalfof7.5%rentalgrowthfromoccupancygains.
• GuidanceForFullYear:
-TenantInsuranceIncome: $34millionto$35million -Acquisitions: $150million
• Projectingtoincreasestreetrates4%to5%
• Tenantreinsurancerevenuegrowthof18%year-over-year.
• Tenantreinsurancepenetrationonnewtenantsisabove90%,andoverallpenetrationinthehigh60’s.Itwasinmid-60’soneyearago.
• Companyonthird-generationofrevenuemanagement.Today,tracking56differentinputsandvariablesandmetricstohelpdefinepricing.
• Solartaxcreditsprojectedat$5millionto$6millionin2013.
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SELF STORAGE MARKET OVERVIEWFirst Quarter 2013 ADDITIONAL NOTES
CUBESMART: • 59%growthinwebreservationsversussametimelastyear.
• Salescenterexperiencedover25%increaseincallvolumeovercomparablequarterpreviousyear.
• 13.2%year-over-yearincreaseinsame-storemove-ins,vacatesup2%.
• Discountsdeclined10.9%fromfirstquarteroflastyear.
• Recentlywon3goldawards for sales andcustomer service--ContactCenterof theYear, Innovation in Customer Service, and Customer Service Department of the Year. MatchesDeltaAirlineswiththreefirst-placeawards.
• Scheduledannualwalk-inrentpersquarefootof$13.05,andincreaseof1.2%overbenchmarkJune30,2012.NewYorkCityaskingrentsupabout11%.
• StorageDeluxeyieldabitabove6%,andtargetingstabilized6.5%withmoreclaritynextquartersincestabilizedassetsnear87%occupancyandnon-stabilizedinlower80% range.
• Rate increases on existing customers of 6% to 8%.
• Consideringaddingsquarefootageandclimatecontrolspaceforanumberofassets.
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SELF STORAGE MARKET OVERVIEWFirst Quarter 2013 ADDITIONAL NOTES
CUBESMART: • BestPerformingMarkets:
• Denver and Salt Lake City markets of 12 stores, 770 basis point increase inoccupancyto89.3%,11.6%revenuegain.
• Atlantamarketof10stores,610basispointincreaseinoccupancyto84.6%,8.7%gain in revenue.
• Florida’s51storesposted860basispointincreaseinoccupancytoabout86%,8.2%gain in revenue.
• Phoenix stores 560 basis point occupancy gain, 6.3% revenue growth. Thirdconsecutivequarterofstrongrevenuegrowth.
• Tucson370basisgaininoccupancy,2.2%revenuegrowth.
• Chicago 27 stores 5.4% revenue growth; Texas Major Markets 30 stores 6.9%revenuegrowth,Indiana/Ohio15stores6.5%revenuegrowth.
• InlandEmpire20assetsoccupancyupfrom72.4%to83.4%andrevenueup8.8%.
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SELF STORAGE MARKET OVERVIEWFirst Quarter 2013 ADDITIONAL NOTES
SOVRAN: • Thirdconsecutivequarterrevenuegrowthofover8%,andnetoperatingincomeover10% growth.
• Projected$25millionexpansionandenhancementprogram.Alsobudgeted$13millionforrecurringcapitalexpendituresincludingroofing,paving,andofficerenovations.
• Mobiletrafficuniquevisitsup138%versusoveralltraffic.
• TenantInsurancepenetrationrateoverall52%,andcapturing79.6%ofnewcustomers.
• YellowPagesadvertisingdownto$600,000to$650,000annually,from$4.5millionfouryearsago.Mostly line listingsexceptcertainareaswith lowinternetuse, includingGulfCoastregions.
• Marginsof15%to20%onmanagedstores,and65%onwholly-ownedstores.
• OccupancyatendofApril88.2%,430basispointsabovesametimelastyear.
• Thirdpartymanagementfeesaddedalmost$170,000thisquarter.
• Askingratesup5.9%infirstquarter.
• Incentivesoffereddownsignificantlyfrom82%to73%,withincentivevaluedowntoabout$65permonth.
• Averagelengthofcustomerstayoveroneyear,anincreaseof2%.Ofallcustomers,55.3%staymorethanoneyear.
• Same store operating expenses increased 3.3% in first quarter primarily due toincreasedsnowremovalcosts,propertytaxes,andcreditcardfees.