Brokerage Market Update

Self Storage REITs

Highlights for 4th Quarter 2011 and Full Year Results

February 26, 2012

CubeSmart (CUBE)

Same Store Results

  • Physical occupancy was 78.7% vs 76.7% last year
  • Rental income increased 2.4%, total revenue increased 3.4%, operating expenses .5% and net operating income 5.7% vs. Q4 2010.
  • For the year, same-store revenues, operating expenses and NOI increased 3.6%, 0.3% and 5.7%

Investment Activity

  • Entered agreement to purchase 22 Storage Deluxe facilities in NY Metro Region for total price of $560 million; closed 16 last year for $357 million, and expect to close the remaining 6 during Q1 2012 for $202.7 million.
  • Acquired 2 facilities in the Washington DC area for $31.3 million, sold 1 in Michigan for $1.7 million
  • Closed a total of 18 facilities in Q4 and 27 for the full year
  • Away from the portfolios acquired 75% of acquisitions were done directly with facility owners that CubeSmart provided third party management.

Balance Sheet

  • Raised $202.5 million in net proceeds from a public equity offering and an additional $74.8 million in net proceeds from the company’s first preferred stock offering
  • Closed on $600 million in unsecured debt financing
  • Assigned Baa3/BBB- investment grade credit ratings from Moodys and S&P

Quarterly Dividend

  • Declared $.08 dividend
  • Current Yield 2.77%

Third Party Management

  • Received 1 new management contract in Q4 and 24 during the year
  • Now manage 103 stores

Outlook

  • The company offered a positive outlook for 2012 based upon slow but steady economic improvement, employment gains, and lack of new development supply into the markets

Extra Space (EXR)

Same Store Results

  • Increased revenue 5.8% and NOI 9.3% vs. Q4 2010
  • Occupancy increased 3.1% to 87.8% vs 84.7%
  • Street rents increased 4.5% while discounts decreased 1% during the quarter
  • Operating expenses were lower due to lower utility costs, decreased advertising, and lower snow removal costs
  • Major markets with revenue growth above the portfolio average for the 3 months were Boston, NJ, NY, Philadelphia, San Francisco and Washington DC. Underperformers were Houston, Las Vegas and San Diego

Investment Activity

  • Acquired 28 stores for $189.9 million. Locations include California, Florida, Illinois, Massachusetts, NJ, NY and Rhode Island

Balance Sheet

  • 75.5% of total debt was fixed rate at average of 5.3% and 2.7% rate on adjustable debt
  • Combined average rate was 4.7% and WAM of 5.5 years

Quarterly Dividend

  • Paid Q4 dividend of $.14 and declared Q1 dividend of $.20
  • Current yield 3%

Third Party Management

  • Increased total stores under third party by 7 to 185

Outlook

  • 2012 estimates include: revenue growth of 3.5%-5%, operating expenses between 3%-4%, NOI growth of 3%-6%.
  • Acquisition activity of approximately $100 million

Sovran Self Storage (SSS)

Same Store Results

  • Full year revenues increased 4.2% and NOI improved 6.2%.
  • Occupancy improved 1.5% to 81.7%
  • Best performing markets were New England, NY, and Tennessee while Georgia and Virginia lagged

Investment Activity

  • Acquired 29 stores for the year including 1 company store in Pensacola, FL for $4.6 million and with JV acquired 1 store near Philadelphia for $5.7 million. Subsequent to the end of the year, the JV acquired 10 stores in Dallas/Ft Worth

Balance Sheet

  • Last year the company incurred $500 million in senior unsecured debt
  • At year end, the company had $7 million cash and $129 million available on its line of credit
  • In September the company issued 1,034,375 shares of common stock at $40.75

Quarterly Dividend

  • Paid $.45 dividend in January
  • Current Yield 3.65%

Third Party Management

  • Added 9 stores to third party management bringing the total to 68

Outlook

  • Encouraged by greater pricing power and resiliency in most markets
  • Expects to continue leasing incentives along with aggressive pricing and increased advertising
  • Estimates include revenue increase of 3.5%-4.5%, operating expenses up 3%-4% and NOI 3.5%-4.5%
  • Plans to spend $20 million on expansion and renovations

Public Storage (PSA)

Same Store Results

  • Q4 vs last year – revenues increased 5%, operating expenses up 2.1% and NOI up 6.1%
  • 2011 vs 2010 – revenues increased 4.6%, operating expenses up .4%, and NOI up 6.6%
  • 2.8% increase in annual rent per occupied SF
  • Occupancy 91.1% vs 89.8%

Investment Activity

  • In Q4, acquired 1 store in CA and 1 in TX for $16 million
  • In October, acquired remaining interests in 2 partnerships for $6.3 million

Balance Sheet

  • In November, redeemed all outstanding 6.95% Series H preferred stock for $105 million and in January, issued $460 million of 5.90% Series F preferreds
  • In February 2012, redeemed all 6.75% Series L preferreds and 6.75% Series E preferreds for $348 million and in March will redeem 6.85% Series Y preferreds for approximately $8.8 million

Quarterly Dividend

  • Declared Q1 dividend of $1.10 per share, a 16% increase
  • Current Yield 3.21%

Outlook

  • Good momentum with move ins and pricing power in first 2 months of 2012
  • Feel good about occupancy and rental rate increases

John E. Barry is Vice President of Self Storage Brokerage for Investment Real Estate LLC, York, Pennsylvania. He can be reached at jbarry@irellc.com.