Good day, and welcome to the CubeSmart Fourth Quarter 2011 Earnings Release and Conference Call. [Operator Instructions] Please note this event is being recorded. I would now like to turn the conference over to Dean Jernigan. Please go ahead.

Thanks, good morning to you all. Please bear with me for a minute. The company's remarks will include certain forward-looking statements regarding earnings and strategy that involve risks, uncertainties and other factors that may cause actual results to differ materially from these forward-looking statements. The risk and factors that could cause our actual results to differ materially from forward-looking statements are provided in the documents the company files with SEC, specifically the 8-K, together with earnings release filed with the Form 8-K in the Business Risk Factors section of the company's annual report on Form 10-K. In addition, the company's remarks include reference to non-GAAP measures. A reconciliation between GAAP and non-GAAP can be found on the company's website. Good morning to you again. Thanks for joining us. As usual, we have with us Chris Marr, our President and Chief Investment Officer; and Tim Martin, our Chief Financial Officer. I'll start off this morning and I want to talk about the future as I usually do. And I'll let Tim and Chris address Q4 in 2011. But I want to talk about my crystal ball for 2012 I maybe a little bit beyond but crystal ball for 2012, at this point in time is very clear to me. Obviously, we're too much into it and I think I see clearly as to what -- how the year is going to play out. So I thought I would share that with you this morning. I see another outperformance year for the entire sector. Our company and the other 3 public companies in our sector should outperform all the major U.S. indices along with the RMZ[ph]. I am very optimistic that we'll have another outperformance year and reasons for that optimism include the one we always talk about, no new supply, having…

Thanks, Dean and thanks to everyone for joining us today, for your continued interest and support. The fourth quarter was very productive if not, transformational for the company. We've continued to build the foundation for long-term growth. Our operational execution continues to drive healthy internal growth. The continued execution of our articulated investment strategy has improved the quality of our real estate and has created meaningful external growth. And our focus on enhancing our balance sheet creates improved access to capital and the flexibility to support our future growth. Some quick highlights for the quarter. We closed on the first tranche of the Storage Deluxe transaction. Tranche from closed on November 3 and included the 16 unencumbered properties for a purchase price of $357.3 million. To fund the first closing, we closed on our common share offering of 23 million shares, raising the proceeds of $202.5 million and we closed on our debut preferred share offering including this year, we sold 3.1 million preferred shares for net proceeds of $74.8 million. And finally, we drew the first 1/2 or $100 million of our 5-year unsecured bank term loan and that has an effective fixed rate of 3.09%. The second phase of the Storage Deluxe transaction includes the 6 encumbered assets and they have a combined purchase price of $202.7 million. One of these assets closed last week. We hope that 3 more will close next week and then the final 2, we expect to close sometime in mid-to-late March. The second tranche will be primarily funded with the assumption of the $88 million of secured debt that has a blended 5.4% coupon as well as the remaining $100 million of the aforementioned 5-year unsecured bank term loan that included the delayed draw feature. For modeling purposes, I think it's important…

Thanks, Tim. When we entered 2011, we had 3 key points of focus. The first was to continue to improve the quality of our portfolio cash flows through acquisitions in our core markets and dispositions in slower growth, lower barriered entry markets. During 2011, we acquired wholly owned assets in the Northern Virginia suburbs of Washington, D.C. specifically, Fairfax and Leesburg, Virginia; Miami, Florida; White Plains, New York; the Maryland suburbs of Washington, D.C. specifically, District Heights, Maryland; and in the District of Columbia itself. Through our joint venture with Harrison Street, we now own a 50% interest in assets in the Philadelphia suburbs; the Washington DC suburbs; Long Island, New York; and Northern New Jersey. Combining our equity investment in the JV on our wholly-owned acquisitions, we invested approximately $127 million in these core market transactions. The Storage Deluxe acquisition was transformational and accelerated our long-term objective of earning the majority of our cash flow from our core markets. Upon our final closing, approximately 60% of our future cash flow will be derived from our core market assets. In February, as Tim mentioned, we closed on one of the final 6 Storage Deluxe assets. We anticipate closing on 3 additional assets before the end of this month and the last closing is expected before the end of the first quarter. Our acquisition program continues to benefit from our relationships in the self-storage industry, our reputation as a quality buyer and our third-party management program. Of our 2011 acquisitions, 9% were acquired through a broker marketed process and 81% were acquired on a direct basis, either acquiring managed assets or us working directly with the seller. Of our non-Storage Deluxe acquisitions, 60% were the acquisition of properties we were managing for a third party. Our third-party management program not only…

[Operator Instructions] The first question comes from David Toti Cantor Fitzgerald.

Dean, I want to go back something I think I heard you mention in your opening remarks. Did you comment that you think occupancy gains are going to get tougher from the year on out? I would think given the industry conditions that you outlined that the occupancy gains should be -- I mean, theoretically, relatively stable from recent trajectories?

Yes, that's not quite what I said, David. Good morning to you. What I was -- I don't think I said that. What I was trying to say is that revenue gains will get tougher going forward if you don't have an occupancy run rate. In other words, you only have a rate to deal with or diminished concessions. And what I was referring to as we do a revenue attribution analysis continuously here to see exactly what makes up our 3.6% revenue growth for the year for example. And most of that came from revenue it does -- I mean, I'm sorry, most of that came from occupancy this past year. And so, the point I was making is if you don't have some occupancy left, it's going to get tougher going forward because you only have revenue to deal with.

Okay, that's helpful. And then Chris, a question for you. Has the Storage Deluxe deal shaken out any new opportunities that you can speak about?

It absolutely has shaken out a very large pipeline of new opportunities. Not surprising, given the fact that we were able to execute on that transaction with no leakage in terms of disclosure and raise the capital to close on that transaction very efficiently. We have received a significant amount of inbound inquiries from folks who are interested in doing business with us. Obviously, don't want to get into the level of details but those transactions tend to have a long lead time and are obviously more complicated than a one-off but we are very enthused by people's interest in doing business with us.

Has the pricing changed at all in your view given the Storage Deluxe transaction? My sense is that, that may have instilled some optimism among sellers in the market?

Yes. The reality as we would have expected is that, that will influence people's expectations and one of our jobs is to just make sure that the market doesn't misperceive their assets relative to that opportunity.

The next question comes from Eric Wolfe of Citi.

It's actually Nick Joseph here with Eric and Michael. I was wondering if you can walk us through the uses of the unsecured debt issuance assumed in guidance? I know you have $165 million of debt maturing in '12 and are targeting net acquisitions of about $60 million. So what do you plan on doing with the remaining proceeds?

Good morning. It's Tim. Good question. What we wanted to include in the guidance of course, is our expectation as I've mentioned of doing a sizable index eligible offering, market conditions permitting. And so, you hit the nail in the head for the first and most obvious use proceeds which would be to use them for the $164 million of 2012 maturities. The balance of the proceeds is really a mixture of potential other uses including repaying other debt, including some secured debt that doesn't mature in 2012 that we could choose to prepay, includes the possibility of us prepaying some or all of our 2014 unsecured bank term loan and extend that maturity out from 2014 well out into the future. We have an opportunity later in the year, to look at a joint venture arrangement that we have and the proceeds from a bond issue could be used to finance us buying out some or all of a partner's position in an existing joint venture. And of course we could use the proceeds to fund our net acquisition activity depending on the timing and the amount of such activity.

Okay. And then, can you give us an update on your Superstore transformations? What are you seeing from these stores that are different from the rest of your portfolio?

This is Chris. The one store that we have had opened since September of last year is our Callowhill Street store in downtown Philadelphia. And the performance of that store, what I think is most interesting and again, a portion of this is anecdotal because the store has only been open for a while and a portion of it is related to our actual performance. We've seen a good increase in the amount of commercial activity at that store. We have had a history there of having commercial tenants and we've seen a sharp rise in the amount of commercial tenants at that store since we converted it to a Superstore. We have about a 10% increase in terms of the number of commercial tenants we've identified there from -- this is from January of last year to January of this year. So a portion of that attributed to the superstore introduction in the third quarter of last year. So clearly, they rent larger units and the commercial tenants are very much aligned with the types of services we're offering there, particularly the packing and shipping, the shredding, et cetera. We have at that store, also, used our sold -- a majority of the services that we have there at that particular store, again, the shredding, packing and shipping and moving services are the ones that have risen to the top of the list in terms of the most utilized.

Okay. And then can you talk about the supply picture? You mentioned how low it is now in your markets, but when do you see it return into more normalized levels?

Are you talking about new supplies?

Right, new supply.

I don't it will ever return to the levels that we have seen in the past. I think we become a mature sector. And so, the old days where we build and they will come model is no longer -- I do see some development coming back probably in latter parts of 2013 and 2014 but it's -- I mean, it's clear sailing between now and then. I mean, we would know about anything coming online in the next 12 months that would be representative starts that we monitor and it's just not happening yet. So I think we've got probably another 24 months here before we can anticipate any supply impacting us in any fashion of importance.

It's Michael Bilerman speaking. Tim I said, just a quick follow-up. In terms of this bond offering I guess, you're thinking 5.50% to 6% on the rate. That's like 350 to 400 over the current 10-year and I guess like Alexander did a bond offering last week saying BBB- they were 260 over. So I guess what are you -- I guess the 350 to 400, are you -- is that sort of what the banks are telling you where your spread would be or are you thinking the tenure is moving up materially between now and then?

It's more of the latter. We certainly don't think that if we were to be in the market today or had we been in the market over the last 8 weeks, that our all in cost will be 5.5% to 6%. We also don't -- certainly don't profess to have visibility into exactly what treasuries are going to be in the range of time that we have provided in our guidance. So by today's standards, today's treasuries and our expectation of where we would price over the 10-year, that would suggest a little bit of conservatism in the 5.5% to 6% range by today's pricing. We just don't know exactly where treasuries are going to go between now and then. We certainly don't expect that our spread over treasuries would be 3.5% to 4%, but would be more closely aligned with other BBB- credit companies.

Yes. Because you should be able to get this deal done in the low 5s potentially even lower, high 4s if you were to go next week?

That's a fact.

And then how does that -- I mean, because it is a significant variance in guidance and obviously, how you use the proceeds and when you reinvest those proceeds would have a significant impact on guidance? The quarterly sort of run rate in the guidance is $0.17 to $0.18. I got to imagine that when all is said and done, you're going to be ending the year or heading to next year when all the money is put to work and you have the acquisitions that you're somewhere, it's got a 2 in front of it instead of being in the teens?

This is Chris. I mean obviously, all of that depends upon all on those assumptions you just made. So let's see how this plays out and hopefully treasuries will stay where they are. We obviously think the market is very, very interested. The debt capital markets in self-storage paper, we will be the only real committed issuer in the space and we're going to try our best to price closer to the BBB multi-families than we would to the BBB- office REITs.

The next question comes from Christy McElroy of UBS.

Dean, I just wanted to follow-up on your comments about things that could derail performance potentially. With oil approaching $110 a barrel again, I'm wondering if you've done any analysis looking at the correlation between the net rental activity and gas prices over time. Sort of all else being equal and if it impacts some regions more than others geographically?

I don't think our data is that good enough in our sector yet to really be able to make observations -- good observations like that but I've put a fair amount of thought into it and what I do anticipate the impact to be is just what every other type of industry or sector out there. It will take discretionary spending out of the pocket of the consumer who's having to spend $5 a gallon on gasoline. So to the extent that we have people out there who are thinking about storage but are filling their gas up -- their gas tank up at $100 a clip, they're probably -- if they don't have a real demand for it, they're going to put it off. So that's the only place that I can see it impacting us and I think it's really at the margin.

And then Tim, from a modeling perspective, how should we be thinking about the properties that are currently in lease up? So what are -- sort of what are they currently yielding and what should the ramp look like over time?

If you think about the 6% yield that we quoted that's on all of the 2011 acquisitions including the full Storage Deluxe transaction, there certainly is a ramp throughout the year. You wouldn't expect that to be 6% each quarter. I think generically speaking, it grows from closer to a 5.5% combined return early in the year. It gets to about that 6% midpoint on average between the second and third quarters and then grows to closer up to the 6.25% to 6.5% range as you get to later in the year. So from a big picture, that at least gives you some sensitivity that to have a ramp-up is going to flow throughout the year.

Okay. And then when you pay off the loans coming due in August and September, does that free up any assets that you're targeting for this addition?

Hey Christy, it's Chris. It does. So there are some assets in those pools that are orphaned, so to speak, where there are single asset in a particular market and we are targeting those for disposition.

And how much would you say is in...

Those are included in our objectives of the $35 million to $50 million.

Okay. And then just lastly, what are you guys targeting for management fee income in '12?

I'm very sorry, Christy. I'll double back as soon as I put my finger on the number.

And the next question comes from Jana Galan of Bank of America Merrill Lynch.

I was curious, there's recent reports that homeowners are increasing renovations on their homes. Have you seen some new demand come from those types of renters?

Good morning, it's Dean. Yes. That really is an interesting opportunity, I think, for the storage sector and that housing as we've noted in the past, is not going to come roaring back but that gray market out there of rental houses if you will, there's a lot of work needed on those. And also, housing that has been vacant for one year or 2, that they're going to fix up to sell and there are now people in the business I was hearing about a large entrepreneur the other day or a are large for that sector who is out buying houses and fixing them up and selling. That's good for our sector. That's a good point to make. We don't have to have subcontractors who are building new homes. Just those subcontractors getting back to work is going to be good for us.

Thanks. And then I guess just regionally across your portfolio, are there some areas that you're feeling much stronger about versus others?

Hey it's Chris. Yes. I think when you look at markets across the country and where we're feeling particularly strong, would not be surprising. You're going to see on that list, Chicago, the greater New York City area, Dallas, Fort Worth, Miami, Atlanta, Washington, Baltimore, Philadelphia corridor and Boston. And then from markets where things are slower, Houston, West Palm Beach, Orlando and Tampa in Florida, and then most of Arizona although there are some pockets that are performing better than others.

And I'm sorry if I missed it, did you give where occupancy is currently?

We do not provide updated occupancy for the current year on the call. Seasonally, for January and February, we are seeing trends very consistent with what you would expect.

If I could just interject, Christy, this is Tim. Back to your question. A good range of expectation for 2012 on third-party management fees is a range of $4 million to $4.5 million, which is relatively consistent with our existing run rate. It's obviously dependent upon how many new contracts we bring on and how many existing third-party management contracts become part of our acquisition results for the year.

And the next question comes from Todd Thomas of KeyBanc Capital Markets.

I'm on with Jordan Sadler as well. I just wanted to go back to your revenue growth forecast for 2012 and your expectation to gain 150 to 200 basis points or more of occupancy throughout the year. It seems like the occupancy gains are comprised more than 1/2 of that revenue target and then if I add in rent increases to existing customers and something consistent to 2011 in the 5% to 9% range, maybe modest growth in asking rents and tenant reinsurance income which is included in revenue, you'd think that top line should be a bit higher than what you're projecting. Am I missing anything there?

Well, maybe. Well, if you think about the makeup for example of our fourth quarter growth, our realized annual rent per occupied square foot if you look on Page 16 of the supplemental, was down about 0.5% for the quarter and was flat for the year. So effectively, that's saying that the combination of people moving in and moving out, the timing of when they do so and the rate at which they move in and then they move out, along with promotions, discounts, specials, et cetera, offset effectively the impact of our street rate increases where we're up about 2% in both periods. And when you're passing along a rate increase to existing customers as we have throughout the recession at a consistent 7% to 9%, we've tended to get to a point where we're flattening out a bit on how much of an impact to the growth rate, that existing rent increase to existing tenant has. So when you look at that line for us and I think there's maybe one or 2 other of our peers who also disclosed that line, it will give you basically the impact of all of those factors in one number and we're effectively flat for the year. Expect that trend to continue albeit as Dean said, we don't see downside risk, there could be upside to the extent that there is a more robust economic environment and/or those who don't have the occupancy start to push on either street rents or reduce promotions. But if you think about the attributes of our revenue for 2011 growth and again, as we expect it to be in '12, the vast majority of it will come from occupancy with the remainder being from ancillary income, as I've said. And our current base case contemplates that our realized annual rents are effectively flat.

Okay, that's helpful. And then I was just wondering with regard to occupancy in the quarter, some of your peers saw a more muted sequential decline in the fourth quarter from the third quarter. You were more in line with your historical changes in occupancy. I was just wondering if you had any thoughts on what happened in the quarter in your portfolio, maybe versus some of your peers and whether or not you were targeting a higher level of occupancy for the quarter?

Yes. We were not surprised by the quarter in that we were expecting robust move-in activity given our enhanced marketing efforts and presence on the web as well as the operations, operating very smoothly throughout the year. So the 6% as I quoted, move-in activity in line with expectations. We also expected, given the fact that we had an incredibly strong June to August rental period in 2011 where our rentals were up about 10%. And as you know, about 32% of our customers tend to stay 3 months. So we were targeting increased move-outs in the fourth quarter. They were about 13% higher than they were in the fourth quarter of 2010. We have very little to no control over when folks reached the end of their need for our product. We do have a good predictor of when that happens and that move-out activity was not incredibly surprising. I think if anything, again, those same markets that I quoted, particularly -- well, the same markets that I quoted for the previous question were a little bit softer than obviously, our core markets.

Okay. And then just lastly, your first quarter guidance, did you talk about any of the assumptions that sort of get you down from the $0.17 a share in the fourth quarter to the $0.14 to $0.15 share range?

I didn't talk about them specifically. I mean, seasonally, you would expect a little bit of a line. I think one of the bigger variables there is that you have a full quarter of the first tranche of the Storage Deluxe transaction and some of my comments earlier were really geared towards pointing out that, that part of the transaction was funded with the most expensive capital that goes along with the entire transaction. So you have a full quarter impact of the first tranche of Storage Deluxe. And you have the second quarter of that -- or the second tranche of that transaction is going to close heavily weighted towards the end of the first quarter. So the first quarter is going to get the detriment of the more dilutive portion of the Storage Deluxe transaction and doesn't get much of an impact from the second half, which is actually helpful from an FFO perspective. So that is one of the larger drivers that maybe isn't at the forefront of everybody's thought process as to why the first quarter guidance is where it is.

The next question comes from Paul Adornato of BMO Capital Markets.

I was wondering if you could touch on the concept of capitulation on the part of the smaller operators, both with respect to the management business and so was wondering if you are seeing a better pop in the properties that you're now getting from the mom and pops and also with respect to the pricing on acquisitions, if there's some sort of noticeable impact on cap rates?

It's Dean. I'll take the first couple and I'll let Chris address cap rates on acquisitions. But it really is becoming obvious to the smaller players out there that they can't compete in the marketing world that we live in today. And so that capitulation as you describe it is very appropriate. We're hearing from more and more of these folks and the results part of your question is very positive. In fact, we're going to start putting that in our magazine ads as to how well we performed last year, year-over-year for our third-party managed assets because it's not that difficult to do and the performances are really well, are really good and that will add to the capitulation I think, as we put those performance numbers out there.

Hey Paul, this is Chris. From an acquisition perspective, the trend has always been and continues to be that those entrepreneurial owners are very optimistic people. And so, the May to July rental season will always be better this year than it was last. So at the moment, as we cycle through the year, a lot of folks are holding on to see how that progresses. And what we saw last year is that they had disappointment for how well they could perform during that time period. The capitulation came into play in that August, September, October time period which is why we tend to see more transactions in the second half of the year. So at this point, to specifically answer your question, I don't think it's had any impact on cap rates.

And maybe just a comment on cannibalization. Are you seeing any evidence that as more and more properties become professionally managed that there's cannibalization among your properties?

Can you help me with what that exactly means?

That means that if you're managing a whole bunch of assets in the market, that your properties, your owned assets are going to give up a little bit because you're helping other properties?

No. It actually works the opposite to the extent that the larger, more sophisticated managers come into the market, they have more courage to push rent, they have a more sophisticated operating platform and I think it tends to lift everyone in the market. So I think it actually works the opposite way.

The next question comes from R.J. Milligan of Raymond James.

Dean, in your comments about the market share grab that you expect to continue and talking about the online marketing abilities of the mom and pops, I was just wondering if you're seeing them catch on at all and if they have even the scale or the budgets to compete in the local market online?

Many of them are starting to understand and catch on as you say, but they really can't do anything about it and they're understanding that as well. They don't have the budget, they don't have the platform, don't have the consultants to manage that budget for them even if they had the budget. I mean, it's -- they're really in an impossible situation except for one thing and I speak to these groups from time to time and I tell them that they just really need to bring the battle lines in. They need to circle their wagons, they need to shrink their geographical presence. They can compete in a submarket. You got 3 properties for example, you can compete in a submarket in almost any city. You can't compete in 3 different cities because of all the keywords, you have to buy from Google and others. And so they're starting to understand that and I think some of them are starting to do that. I spoke in the fall to some folks and I referenced the game of Monopoly and I said we've all played Monopoly. You need to think about that because you really need monopolies. You just can't own single properties around the board and expect to win the game and I think that's getting through the people.

Thanks. And obviously, occupancy, you guys have some room to go and it's certainly another growth lever that you guys have to pull and a couple of your peers have talked about hitting the optimal occupancy level. I'm just trying to get an idea how you guys think about your optimal occupancy level and how long that runway is before you reach it?

We operate basically like -- well, we just think that the level of operate your property, you can just snap your finger and say this is where I want my properties to operate. You want them to average in the very high 80s throughout the year. You want them, they will peak in the summertime at about 92% and perhaps in wintertime, roll down to 86%, 87%, something that. That gives you inventory throughout the year to rent. You don't run out of space to rent to people when they come up and you keep pricing your space up to the point where you have inventory. And so, high 80s on average throughout the year is where we expect to take this portfolio to.

Okay. And just on your anticipation for the timeline. I mean, how long do you think that's what you think the ramp-up is over the next 2 years?

Well, I mean, what we keep talking about is we got our 200 bps this year, we keep talking about 150, to 200 bps a year in continued growth. With an improving economy, I can see that may be getting a little bit better than that. But I think clearly, we can see out 3, 4 years of occupancy ramp up available to this company.

The next question comes from Ki Bin Kim of Macquarie.

Going back to your unsecured bond issuance topic. It seems like you're -- I understand, you have to raise $250 million to be part of the index but it does seem like minus acquisitions, is a bit more capital than you need immediately. And I guess my question is, why do you have to pursue unsecured bonds anyway? Why can't you just stick with the mortgage market if it's -- assuming the mortgage market is still much more attractive than the 5.5% to 6% you'll get in the bond market?

This is Chris. We've been very clear and consistent in articulating what our long-term strategy is, and it does not include secured debt. So it is not a direction that we would anticipate going. I think if you look at a similar tenner piece of secured debt and you take the trade-off of all of the costs to encumber self-storage assets along with the coupon, along with the lower levels of leverage today and along with the headaches that we've all experienced both going in and going out of these instruments, it's just not a place where this company is going to play. So as it relates to strategy, we've been very consistent in what we're doing and as you look at the opportunities we have this year to push out our maturity profile, it should be no surprise to anyone that we're interested and will execute in the unsecured debt markets with a debut 10-year deal along the lines of the amounts that Tim has articulated.

And is the debt coming to this year, are those CMBS?

They are.

And any commentary on the market? Is that an option or if that market comes back or not at all?

It's not an option for us. Currently, I would say that market is very tenured. Have not seen a significant amount of deals getting done but that doesn't mean they won't before the end of this year but not a market that we are interested in.

And I know you haven't had a chance to fully put the Storage Deluxe assets under your system and then whatever else [indiscernible] putting on your system but you probably do have the historical financial statements. So I was wondering if you can comment on the same store revenue or same store NOI growth in the quarter or January, February for the Storage level portfolio.

To compare to what a prior operator did is probably not all that valuable to us. But we don't look at it that way. We look at how are we doing versus our expectations. So that's a more relevant comp. And so, the assets are integrated. We closed in November, hit the ground running and we're well-positioned to put them into our system without missing a beat and they've been operating wonderfully. So as we look at revenue performance against our underwritten expectations and along the lines of what Tim had articulated, the properties are performing better so far than what we had anticipated. If you wanted a number compared to last year, I don't think it's a very fair comparison but the assets are up on a year-over-year basis and the revenue is about 20%.

I could ask the same question but when you said they're doing better from a revenue standpoint than what you modeled in or can you perform -- I was wondering if you could kind of give a little more detail around that?

Yes. Slightly better.

I guess last question. Your G&A seems like it's moving up quite a bit in 2012. I was wondering, your comment on the different components of that?

I think if you look at our G&A guidance for 2012, the $25.5 million to $26.5 million and you dial back and you look at our guidance from one year ago as entered 2011, it's an identical guidance range from where we were last year. In 2011, we performed better than our initial guidance range. Partly due to the fact that we did not have a fully staffed team for the entirety of the year given some turnover at some senior positions. And so our 2012 number contemplates a fully staffed team and also contemplates marginally, some slightly higher costs related to having our operating partnership as an SEC registrant and also, some of the additional cost of having more shares outstanding as well as the preferred issuance. But those aren't big increases but they are a slight factor in the growth over 2011 numbers.

The next question comes from Michael Knott of Green Street Advisors.

Chris, can you just maybe give a little more color on I thought you said you're seeing cap rates in your market, 7% plus. Can you just compare and contrast that with the 6% number you guys gave for your guidance. Obviously, I think we all know the answer but I just thought it would be interesting to compare and contrast those comments?

Yes. When you think about that number, that's a blend of obviously the Storage Deluxe stable assets, the Storage Deluxe lease up assets and then the mix of assets we acquired last year which did also include a mix of stable assets we would have looked at on a cap rate basis and those that had either some distress to them and where a bank orchestrated short sale or some other opportunity for us where the going in yield wasn't on a stabilized asset. So when I think about what we're seeing out there, when you have a one-off transaction, individual seller, in all markets, I would say except specifically, Washington, D.C. and New York Metro, you're generally in that 7% to 7.25% kind of range as we look at in place cap rates. When you're in the district itself, you can push inside of that without a doubt and New York definitely is inside of that. We have just not seen a lot of activity in San Francisco Bay Area but from identifying what traction there has been, you'd see tighter cap rates in that market as well.

That sounded like $50 million max dispositions in '12 and you're getting pretty close to the end of your sort of pruning phase, right?

Yes. With these upcoming CMBS maturities as I said to a previous question, we have some orphans in markets along the Gulf Coast, et cetera, where it provides us an opportunity to exit. We're always going to look at the bottom 25% of the portfolio and evaluate those as to the trade-off between disposition and redeployment versus what their upside potential would be but the heavy lifting is done.

And then if you found another large opportunity like Storage Deluxe, how would you feel about the organization's capacity to integrate that kind of deal. It feels like integration risk isn't as big a deal as it used to be in this business maybe because of technology. Do you guys have any comment on that?

We collectively would feel great about such an opportunity. The one thing to think about the Storage Deluxe deal is it was a large investment from a capital perspective. But the absolute quantity of assets was not that significant. So I kind of go back to '94, '95, '96 and when we were targeting $300 million worth of acquisitions in the year. That could 80 properties. And so it was the lack of technology that we have today and then it was just a larger quantity of moving parts. So we absolutely could absorb additional either third-party managed or wholly-owned acquisition without missing a beat.

Okay. And then last question, Dean, if you wouldn't mind getting Chris Marr back out, I'd be curious, just any comments you can provide on I believe, if I have my facts straight, when your contract is up at the end of next year, I believe that you're planning on stepping down and you've obviously sold companies before it but it seems unlikely to be sort of the in game for CubeSmart just given your perspective on the consolidation opportunity. Just any comments you have on what happens at the end of next year with the management team and...

Well, Michael, you're always good at asking the tough questions. This is a very strong management team that we have today, excluding me, whatever you might think about me. This management team is outstanding. We've got depth, we've got a platform that is taking on -- taken on sizable growth this past year, anticipates taking on sizable growth going forward. I think this company has a wonderful opportunity in the future as a standalone leader in the sector of storage and in the sector of real estate, public real estate. I'm very, very pleased with where we are positioned today.

[Operator Instructions] The next question comes from Todd Stender of Wells Fargo Securities.

Just looking at the operating expenses for this year, and kind of the risk to the downside that you can identify, what kind of visibility do have on property taxes for 2012? Can this be kind of an unforeseen risk not for just for you guys but for the industry?

That's always an area that none of us have very good visibility into. There's always the reality or the fear I suppose, that in some point, municipalities are going to need to increase mileage rates to make their budgets balanced. However, we haven't seen that. Over the past several years, we have been pleasantly surprised with our ability to continue to challenge assessed values, and we have been able to have results that have had real estate taxes really held in check for several years. So there's always the possibility that, that could change in any year. Hard to believe in an election year that, that would be the year that it would happen. And most of the folks that have to make those tough decisions at the local level, like their jobs and like to remain elected officials. So it's generally not in their best interest to raise those mileage rates. So there's always that part to offset the fact that they continue to struggle to have balanced budgets. So not a particularly pointed answer to your question, it is certainly an area that has risk. We don't believe because that there's a lot of downside risk to us in 2012.

Okay thanks. And just quickly, just relative to your same-store NOI expectations for 2012. Where do your acquisition growth assumptions kind of fit into that, very much inside or a little above?

In terms of how we think about growth on those...

Yes. you you're thinking -- exactly. Your underwriting assumption.

The expense is matched up nicely. On the revenue side, those assets in -- I mean, even if you took the 9 or so assets that ended up in the same-store pool this year that we acquired in '10, they grow at a higher revenue pace than that same-store average.

Next question comes from Paula Poskon of Robert W. Baird & Company.

A couple of housekeeping questions and a couple of big picture questions. Housekeeping, could you tell us where you are relative to plan on the supercenter conversions?

Sure. We are right on track. As I mentioned in the preliminary comments, we have about a $44,000 per store average for the cost of putting the office into a Superstore condition and that was against our $50,000 original estimate and we are at 41 stores with an expectation that we'll be right up against that 100 that we targeted by the end of the year. And I did give some conversation around Callowhill which is the one that has been open since last fall and it didn't have the specific in front of me, I now do. We've moved from 178 business commercial sales rep type customers to 196 business commercial sales rep type customers over the last year and I don't have the exact number but a good portion of that has occurred since we implemented the Superstore concept at that store.

And how does that deeper penetration in that business commercial segment compare to what you had hoped to see?

It's in line if not, better than what we had anticipated and probably, a little bit quicker. Those are the type of locations that allow a good commercial presence. The additional amenities has obviously attracted a greater number of those types of tenants. Many of which were not using storage before. But we're dealing with their needs in a different way. So we're opening up different channels of customers, which is very positive and then they rent larger units. So again, that store has a 2% increase in square foot occupancy up into the -- currently up into the very high 80s that was in the '90s in September. So it's had a positive impact on that store all the way around.

And then likewise, where are you relative to plan on the physical re-branding rollout?

Yes. Also as I had mentioned in my prepared remarks, we have 212 stores converted as of the 15th of February. The remaining will be done by April 1, and we had an original budget of $8 million for that and it's coming in around $4.5 million to $5.5 million.

Thanks and I apologize if I missed that earlier. And then following up on Todd's earlier question about the third-party strategy, how do you answer the critics who say that you're just driving up your future acquisition price by improving operations?

I think consistently with the way everybody else who has been asked that question answers, the reality is when we have an introduction to a potential customer, the first question we ask is can we make you an offer to acquire your asset today? If that is not successful, we look to get involved with them from a third-party management perspective and it gives us perfect insight from an underwriting perspective into the asset and gives us zero operational and underwriting risk in terms of bringing that asset into the system. So the reality is that does happen but it's also an opportunity for us to control an asset in a market that we would like to be in and we're willing to take that trade-off.

Thanks. And then bigger picture. I look back at the historic forward multiples between you guys and extra space. Back in the crisis of spring 2009, there was maybe a 3 turn difference and as things stabilized and those companies improved, this year's valuation improved and the valuation gap there narrowed to just about 0.5 turn and let's call it summer of 2010. And then it kind of started to widen back out to 3 or 4 turns even as recently as this past fall. Why do you think that is? What is the market telling you?

I think the market is telling us that they very much understand and appreciate the portfolio transition that we're going through but we have made significant changes to the quality of our portfolio very recently and we, as we are very well aware, need to deliver on those expectations. And clearly, that's what we plan to do. And I think those who invest early in that process will be the winners. And we expect to deliver on what we've articulated.

Thanks, Chris and a final bigger picture, this is a left field for you and Tim. So you've been at the storage gig now for several years, what is the single biggest similarity and the single biggest difference between running a storage company and running an office company?

Clearly, the biggest difference is that the office business, given the accounting and given the incredible amount of capital that needs to be invested every time a tenant leaves or you're trying to fill a new building, to me, makes that a very difficult public company model. I mean, you definitely make your money in that business by buying at the right price, leasing the asset up and selling it. And those gains aren't valued in terms of how folks apply a multiple to a suburban office company. It's also a much tougher business in terms of, you have a broker involved in every transaction and there's full awareness of what's going on in the market when an office tenant comes in to lease. So I think those are the biggest differences. I think in terms of similarities, it's probably answering questions like that.

I would say the other difference at least being at a public version of each of those sectors is that this sector certainly is different in that you get to the end of a period and you are directly compared against other companies within your sector on most every metric and that's a big difference of course from the office space. We rarely, if ever were compared to a peer on a direct result. Most people would have evaluated results based on their expectations for delivering on our expectations on our portfolio. And this sector is a little bit different in that each of the companies seems to be lined up and compared against each other on a very regular basis.

This concludes our question-and-answer session. I would like to turn the conference back over to Dean Jernigan for any closing remarks.

Okay, thanks again for your interest, look forward to seeing you all soon. Good day.

The conference has now concluded [indiscernible] today's presentation. You may now disconnect.