Public Storage (PSA) Q2 2008 Earnings Report, Transcript and Summary

Good afternoon. My name Pam I will be your conference operator today. At this time I would like to welcome everyone to the Public Storage Second Quarter 2008 Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks there will be a question-and-answer period. [Operator Instructions]. Thank you. It is now my pleasure to turn the floor over to your host Clem Teng, Vice President of Investor Relations. Sir, you may begin your conference.

Good morning and thank you for joining us for our second quarter earnings call. Here with me today are; Ron Havner, CEO; and John Reyes, CFO. We will follow the usual format followed by a question-and answer-period. However, to allow for equal participation, we request that you ask only one question when your turn comes up and then return to the queue for any follow-up questions. Before we get started, I want to remind you that all statements other than statements of historical facts included in this conference call are forward-looking statements. These forward-looking statements are subject to a number of risks and uncertainties, many of which are beyond our control that could cause actual results to differ materially from those projected in these statements. In addition, to the risks and uncertainties of ordinary business operations, these forward-looking statements are subject to among other factors the affect of general and local economics and real estate conditions, risk related to acquisitions and joint ventures and risks associated with international operations. These and other factors that could adversely affect our business and future results are described in today's earnings press release, as well as in reports filed by Public Storage with the Securities and Exchange Commission including our 2007 annual report on Form 10-K and subsequent reports on Form 10-Q and Form 8-K.Our forward-looking statements speak only as of today, August 8th, 2008. We undertake no obligation to update or revise any forward-looking statements whether as a result of new information, future events or otherwise. During today's call we will also provide certain non-GAAP financial measures; a reconciliation to GAAP of these non-GAAP financial measures is included in our earnings press release. You can find out press release, SEC reports and the audio webcast replay of this conference call on our website at www.publicstorage.com. Now I'll turn it over to John Reyes.

Thank you, Clem. Yesterday, we reported our funds from operations with a $1.10 of the second quarter the same as in the second quarter of last year. Both of these numbers however, included the impact of non-core items as outlined in our press release. After adjusting for the non-core items funds from operations was $1.25 per share in 2008 compared to $1.14 in 2007 representing an increase of $0.11 or 10%. This growth was primarily driven by improvements from our same-store operations. For the second quarter of 2008, net operating income for U.S same-stores improved by 4%. Our European same-stores improved by 11%, and our non-stabilized group of domestic facilities grew by 23%. Overall, this growth is driven primarily by higher realized rents for occupied square foot, offset impart by higher expenses associated with advertising and property taxes. For our U.S. same-store pool, revenues increased by 3.2%, while occupancy was roughly flat at 91%. Keep in mind unlike other self-storage companies we do not include tenant insurance in our self-storage numbers. If we had, growth in revenue and net operating income would have been much higher as revenues in our tenant insurance business here in the U.S improved by 13% during the quarter and net operating income improved by approximately 20% on a year-over-year basis. Further, we do not include a SG&A expense, indirect overhead cost that support our property operations. All costs that supporting our property operations include; human resources, information technology, accounting legal and all supervisory compensations are included in our cost of operations. This is probably different in some other REITs and may impact inventor's calculations of net asset value. Some of the larger expense items that are included in our G&A include state income taxes, certain senior executive salaries, development overhead, audit and tax fees, stock-based compensation, and cost associated with being a public company such as Investor Relations, and trusty expenses. Our G&A expense for the second quarter of 2008 totaled $33 million included in this numbers incentive compensation of $25.4 million related to the disposition of an interest in Shurgard Europe. Accordingly, the core run rate for the quarter was approximately $8 million. For the remainder of this year, we expect our property tax expense will continue to trend between 4.5% and 5% higher than last year. There are numerous reports about municipalities running into large deficit and needing additional revenues to balance their budgets. As a result, we are seeing municipalities becoming much more aggressive on the assessed values. With respect to the disposition of the 51% interest in Shurgard Europe that we completed at the end of March, our pro rata share of funds from operations from Shurgard Europe was approximately $6.3 million lower this quarter as a result of the disposition. However, offsetting this reduction was approximately $3.3 million of incremental interest generated on the $610 million of cash proceeds that we received from the disposition. Importantly, we had a net negative spread of about $3 million during the quarter. Keep in mind that the $610 million was invested during the quarter at an average rate of 2.2%, and we expect that our ultimate reinvestment rate will be higher than this 2.2%. In July, we acquired the remaining interest in 10 self-storage facilities that were part of the unconsolidated joint venture for total costs of $46 million. This cost included the repayment of approximately $38 million of debt and the acquisition as the partner's equity. The debt had an effected interest rate of 8.5%. We are also obligated to provide up to €305 million of additional loans to Shurgard Europe that will bear a fixed interest rate of 7.5% through March of 2009, which can extended for additional year through March 2010. These loans could be used by Shurgard Europe to repay existing third-party loans owned by the two joint ventures and the possible acquisition as a remaining joint venture interest. At the end of June, the arbitration proceedings for the European joint ventures was held in Belgium. Organized were here from both sides and we expect that the decisions will be made by the time we report our third quarter results. With that I will turn it over to Ron.

Thank you, John. Our combined domestic same-store REVPAF or revenue per available foot grew by 3.1% in the quarter due to rate growth and positive absorption. We continue to aggressively price, promote, and market our product in order to drive customer volumes. For the quarter, our pricing and promotional programs generated 1,200 more net customers than last year. At June 30th occupancy ended at 91.7% equal to the prior year and our July 31st occupancy was 91.5%, 0.3% ahead of last year. For July, we had net move-outs of 2,900 customers versus 5,100 net move-outs last year, an improvement of over 40%. Historically, July is a net move-out month, most of which occurs on a very last date of the month. Our most challenging markets continue to be in Florida and Honolulu where we had negative top line revenue growth. Florida makes up about 10% of our combined same-store domestic portfolio and lower rates in occupancies in this market reduced the combined same-store revenue growth by about 50 basis points. We are starting to see some positive trends especially in Miami. Honolulu continues to be negatively impacted by additional supply and reduced demand resulting 8% revenue decline in this market. With respect to the question of how the housing market crisis is impacting our business, we posted a supplemental schedule on our website outlining foreclosure rates and changes in home prices for the 20 markets reported on by S&P, Case Schuller and Realty Track. We've compared that analysis to our same-store revenue growth and occupancy. It's an interesting analysis and it does not appear to be a direct correlation to local housing market conditions and our performance at least in the short-term. However, the overall reduction and moving activity tied to the decline in home sales is no doubt impacting our business. The European same-stores continue to perform well. For the quarter Europe achieved a top line growth of 4%. Europe continues to benefit from tight expense control that helped drives NOI higher by 11%, and the gross profit margin to 61.6%. As we've said before, Europe's growth rate will start to normalize, and we believe we're approaching that point. Some key markets, especially London, are under pressure, and the ability to reduce expenses is more modest than two years ago. In summary, the good news is, customer volumes are up, pricing promotion and marketing programs appear to be working. Occupancies are higher going in the third quarter, and we have better absorption in Q2 in July than last year. Receivables and other cash collection metrics are the same or better than last year. The bad news is asking rates are below last year, credit card usage is higher up to 49% from 46% last year with credit card discounts up $300,000 to $6.9 million year-to-date. We show credit card discounts as a reduction of revenue not as an expense. Promotional discounts are also higher, resulting in 20% increase in customer acquisition costs. Putting all this together, while we're going in the third quarter with higher occupancy, rates for new customers are less than we charged last year. So our revenue growth could be lower into the third quarter, and possibly the fourth quarter depending on the level of pricing and promotions needed to sustain customer volumes. With respect to investments, we're well-positioned for this environment. We have bought $800 million of cash, just over 2%. So we have a lot of earnings power built into deploying this capital. Reverse inquiries are increasing and salary expectations are starting to adjust. However, we still have other ways to go. We will remain patience and disciplined. With that operator, let's open it up for questions. Question And Answer

Thank you. [Operator Instructions]. Thank you. Your first question is coming from J. Habermann with Goldman Sachs.

Hey, good morning guys. Ron, just to start on the last point you mentioned there in your comments about the cash on balance sheet, and you mentioned pricing getting a little bit more favorable. I missed wondering what you are seeing so far. How much more of a changing cap rates do you need to see, and I guess ultimately if you don't see much of a change in cap rates, do you think you do more share repurchase, and I guess as well, are you starting to see some sellers come to you with any sort of refinancing issues, the potential sellers?

Well J, there is whole variety of things that we're seeing in the market. There're some people that have refinancing issues. So you have to take a look at those portfolios and say, what is the loan-to-value relationship? Are the properties over levered, because in some cases people they are buying a product, with very creative financing, resulting and frankly today there is no equity in the deal, because the financing was so favorable. We're seeing an increase, as I said in reverse inquiries where people that we've been in touch with over the last year or so, are starting to call back, transactions have not closed, or they've decided that they want to sell and they realize that the market has changed. That doesn't mean that their expectations have comeback to a kind of back down to earth, they're still in kind of '07 pricing. But, at least they're talking and they're interested in a transaction. Share repurchases are really dependent on what are the alternative uses of capital; in terms of what are the opportunities before at any particular time and the price of the shares, and that really drives the share repurchases. Keep in mind with the $800 million, as John Reyes touched on, we still have a commitment to Shurgard Europe up to loan and back €300 million or €350 million, which is close to $500 million. So over half of that money is indirectly kind of committed to the Shurgard Europe operation at least until we have some resolution on the joint ventures over there.

Did you say how large reverse inquiries were?

Did I say how large they were, no.

Could you provide that?

They're all over the board, from local operators to guys with sizable portfolios.

Okay. Thanks.

Thank you. Your next question is coming from Michael Bilerman with Citigroup. Please go ahead.

Hi this is David Toti [ph] here, with Michael. Can you guys talk a little bit about, the economic scenario, that's underpinning some of your outlook, and internal forecasts with regard to your revenue and occupancy expectations for the next 12 months or so?

Well, I don't think we have a 12 months, forecast that we've articulated. We have some sense of what we think might happen, but we've nothing that we've kind of come out with. Most of the way we operate is day-to-day, rental-by-rental, space-by-space, in each and every market. And we're constantly adjusting our pricing and promotional, and marketing discounts, to what is happening at the particular facility, in a particular market. And you can have, new competitors come into the market. You can have competitors drop out. They can have problems, they can be doing adjusting the rates and so we have to adapt to that, each and every day. And that's really our... the way we operate the business.

Thank you.

Thank you. Your next question is coming from Christine Kim [ph] with Deutsche Bank. Please go ahead.

Hey, good morning. Ron you mentioned that you're seeing some positive trends in Miami, could you talk about what some of those positive trends are, and what you think might be driving those?

Well, the... let me see here, positive trends in Miami. We're starting to have better customer volumes year-over-year. Occupancy is starting to move up. Although, rates are backwards from last year, our promotional discounts are leveling of year-over-year. So at some point in Miami once you start to get these kinds of trends going, at some point you crossover to year-over-year comps and so the comps also become more favorable. In some of the other markets, where it's still extremely competitive such as West Palm Beach, where we're up over last year in terms of customer volumes, and... but, we're still backwards, I believe in terms of occupancy and rates.

But do you have a sense of what's driving some of the other trends, demand trends in Miami?

No.

Okay. Thanks.

Thank you. Your next question is coming from Christine Mcelroy, with Banc of America. Please go ahead.

Hi, good morning, guys. Can you just give us a sense for how you're approaching the revenue management process in Europe, versus the U.S differently, if that all, in terms of kind of balance between pushing rents versus occupancy especially, as you mentioned as growth in Europe has started to normalize?

Well, Christy, we've spent a lot of time with the European folks, kind of getting them up to speed, on our... the way we manage the revenue sites here in the U.S., and how to layer in promotional discounts. Keep in mind, in Europe you have a couple of different dynamics, environments that are different here than the U.S. One, they don't use the media like we use the media here in terms of television. There is not the scale in any of the markets over there to kind of turn on TV and turn off TV. The Internet is the highest percentage of the customer flow over there, and they're definitely into the Internet. Also, we don't have a call center in Europe, like we have here in the U.S. So it's a little different in terms of managing customer flows in and what's going on in that regard. Other than that, the pricing promotional discounts, last year they introduces the one euro special, it's very similar to what we do here in U.S. One of the things in Europe that we did last year and into the first quarter of this year, is we saw that we get the real good pricing power in a couple of markets, and we will continue to push rates. And I think in couple of those markets, we've kind of found the top in terms of our ability to continue to push rates with the customers. And I'm thinking of Denmark and Sweden. France, we have been challenged, France we have properties in a number of both comparison in number of submarkets, and we've had some people, challenges there. And London; pricing wise, one is the most competitive market over in Europe. And there has been have been influx of new competitors, additional supply coming into that market and it's made that a little more challenging.

Thank you.

Thank you. Your next question is coming from Jordan Sadler with KeyBanc Capital Management. Please go ahead

Good morning. Did your cost seem to be contagious this quarter among storage REITs, I didn't see any in your numbers did you guys have been to happen to top into the fray for any portfolio acquisitions this quarter?

I don't think of magnitude of the otter guys Jordan.

What's that?

I don't think of the magnitude relative to size of the other guys, I am sure we had some each quarter we got acquisition cost, we've got an acquisition team with two or three guys and we spend on traveling and legal fees and that kind of stuff each and every quarter.

Okay. That makes sense. I wanted to come back to one of your comments and maybe new answer but interesting enough. July, you said is usually in that move-out month and after on last day and I was curious if there is any thing that drives better thoughts on that?

Well the move-in and move-outs in particular typically occur a lot on the last day it also depends on what day of the week, if you end on the Sunday where we open most market half day on Sunday. So you are not going to get as many move out as if the month ended on a Friday or Saturday. But to give you some idea going into July, if you look at the numbers on July 30th, we were positive 2,100 tenants in the same-store pool, and after the last day of the month we are down 2,900 tenants. You compared that last year July 30th, we were up 800 tenants and after the 31st we are down 5,100 tenants. So on both month and days, you've got 5000 to 6000 net move out met one day. That is particularly pronounced in July, June 30th is historically the peak and the occupancy and the balance of the year is each month is a net move out month generally. It varies in terms of volumes, by generally from July though December. It's a net move-out mode for the rest of the year.

Okay. Your comments on sort of summarizing what's working what's not working, or what's good versus bad. I think in the end you kind of suggested that you are a little bit less sanguine about sort of revenue growth headed into the back half of the year, just because it's sounds like low pressure on rental rates and promotion activity needs to remain high to continue to get peoples through the door. Is that sort of an accurate read and what you were saying?

Yes, rates as I said the bad news is rates on a broad scale are below, asking rates are below last year. And how... what level of negative asking rates we're going to need going into second half of the year? What level of promotional discounts we can see? But it's certainly been a pretty challenging first half of the year. The offset to that is work your way into the year remember Florida started to moving go sideways in the back half of 07. And so at some points Florida is going to crossover and start to give you positive comps. That's I am sure Hawaii will some time in the future as well. So at some point you are kind of crossover under these markets that have been big drag and the comps start to become better.

That's helpful. Thank you.

Okay.

Thank you. Your next question is coming from Paula Poskon with Robert W. Baird. Please go ahead.

Thank you. Good afternoon. Do you have any further expectations for incentive compensation related to the Shurgard transaction in the second half?

No.

Thank you.

Thank you. Your next question is coming from Michael Knott with Green Street Advisor. Please go ahead.

Ron, talk for a second about sort of maybe not effective rate. So what you think about you said your street rates are down, are discounts increasing as well? And then also like you have to continue increasing your media spend to continue maintaining your occupancy. So what sorts of the net effective decline you're seeing in rates?

Michael, this is John. I think if you look at our street rates, lot of that indicate that they are down probably down about somewhat about 5% on average across the country or the quarter on street rates. However on mark-to-market basis our rates that were asking are still above what our in place rents are, in place being what our existing tenants are currently paying on a contractual basis. So we do have a still nice spread there, which is helpful and still grow in the revenue line. With respect to the discounting our discounting is higher this year not only are we getting that to more tenants that are moving in the actual dollar amount is actually higher than last year and also now we are saying the fact that rates are down. So on a net-net basis overall discounting is higher, and the absolute dollar, as well as the absolute tenants that are coming in and receiving the dollar special discount. I expect that as we move forward into the third and fourth quarter we will continue along this path of discounting more, as well as keeping our REVPAF asking around it's below last year's asking around.

Michael, one of the thinks I touched on to give to you net effective there is a thing I touch on called custom acquisition cost and it's kind of plays into recall that combined to marketing costs and promotional discounts divided by the number of movements compared to so that takes into account your volumes compared to your begin first month rent and your moving fees to get you kind of down to what is the cost to get a customer vis-à-vis how many you got and what is your asking rate. And Q2 07 customer acquisition costs were $29.70; Q2 2008 there up to $37.36. So that's 20% increase or in customer acquisition costs. I think that kind of captures the metric now obviously in customer acquisition cost moved down a whole variety of metrics get positive both on the revenue line and on the expense line especially related to media.

And then just a quick follow up and on year before. John also given the spread that you noted between in place and what you're achieving on new customers combined with existing customer rate increases you would still expect revenue growth to be positive, is that correct?

Well we've not given any projections on our revenues, but we're certainly hopeful that revenue growth is going to continue to be positive.

And you're continuing to be traction and increasing rates for existing customers?

We typically have wrapped up the year in terms of when we give increases existing customers. So we are essentially down for the year, which is consistent with all the past year as we typically do not give rental rate increase that is going into the--.

But, what's our volume or percentage increases?

It has been roughly about a 5%. So for those who did get an increase on average has been about 5% increase.

Thank you.

Thank you. Your next question is coming from Michael Mueller with JPMorgan. Please go ahead.

I think, you touched on this a little bit, but the idea the second half of the year, revenue growth maybe begin little bit less. I guess the question is, is it more of a prudent expectation that things continue to moderate a little bit because of the economy or if you compared the beginning of Q2 and think about your pricing power versus the end of Q2. Was there any notable change from kind of beginning of the quarter, to the end of the quarter?

Capital I think right, Michael, if you look at our press release at the end of the first quarter. We disclose that our in place rents at that point of time were up about 3.4% and that was at March 31.

Yes, 2.7... yes.

Okay. So that alone I think shows you the decline so far that we have experienced in over three months in that three months period.

Okay

And it's not in the occupancies because you can see our occupancies on a year-over-year basis is roughly flat. I mean in the rate is the great equation.

Okay. Thanks.

Thank you. Your next question is coming from Michael Salinsky with RBC Capital Markets. Please go ahead.

Good morning, Ron. In the past in the earnings release you had disclosed the performance of the legacy portfolio versus that of the Shurgard U.S portfolio. You have... could you talk to how those performed on a relative basis?

Sure. Let's see the Public Storage same-stores, revenue was up 3% for the quarter, cost of ops 2.5, and NOI was up 3.2%. Occupancies were 91.4 last year it was 91.2 and you had REVPAF growth of 2.9%. On the Shurgard same-store revenue was up 3.7, cost of ops was down 1.4, Shurgard NOI growth of 6.4%, occupancy were to 90.5% [ph] from 89.3 last year and REVPAF growth was up 3.7%.

Okay. Thank you.

Thank you. Your next question is coming from Chris Pike with Merrill Lynch. Please go ahead.

Good morning gentlemen, Ron are you guys... I know back last down turn you had pay in arrears, given your rising customer procurement costs, are you contemplating any change or any modification to the $1 move in that could may be try to temper those costs going into the back half?

Well. It really depends, Chris we valuated... as I touched on earlier kind of market-by-market if you were hearing regarding the granularity of the pricing group we there are looking at a space, by property, by market. And then immediate decisions are made obviously on a market basis because you can't run television for one property. And as we see the customer traction in the moving volumes then we calibrate up or down on the pricing in the promotional discounts and the media. Obviously in the first half of the year you've seen, with fairly aggressive on the media our year-over-year expenses is up $2 or $3 million going into the back half of the year at this time Q3 we're looking at comparable media to last year, but that will depend on how things play out. We have got to get through August and then we'll be making immediate decisions in September and October.

I guess the question you are not going to modify something, which you offer discounts, you are going to tweak it by market, so you're not going to embark on entertainment in your rear system or some other deviation from your typical discounting process, you're just going to tweak it by market and by amount

Yes.

Okay. Thanks.

Thank you. [Operator Instructions]. We have a follow-up question coming from J. Habermann with Goldman Sachs. Please go ahead.

Hey Ron just going to the advertising and promotion you talked about sort of the aggressive pricing of promotion at the start of the call, are there any markets where you are seeing that work less well and I guess again the benefits of that even in the last few months has obviously diminished a bit, and then I guess further to the point, when do you think about giving discounts to existing customers obviously them staying longer in place or certainly left turnover is helpful?

Hi, well let me see if I understand your question on the media. We look at the media by market. It works to different degrees of efficacy in each of the markets. I think we've been doing this long enough to know in general which market it worth the money and which not it is not although as with all companies marketing, is the tough thing to measure. So we are looking at that all the time and spending the money we think appropriately. I can tell you and for example in San Diego we've done TV several times, it doesn't work so we don't do television in San Diego. In markets like where media in New York, it seems to be working and so we are in television in the New York. So it's different by market. In terms of customer churn rate typically when you have an acceleration in customers moving volume you have for a period of time and acceleration of customer moved outs because 60% of your customers are move out within the next first six month, so there is an uptake in that. We experienced that in last year as we were filling up the Shurgard portfolio, we have experienced a little bit in the first quarter, but our move out rate, the to rate... the percentage of customers moving out each month is actually been ticking down and which is normal as the customer base gets more stabilized.

Okay. So back to the first part about the advertising and promotion I guess I was just trying to get at like more recently as you been increasing the spend have you seen any sign of whether that's actually not yielding the type of results you would like to see?

Well for the amount of... I will give you general picture, for the amount of money we spend I don't think... I sometimes question whether we've gotten a bigger bank for it but overall I would have to say the media and the pricing programs have worked because our customer volumes have been up year-over-year every month this year, except January. So, February, March, April, May, June, July and so far into August, our customer move-in volume is higher than last year. So I would say overall, the program is working in conjunction with our media, our pricing and promotion programs.

Thanks.

Thank you. Your next question is coming from Michael Knott with Green Street Advisor. Please go ahead.

Hey guys. John or Ron, can you just give a little bit of color on the partnership interest acquisition, maybe location price per foot, implied by your purchase maybe cap rate?

You're talking about the one we did in July?

Yes.

It's was a partnership we formed probably about five years ago, with a U.S pension plan. Pension that we've done business with before. It is a somewhat structured transaction, where they had essentially capped return on their investment. They hit their cap; their cap was about 10%. So, we were essentially straighter partners, except for they had a cap to return. Part of their investment had to be classified as debt due to the timing of getting some property's into the fund, some five years ago. So, in terms of cap rate, kind of didn't really follow those lines, because if we had put a market cap on them and they had did not have a cap to return. They would've had something in the low teens. But, because they were capped out, we just had to write them a check for their return. So, it didn't follow kind of typical buy assets from a third party, type of structure.

Okay, thanks.

Thank you. Your next question is a follow-up question coming from Michael Bilerman, with Citigroup. Please go ahead.

Hi, it's David again. Given that you've, pretty much completed the Shurgard integration, as well the Shurgard interest sale, is your appetite for another large scale acquisition increasing at this point?

Why would you loving to know the answer to that question.

Yes.

You know, we really can't comment on that.

Okay. Let me reframe that. Given that you've got such a large asset base, which is pretty scaleable, but, when you make small acquisitions, there is not a lot of meaningful, productivity out of that. What kind of external growth channels, do you think about, relative to moving the needle, could be a little bit of... more above average, for the industry?

Yes, there as I touched on earlier, we're continuing to do the one and two and five property acquisitions as they make sense. There are some larger portfolios in the market place where one can deploy a meaningful amount of capital out there and so there is opportunity to continue to drive that and whether we... I think on the last call I touched on the benefits of 50 property portfolio versus 51 property portfolios generally are the same and we get the kind of the same thing out of it in terms of Yellow Pages marketing and cost efficiencies in that regard. So we're going to continue to do that as opportunities present themselves.

Okay. And if I could expand along those lines a little bit more. If we think about you guys as... about PSA as a large portfolio of assets in markets do you ever think about the company as sort of opportunity fund where by you should be really trading out of assets and markets that are chronic under performers and if so why don't you actively dispose little bit higher volume?

Well I don't think you should think of this is an opportunity fund. We are an operating business where we have scale and brand name as for the operating platform is very important. With the Shurgard merger, we have looked at certain submarkets tertiary markets where we acquired assets and where we... the properties are indeed of a fair amount of capital. We are getting those property positioned sometime down the road there probably be some small group of property exposed of that where we have no scale or really presence in a market but now is not the time to be frankly in the market place trying to sell product. So you are not going to see anything for the balance of this year.

Okay. Thanks for the color.

Thank you. Your next question is coming from Jordan Sadler with KeyBanc Capital Managements. Please go ahead.

Hi, this is Thomas [ph] for Jordan. Do you think you saw any benefit from government rebate checks in the quarter either move in or tenant retention?

No way of figuring that out. I look at that comps across the platform if you look at the data produced by Ray Wilson if you look at some of other public comps and macro basis you would say probably didn't impact the self storage industry or whole bunch. It's pretty hard to measure, because you have got a mixed bag of results with our portfolio, net absorption. And I think your store has net absorption the other guys move backwards or sideways. And I think that data from Ray Wilson shows that there was negative absorption. So I say overall no impact.

Okay. Thank you.

I one as well, it's Jordan. The media spending of 25% year-over-year, which you've talked about and I'm just forward-looking little bit here. What would you expect any impact on media spending from your increased rates associated with the summer Olympics or the upcoming election?

That's a good question Jordan. We're in the August, so we already have the make our media buy and we've looked in the way earlier. We've locked in spin the rates in that the media by 4 October, which is where you would expect that heavy political, so were kind set and prepared for that. Keep in mind last year in Q4, we reduce media spend mid-December and none, mid-November, excuse me and none in December. And we're going to do that again this year. We won't play media pass mid-November and not in December. So anyway we've locked in the way through October when we do October not I can tell you the same on the political is even though you can get a commitment from the station in terms of giving your area time and all that you can get bumped because they have to give both candidates equal time. And so if some one is really cranked up their media spend then the other guy gets equal opportunity and you can give bump even though you think you have the media time.

Okay. That's helpful. Thank you.

Thank you. Your last question is coming from Michael Mueller with JPMorgan. Please go ahead.

Yes, I thought, I was through that I am fine. Thanks.

Thank you. At this time I'd like turn the floor back over to Mr. Clem Teng for any closing comments.

Thank you. I want to appreciate everybody's interest and question on today's conference call, and we'll talk to you next quarter, bye.

Thank you. And this concludes today's Public Storage second quarter 2008 earnings conference call. You may now disconnect your lines, and have a pleasant day.