Ladies and gentlemen, thank you and welcome to the Public Storage First Quarter 2015 Earnings Conference Call. All lines have been placed on mute to prevent any background noise. Aster the speakers’ remarks, there will be a question-and-answer session. [Operator Instructions] Thank you. I’ll now turn the call over to Clem Teng, Vice President of Investor Relations. Please go ahead.

Good morning, and thank you for joining us for our first quarter earnings call. Here with me today are Ron Havner and John Reyes. All statements other than statements of historical facts included in this conference call are forward-looking statements subject to a number of risks and uncertainties that could cause actual results to differ materially from those projected in these statements. These risks and other factors that could adversely affect our business and future results are described in today's earnings press release and in our reports filed with the SEC. All forward-looking statements speak only as of today, May 1, 2015, and we assume no obligation to update or revise any forward-looking statements whether as a result of new information, future events or otherwise. A reconciliation to GAAP of the non-GAAP financial measures that we are providing on this call is included in our earnings press release. You can find our press release, SEC reports and audio webcast replay of this conference call on our Web site at www.publicstorage.com. Now I'll turn the call over to Ron.

Thank you, Clem. We had another solid quarter. We continue to execute on all fronts. In the U.S. and Europe revenue growth continues to accelerate, our development pipeline continues to expand and industry fundamentals are good. With that operator let's open up for questions.

[Operator Instructions] Your first question comes from the line of Michael Mueller of JPMorgan.

Europe is obviously pretty small this point relative to everything overall, can you just an update on pricing, occupancy and NOI trends there?

Occupancy for the quarter was for all of Europe was 87.9 versus 82.1 last year, so up 7.1%, rates were backwards 3%. So REVPAF was up close to 4%, 3.8 for the quarter. So, we’re feeling good about Europe. All markets, but one was up in NOI and Holland our most challenging market, occupancy was 81.4 versus 70.7 last year, so a big 15% increase in occupancy year-over-year.

And I forget is there a follow-up or is it just one question?

You can follow-up.

Can you talk a little bit about the G&A increase relative to prior quarters and what’s a good run rate to expect for the balance of 2015?

This is John. So our G&A for the year quarter was about 24 million and that compared to last year at around 19 million. And the major swing items, the increases were basically of three categories; one was a share-based compensation expense which was up about $1 million; the second item was our development overhead that’s been expensed, that was up about 0.5 million and then legal cost which is up about 4 million for the quarter. So on a run rate basis going forward, I would expect that our G&A although it's running about 24 million for the quarter, don’t think they will run 24 million for each of the next three quarters, but it will continue to run higher than last year. Primarily due to we expect additional increase to legal cost as well as share based compensation and development overhead cost the expense, so expect higher G&A going forward.

And what’s the legal cost tied to?

Various litigation matter, I mean various parts for the company.

Your next question comes from the line of Ross Nussbaum of UBS.

Jeremy Matson with Ross. I was just wondering if you can take a little bit more about traction that you're making on rate growth you obviously see some good acceleration in 1Q, it appears to be at some of the highest levels in quite a long time and just how much of an impact lower discount is having and where realized rents were moving, were relative to move outs.

Jeremy this is John again. For the quarter our street rates were up about 6% roughly and our move in rates were up about a little over 5%. Our volume of move ins were up about 1.3% and so I'm pretty happy that we're able to move street rates and people are accepting those higher rates. And we're seeing competition also raise their street rates, which we really haven't seen a whole lot over the past couple of years. So I got to believe everybody is fairly full and people are getting more aggressive on rates. On the discounting side, at least for the quarter the number move ins receiving discounts was -- the percentage was about the same as the first quarter of last year. So roughly about 80% of our move ins were getting discount. I expected that as we move forward given our occupancies we'll start turning now back and we're starting to do that in the month of April. Street rates continue to move higher in April. They're now somewhere in the neighbourhood of about 7% higher and moving rates are also moving higher at this point of time. So [indiscernible] right now.

Great and then just one for Ron if I can, just a little bit bigger picture on the development front more broadly obviously you guys pipeline grew a little bit this quarter but anecdotally we're hearing about pickup from all the new money [indiscernible] stores, it's looking for different ways beyond the acquisitions and the looking at more fair deals just kind a giving your footprint where you're see any sort nationally in the development front?

Jeremy, we start our development program a couple of years ago in part because acquisition pricing was starting to trend above replacement cost and I said, it's many cases well above that and so we're already happy we've got a good development program growing at -- despite some meaningful deliveries this quarter, we still expended the pipeline. So worked at 31 projects about 3.6 million square feet. We're seeing increased development across the U.S. Is it something to worry about today? No not really. It's kind of natural given the comments John just said in terms of rates moving up, it's natural then that developers will look at those rates by us and others would say okay at those rates I can develop and make a decent return on capital.

We have David Doll here any color you on development?

No, I think we're pretty happy with the things that we're opening. In fact we'll open one next Tuesday in Glendale and continue to see other new development in natural markets like Miami, Houston, Dallas but not so much in Southern California, Northern California or some of our other key markets.

Your next question comes from the line George Hoglund of Jeffery.

Yes internally acquisition environment, are you seeing any difference in the composition of potential buyers out there and also any difference in the motivation from sellers of anyone feeling more of a rush to get deals done nowadays?

Not in terms of -- David Doll again. Not in terms of new equity players, there has been a constant inflow of folks trying to come in to the marketplace. I don't think that's changed any perception any over the last several quarters but in terms of quality of product coming to the marketplace, we don't see high quality products available today and hence it's one of the reasons why we're so happy with our development program, it gives us an opportunity to bring better product to the market player to our customers.

And then in terms of development you guys are seeing outside of the projects you guys are doing? [Tough that's] schedule become online in your markets generally who are the developers or the operators of these facilities?

Many of the local regional players that have continue to hold their portfolios and have active development programs started. There are a number of developers that has sold out in the prior 2006, '07, '08 timeframes; they're back in business again trying to start up development programs. So, it's generally people that have [technical difficulty] business over the years.

Keep in mind, remember the industry rights got 50,000 facilities to top five operators have less than 10% market shares to the industry's highly fragmented. And you can extrapolate that into the development programs as well. It's highly fragmented -- a lot of small one, two, three property operators doing development programs.

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

I was curious, where do you think the portfolio can get from an occupancy standpoint is 96% possible in late July, along lines are you seeing any changes in move out activity related to existing customer rent increases any changes in behaviour around that?

I'll start and Ron can jump in as. In terms of changes in customer behaviour with rate increases, no we haven’t seen any changes there is still a very sticky for the most part we're seeing tenants are being with this longer than year an annual increase and we're not seeing any change in that. In fact we're seeing that our ageing of our tenant base is actually continues to improve I think we're just about 56.5%, 57% of our tenants have been here longer than a year. So that continues to improve how high can occupancies get, I don't know I made and I think two years ago saying that that can get higher than 94 and were higher than 94. So can I get to 96 we have properties that are at 96 we have properties that are probably higher than 96. So there are certain properties and maybe even markets that can get to those levels but I don’t think our entire portfolio can get there.

Just to add during April we had three markets where the market as a whole was 97% or better occupied during the month of April. I would agree with John to get 2000 properties at 97% is probably not going to happen.

Okay that’s helpful. And if I could just follow up with regard to litigation matters, can you just shed some light on what that pertains to seems like sort of a big number? Is that something that you foresee continuing throughout the balance of the year?

Whatever we could talk about will be in the 10-Q. So that’s what you should read kind of clarity on the litigation.

[Operator Instructions]. Your next question comes from line of Smedes Rose of Citi.

I wanted to ask you as you look back on some of the properties that you've acquired are you reaching stabilization maybe faster than you would have expected given how strong fundamentals are in the business. And as you look forward have you changed your expectations around how long it would take to reach stabilization as you lease up new assets.

Generally what we do on properties that aren’t what we consider stabilized 90% plus occupancy is we'll tend to be a little aggressive actually a lot aggressive on rate to fill them up. And as they fill up and stabilize then we'll start to push the street rate and the in place rent customers. Are we filling up faster than we anticipated yes, you take the Gerard property which opens in May or June of 13 4,000 units and ended April at 93.9%. I think we forecast that property taking four years to fill up and it's basically filled up in less than two. So much faster than we anticipated however it is filled up at lower rates than we anticipated it. But we think we'll make that up and so net to net we'll be ahead of the game and we're seeing that in both our developments and acquisitions. The table that is in the press release if you look at the 2013 acquisitions kind of give you an indication of what we're doing last year there were at 863 then in Q1 at 928 so up 7.5% and then you see the contract rents moving from $13.25 to $14 are up 5.7%. So you should expect in that portfolio that maybe occupancy comes up a little bit in terms of stabilization but at the rates will continue to move up at above average levels for probably the next couple of years because we filled then up at bit below market rates.

And then I just wanted to ask you announced redemption of some preferred in the quarter. Are you still leaning towards issuing that at some point as well for your financing needs and as much as you have any but or perhaps your thoughts around that changed at all.

No we're still looking at potential issuance of debt on time in 2015.

Your next question comes from the line of Ki Bin Kim of SunTrust Robinson Humphrey.

So [hawing] up on the last question if you did pursue that where is you mind set because obviously you expand your line of credit. Is it more shorter term duration or are you looking more at the 30 year type of range.

What we did expand our line of credit so most likely what we'll do is we'll get in deep into our line of credit before we start thinking about longer tenure debt. We could do anything from 7, 10, 12, 15 with 30. I think we can look at the whole spectrum and tranche up [that we see a] best fit for public storage. We have invented that point to have to make a decision yet but I think we have a lot of options open for us.

And maybe just turn to your same-store expenses, you’ve done a very good job of keeping it very flat and we were mostly other expect a lot of expense increases, just curious besides the payroll part of it, which we talked last quarter, but how are you keeping in flat for a while and notice that your allocator overhead was favorable to the expense number by a 1 million or so? If you could talk about that and how long can this be or does it -- you have to return like an inflationary rate?

Well the answer to the second part of your question will it return long-term to an inflationary rate, yes we consistently say that. Having said that as we’ve also consistently said, we’re always working away to take cost out of our system to get more efficient, more productive in all aspects of our business. If you look at Q1, big increase item was snow removal; we were up $1 million over last year. I can’t believe we're up a $1 million over last year’s where we were. Utilities are down, gas prices are down, oil prices are down and so I think -- and we’ve renegotiated some new utility contracts. So I think that number could remain flat to slightly down. Advertising and selling were 95%, occupy there is a not a lot of need for that. I think when we get to Q2, we didn’t did do advertising in Q2 last year, so you won’t see advertising this year. So that line will probably be flat and whether we do advertising, the balance of this year is yet to be determined. Other direct property tax cost were up 3.6 and then allocated overhead was down mainly because we used to have our annual sales conference in the first quarter and we moved it into the third and fourth quarters of last year and so last year was a double up and this year we have the expense savings in Q1.

Your next question comes from the line of Todd Stender of Wells Fargo.

For the acquisitions already completed this year, the annual contract rent is 11.65 and just lower than some of the previous years. Is there anything we can read into that number, is it a reflection in the markets you're entering or any [see about] deals included in that?

It's a function -- it really varies by market. You’ve got some of the properties are down in Texas and I think we got under contract in East Palo Alto it probably has a in place rent of double what is down in Houston. So just depends on which markets for the properties are in that quarter's acquisitions. We’re not sitting here targeting, we want to buy properties at $13 or $14 of in place rents. It's really a function of do we want that property? Yes and therefore the rent -- the rent makes sense and so we’ll buy it.

Maybe the sample size is small item looking at. And then just second, can you provide any color in the land lease buyout that you had in Q1?

It was a remnant transaction from the Shurgard merger in ’06 and we had an option to acquire the land lease this year and so with a pretty terming formula and we exercised our option and closed on the transaction. But pretty good transaction for us, only 15 million, but it's pretty good transaction.

At this time, there are no further questions. I’ll now return the call to management for any additional or closing remarks.

We appreciate everybody’s interest in Public Storage in our first quarter…wait, there is one more call there.

You do have a question from Dave Bragg of Green Street Advisors.

Just bigger picture question on supply for you, there is a lot of concern over this new supply; it's emerging, but in light of your strong operating results. The question is, how much new supply does the industry need? It seems the supply is needed and when you take a step back Ron and you look at eight square feet per capita, does that seem like the right level going forward?

Dave, I think I said that before and if you kind of take the U.S. population, seven square feet, eight square feet per capita, normal population growth of 1% a year or you're going to take 50,000 facilities and 1% a year that’s 400 to 500 facilities per year and that kind of keeps everything at seven feet or eight feet per capita. I will tell you as you go across the country markets very greatly between two square feet and three square feet per capita and 12 square feet and 15 square feet per capita and obviously the ones that have the higher square footage tend to have lower rate growth rate. If you ask me where development will happen fastest. New York has been working on development programs for a while, so I think we’ll see big uptick meaningful uptake in supply in the New York area. And then across the country vary between infield markets and then outline markets where it's easier to get zoning, permitting and land is cheaper. But 400 to 500 properties a year kind keeps things static and we haven’t had much developments since '09. So we kind of four five years behind in terms of the curve of new supply relative to organic population growth.

So the industries saw a significant sector shift in terms of growth of square feet per capital of may be three 20 years ago to eight today. Seems like your thought is that we grow in line with growth in line with population growth would make sense that -- not the result the demand that we're seeing don’t necessarily indicated that we need nine or 10 square feet per capital.

I guess my point mentioning the nine or 10 like I know Austin has got over 11 square feet per capita and Austin is a pretty good market for us. So is the max 7? I don’t think so it varies my market and could the country wide in the U.S could we go to a 10 or 11 square foot per capita? I don’t think that’s unreasonable given the trend to a movement to apartments smaller homes especially in markets like Manhattan and San Francisco and even parts of LA. It’s not impossible to get to a 10 or 11 per square foot is that going to happen I can't say.

One quick housekeeping one you've referenced us to the 10-Q is that coming out today.

Probably next week David.

Your next question is a follow up from Smedes Rose of Citi.

It's Michael Bilerman here. Ron I may miss your opening comments because I dialed in late. Did you commented in terms of how you are going replace the COO role I know Shaun left in March to be I think see some private educational company. Can you just a little a bit about what those plans are.

Well those plans have already been put in place. We have divided up the country and given responsibility to three outstanding executives that are been with public storage 15 plus years. And those three exceptional executive are now running operations

By committee.

With the team.

The three report effectively and I ask it more -- I think the CEO role has had some turnover over the last five or six I think Shaun made third in that seat. So I didn’t know if there was something structurally that wasn’t working just talk about what those inhibitors just reasons why each of them left.

There are different reasons why each of them left but you can describe it to my inability to hire a COO. So I'm just leaving it at that but the guys we have running the operations are long time public storage execs that have grown up here in the operations and -- well, you can tell by the results they're doing an exceptional job.

And then what was the change in Chief Legal Officer during the year was that a retirement or what transpired there?

Yes Steve retired and actually I don’t know what Steve is doing. But he is retired and we brought on [indiscernible].

At this time there are no further questions I'll now turn the call to Clemente Teng for additional or closing remarks.

Thank you again for your interest in Public Storage and we'll speak to you next quarter.

Thank you for participating in the Public Storage first quarter 2015 earnings conference call. You may now disconnect.