Ladies and gentlemen, thank you for standing by. And welcome to the Public Storage Second Quarter 2015 Earnings Conference Call. At this time, all participants have been placed in a listen-only mode and the floor will be open for your questions following the presentation. [Operator Instructions] It is now my pleasure to turn the floor over to Clem Teng, Vice President of Investor Relations.

Good morning. And thank you for joining us for our second quarter earnings call. Here with me today are Ron Havner and John Reyes. Just want to remind you that 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, July 30, 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 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 website at www.publicstorage.com. Now I'll turn the call over to Ron.

Thank you, Clem. We had another solid quarter, hitting on all cylinders in Europe and in the U.S. and our development pipeline in tenant reinsurance. So, with that, let's open it up for questions.

[Operator Instructions] Your first question comes from the line of Smedes Rose of Citigroup.

Hi. Thanks. I wanted to ask you about your -- about Shurgard there, obviously, made some fairly large acquisition in the quarter and things seem to be going very well there. Haven’t met with your team over there quite recently? How do you think about your ownership there going forward either in the public vehicle or in a private vehicle or kind of -- or do you just like the status quo?

Well, right now Smedes, our Shurgard Europe is relatively or modest leveraged. They just did another €300 million financing, so they have €600 million of term debt, average duration of about nine years sub 3% and they will be internally generating about €82 million to €90 million of cash flow with really no requirements other than for growth. So in terms of doing an IPO at this juncture, not sure what we would use the proceeds on since they funded all their acquisitions and they're sitting on €70 million, €80 million of cash at this juncture. Longer term going forward, that will depend on market conditions, growth opportunity those kinds of things.

Okay. Could I just ask you too, we keep saying a lot of media storage pop up about potential changes to proposition 13, particularly related to commercial property versus residential? Do you -- just being out there and maybe being more [indiscernible] in some of us, sorry, do you have -- can you add any color to that in terms of what you think could happen there if anything?

Well, I can't tell you what might happen, but as far as, we know there is no pending legislation or bills in California. But I don't know at the moment what is being introduced. We haven't heard anything to give concern at this juncture.

Okay. All right. Thank you.

Your question comes from the line of Gaurav Mehta of Cantor Fitzgerald.

Yes. Hi. You said Europe is strong. Could you share operational occupancy and rent data for European portfolio?

Sure. The same-store portfolio for Europe operated at 90.1% for the quarter, that's up from 84.9% last year, so 6% increase in occupancy. Realized rents were down a point and half, so revenue growth is about 4.5%, 4.6% and at quarter end the portfolio occupancy was 91.1%. All the markets across Europe were up in occupancy year-over-year. The strongest being in the Holland which closed out at quarter 87.5% versus 76% last year, so 15% growth, but if you recall Holland has been a challenge for us over the last couple of years, so it is obviously recovering and catching up with the rest of Europe.

Okay. Thank you. That’s all I have.

Okay.

Your next question comes from the line of Jeff Spector of Bank of America.

Good afternoon. If we could first focus on profit margins for the quarter in the U.S., saw a nice improvement there? Can you discuss, I guess, the declines in advertising, selling expense and R&M, what we should expect maybe going forward the next couple quarters or even into ’16?

Yeah. Jeff, this is John. On the advertising, the advertising was down in the quarter, primarily because we didn't do television advertising in this second quarter versus last year where we did do about, I think, about a $0.5 million of advertising. We also spent a little less on the key search terms on the Internet. I think that was down maybe a couple hundred thousand dollars there. Going forward on the advertising, I would expect that it’s probably going to be relatively flat Q3 and into Q4, because we probably go back on to television in those quarters similar to what we did last year. As per the R&M, I think it's really -- it's down but it’s mostly I think timing, I think, we're expecting for the full year that R&M will be relatively flat. So there should be a little bit of an uptick in the latter half this year.

Okay. Great. And then, I know that each quarter we asked about occupancy in the business, your portfolio as a whole for all self storage keeps rising at national levels. I mean, any new thoughts on full occupancy levels to your portfolio even just in general for self storage industry?

Is your question, what we think we possibly achieve, like what is the maximum occupancy level? Is that the question?

Yeah. Basically and of course, I would assume that's based on what you're seeing in your markets in general?

Yeah. We have a couple of markets, our better performing markets in the quarter like Denver and Portland that had -- I think that ran about 97% almost 98% occupancy for the quarter. So you can say nationwide, so we possible achieve that where you have every market was hitting on all cylinders. But more likely than not, is there some strong markets, some average markets and some weak markets. So that might be tough to achieve on a national basis. For instance, right now, our DC, Norfolk Virginia markets are languishing a little bit. At the Midwest, it’s not nearly as strong as the West Coast. So to say 2000 portfolio will operate at 90%, probably pretty hard. Having said that, we’re about 96% today.

Okay. Thanks. And then last question on the supply front, I know the last time I saw your team, we discussed the competition for land with departments, anything thereon on competition for site, anything on the supply front to share with us, any anything more recent from June, July?

While I think our main competitors for sites are multifamily, not really retail. Some storage guys although once in a while we run into a storage guy competing for the site but it’s mainly the multifamily. In terms of supply nationwide, we think it’s picking up. If you look at our development pipeline as a percentage of our portfolio, it’s about 2.7%. So maybe you can extrapolate that in the industry and say the industry is growing at 2.7% as a whole. So that 1000, 1200 properties. Growth is not uniform across the country though. It’s occurring where you would expect Texas, Florida, the Carolinas. The positive of those markets is they have above average population growth. It’s not occurring to any significant degree in San Francisco, L.A., Boston, Miami, the markets which are much more challenging to get zoning and find sites to develop. Does that address your question?

Yes. Thank you.

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

Hi. Thanks. Just -- I was wondering if you took a look at the SmartStop portfolio and if you did why you chose not to be as aggressive on the deal as your competitors, just given where your cost of capital fits?

Todd, we did look at the portfolio but I prefer not to answer that question.

Okay. And thinking about your marketing platform and your digital footprint, how does the scalability factor in to your decision to buy properties and does it factor into the equation at all for PSA when you’re looking to make new investments?

Certainly scale does. We look to increase our market share in our key markets where we operate. So if you look at our market like Florida, Miami, Fort Lauderdale. Over the past five, eight years, we've grown from about 14% market share to 25%, 28% market share. The same has happened in markets like Minnesota, Seattle, certainly in Dallas and Houston where we’re building. Our market share is increasing there. So we very much focus our acquisition in our development program on expanding our platform in the key markets where we operate. And so that’s certainly enters into our decision in terms of when you look at our portfolio like the one you just mentioned, there is a lot of tertiary markets there where we have no product and in a number of cases, we have no interest in having a new product. So it doesn't do much for the platform. Certainly scale in markets is very important. John can touch on the marketing side of it and the pricing side of it and scale in terms of operating efficiency, managerial talent, brand awareness. Here in L.A., we often have analyst come through and say, jeez you guys are everywhere here in L.A. and we are here in everywhere in L.A. We dominate the market and it’s 200 plus property. So that's great for brand awareness and in television advertising and marketing. You want to add anything?

No, I don’t want to add anything.

Okay.

Does that answer your question?

Yeah. That’s helpful. Just a follow-up then on, selling and advertising expense, it was down nearly 10% but it was still about $5.5 million in the quarter. And just thinking about where occupancy is, why is that not down more? I would think that you could pare that back a bit more?

We’re doing everything we can to pare it back. Even though our occupancies remain high, we still had over 2000 tenants move out during the quarter. So we still have to advertise to replace those tenants and maintain the occupancy level. So if people stop moving out, I can guarantee you will cut down that advertising cost quite a bit.

Okay. Thank you.

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

Dennis, it’s a follow-up on that previous question. As you’re approaching 96% -- I guess, you hit 96% in July. It’s unlike -- what point do you think it drove sufficiently high enough and I know you’ve been pushing rates already but maybe push harder? When does that equation can start to favor pushing the rate level much more than just keeping occupancies higher?

The problem that happens when you start pushing rate too high is you will get a tenant that you probably have to continue to provide the dollar special discount, and/or you will get a tenant that will not be a very long-term tenant. So, it's not necessarily -- the game is not won on the move-in rate. The game is won on getting the tenant that stays long and becomes very sticky to rate increases. Although we are pushing rate could we get more aggressive? Absolutely. We would lose occupancy and we would get a tenant that would not stay as long. And that's not in our strategy.

They key to follow-on on that, for the quarter, percentage of customers greater than one year was up 60 basis points to 55.9%, up from 55.3%. So if you had a chart in front of you last three years, you would see each quarter and year-over-year, we are moving that percentage of customers greater than one year up. And that really tends to -- goes to John’s comment in terms of filling that base of stable customers that are somewhat of an sticky annuity.

And the second question. When you are talking to, which I’m assuming you are -- lot of the big operators outside of five public companies now. How have the conversations evolved in terms of their willingness to sell, kind of -- the bid-ask spread between what they want versus what you are willing to pay for assets? Has that gotten -- you are trying to put a measuring stick to it, more feasible to do bigger deals or still tough as before?

Well, usually the dynamic in the larger portfolio is not per se question of price. At this juncture, it’s more a question of ownership dynamics, connecting the families that can be partners. That can be that other alternatives to selling, just simply refinancing because it’s not hard to refinance a full stable portfolio at this juncture. So there is a lot of alternatives to the more established operators besides just selling and/or price. There is other dynamics within the ownership going up besides just do you want to sell or do you not want to sell.

Okay. Thank you.

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

Yeah. Just wondered if you can comment on what the insurance participation rate was at the end of the quarter and then also if there is any update you can provide on any of the ongoing loss to the legal fees, whether it’s pertaining to tenant insurance or what other matters that may have been resolved that you can comment on?

So your first question was how much -- was your question how much of the portfolio was covered by insurance or customer base, or what’s the tenant insurance rates for new customers?

What part of the existing portfolio?

George. So, approximately 66% to 68% of our tenants have the tenant -- participate in the tenant reinsurance program that is offered at our properties. In terms of the G&A, this part quarter, G&A was up about $5.5 million and about $3.2 million of that were related to increased legal costs and it’s for various matters out there. And we are not going to go through what those matters are on this call.

Thank you.

Our next question comes from the line of Jeremy Metz of UBS.

Hey. It’s Ross Nussbaum here with Jeremy. Can you talk a little bit about the topic of move-ins versus move-outs? What was the percentage increase or decrease year-over-year for each of those stats in Q2?

Yeah. This is John. So the move-ins were down about 1% of the move-in rate. The rental rates that they came in at was up about 8% for the quarter. On the move-outs, the moved-outs were about flat year-over-year. The rate -- the contract rate or the rental rate that they retain was up about 4.5%. Does that answer your question?

Yeah, it does. I asked this question of extra space as well. I’m trying to think of -- how should we'll be thinking about the fact that move-ins are down year-over-year yet the industries enjoying such significant occupancy and pricing pressure? Should we be considering all without that number?

I can’t speak about other people’s move-in volumes and whether they are up or down. But what I could tell you with respect to ours, with their occupancy as high as they are and our occupancy spread being higher than last year, we have less inventory to sell. So notwithstanding the fact that our absolute numbers of moving volume is down, the velocity of move-ins, the move-ins relative to what we have to sell as a percentage is up quite a bit. So, I mean, if you took it to an extreme and we were 100% occupied, we would have no move-ins, right. So, closer we get to 100% occupied, it's very difficult to get move-in volumes on a year-over-year basis to increase. So, we are quite comfortable with the move-ins. We are still getting a lot of -- unfortunately, we're getting a lot of demand into our system, the demand, the call volume, the hits to our website, our website of both mobile and desktop are still way up. Part of our problem is that we have -- we are running into capacity issue in terms of inventory.

Ross for the quarter, even though the move-in volume was down about 2000 customers and the move-outs were about flat, we still had 21,800 net customers for the quarter. That’s less than last year when we had 24,000 net customers. But to John’s point, we still had on that 21,000 more people move-in to move-out during the quarter.

Got it. Okay. Ron, look, strategically you talked about the Shurgard European IPO in the works. You and I have talked in the past about PS Business Parks. And while you’re talking earlier, I was just pulling up a relative chart of PSA versus PSB over basically any timeframe you want to put out from year-to-date to 20 years. And PSA has been kicking PSBs, but from a relative share price performance. I guess what’s it going to take ultimately to spin those shares off to shareholders and what your existing shareholders say if they want them be invest in self-storage, let them surely invest in self-storage. And if they like PSB, they can hold those shares.

Well, Ross, step back couple of things. First of all, if you -- self-storage is a completely different business than flex industrial. So that’s one. Two, PSB is about 4% of our NOI enterprise value whatever you want to call it. Three, if for us to change our attitude on doing anything with PSB in terms of spinning off or sign it, there would be need to be a change in the tax law such that we would not pay any taxes on that, because most of our interest are held in OP units, which have quite frankly a de minimis tax basis. And so whatever we did with it, we for the most part be purely taxable income and in that requiring a distribution.

Okay. Yes, that last point is interesting. Okay. I think Jeremy has got a question.

Hey, just one quick for me. Obviously you took -- it looks like 10 Houston assets are the same-store pool. Can you just talk about what’s going on with those and what kind of costs you’re looking at to get them back online just given that you’re self-insured? Thank you.

While there were flooded, there were some pretty severe weather in Houston in the Q2. They’re poorly damaged and so we took them out of the same-store pool because they will require extensive repairs. And on tenant insurance business, we had about $800,000 additional cost for estimated claims related to those properties. And in terms of our final estimate of how much it’s going to cost to repair, we don’t have that, that’s still under process. My guess is it would be a couple million dollars.

Okay. Thank you.

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

Hi, thanks. We saw that Shurgard issued the bond to fund their Netherlands acquisition. And Ron, you noted that they are generating free cash flow. But just as a reminder, is there a commitment in place for Public Storage to provide capital to Shurgard, just get a reminder what the commitment is if any?

No, Shurgard operates as a standalone entity. We own 49% of it, a large pension fund owns 51% of it, the other 51% and Shurgard has taken quite a while to get here, but Shurgard is self-funding. And as I noted and it issued the bonds, the €600 million bonds without any credit support from either of the two shareholders.

But nothing in writing to say you would commit equity to a large acquisition or anything like that?

No.

Okay. Thanks. And then just to look at an update of your current expectations, your same-store pool continues to generate accelerating fundamentals at this point in the cycle. Any updated thoughts on what it takes to say stabilize new development and C/O deals, anything that you’ve revised anything internally as we enter August here?

Well, internally we continue to use our historical underwriting assumptions of generally about three years for a standard size property. If it’s above average size, say like Gerard property, I believe we used four years. So for 2000 plus unit property, we used the four-year stabilization period. The nice thing is we are exceeding those by quite a bit. We opened a new facility here in Glendale about 2000 units at the end of April and it’s already have 50% occupied in about two months. So that’s a quite incredible, that’s a combination of, it’s a great product, the marketing team, the internet marketing team highlighting that facility, the pricing team pricing it to sell, and then of course operational execution at the unit level.

Is that causing you to accelerate your underwriting as you look at stuff that may close in the second half of this year?

Accelerate, you mean accelerate development faster?

Your expectations of stabilization?

I think we will be -- all of our stuff that’s in the pipeline now filling up.

I guess new deals.

We are well ahead on across the board in terms of financials.

We are not changing our underwriting.

No, we are not changing our underwriting.

Okay. So still three years.

We continue to underwrite it conservatively to keep the discipline on what we’re developing.

Okay. Thank you, Ron.

Your next question comes from the line of Mike Mueller of JPMorgan.

Hi. Sticking with development for a second, it looks like right now the pipeline is $450 million to $500 million for development and expansion. Two questions, one, does it feel like over the near term that’s a good run rate for the size of the pipeline? And then secondly, if you didn’t start anything new, how long does it take you to complete those developments to bring them online?

Mike, I think we are -- the team has got their track shoes on and they are going around the track about as fast as they can with respect to the development team. They are doing a great job. And keep in mind in terms of the development pipeline, you’ve got stuff delivering right. So we’ve got product like the Glendale property delivered in Q2, so that comes out of the pipeline and so you got to backfill that just to kind of run in place at $500 million or $480 million. So there's a continuous in out process on that pipeline of deliveries and the new projects coming into it. So I wouldn't anticipate much more, that number going much above $500 million, certainly not within the next six to 12 month. In terms of what we've got under construction and how long, it will be pretty much third, fourth quarter of '16 before that's all built in out of the ground and up and operating and then you can figure two years after that before it stabilize. So think in '18 before what we're working on now get stabilized.

Got it. Okay. That was it. Thank you.

Your next question comes from the line of Steve Sakwa of Evercore ISI.

Thanks. Good morning. John, as you just kind of parse through the rent data, I guess, can you kind of hit on my question? But I’m just trying to think if you see anything kind of in the data as it relates to rent increases, pushback from customers, anything kind of by region, maybe by demographic profile of the center, just anything that you could sort of share with us about kind of the elasticity of demand here?

Yes. Steve, we do look at that, we look it by markets, by demographics. We aren’t seeing anything different than what we saw last year, so they’re behaving the same for the most part. So we’re continuing to send out those increases just the same strategy as we have last year. We probably year-to-date have spent out about 5% or more increases and the percentage increases about the same as last year, which is about 9% to 10%.

Okay. Thanks. And then Ron, I know we’ve talked a little bit about sort of your funding strategy and your maybe desire to expand your capital sources. And you are sort of contemplating the unsecured bond market. Just kind of what the status today, I realize you're largely self-funding unless maybe something large comes along? But is there any even thought process to doing some longer data debt and we even have an opportunity to maybe call in some of the preferreds and new kind of a swap there?

Steve, we are certainly looking at that. So I wouldn’t be surprised if before the year it’s done that we haven’t kept into some form of debt. I’ve mentioned the last time we’ve been looking at private placement as well as public debt. We’ve looked at various maturity levels, which certainly long-dated maturities also. And we do have a few series of preferred stock, one becomes callable in the fourth quarter of this year. And I think we have two larger series that become callable next year, so definitely on in my mind. And I think you might see something happen before the end of the year.

Great. Thanks a lot.

[Operator Instructions] Your next question is a follow-up from Smedes Rose of Citigroup.

Hey, it’s Michael Bilerman. Ron, I want to just come back on development. So, 2.7% outstanding today relative to your stock and I think you commented that used as a good proxy for the rest of the industry. And I guess from the delivery standpoint, I think you said most of what’s underdevelopment today is going to deliver by the end of 2016? Or do you think some of what gets pushed from a completion standpoint at the '17?

No. Michael, I think most of what in the projects that I kind of used the 60 properties, either under construction or about to start construction. We’re pretty close to getting the deal tie down. I would anticipate that those will be constructed by the end of 2016, a good chunk balance of this year, first half of next year but it will dribble out through 2016. So if you take that 60 properties, we’re 5% of the industry say, so that’s about 1200 properties nationwide, right. 100 million to 120 million square feet, it’s not occurring at all, but all the uniformity they’ll cross the country. Where we’re developing, where we see other people developing the most of markets where you'd expect, Texas, Florida, Arizona, we’re not developing anything in the Midwest but their stuff going on there. Where's development not or it’s de minimis Los Angeles, San Francisco, Downtown Seattle, Downtown Miami, Boston where it’s very challenging to get sites. You’re competing with the high-rise residential guys where there is simply not available, land available to build self-storage. So it’s not uniform across the country. But if you can take our portfolio, our development is a percentage of our portfolio and where we are in the industry. 2.5%, 3% industry expansion doesn't sound unreasonable. That compares with the kind of the Canada growth rate, which I talked about on previous calls, of U.S, population growth which is somewhere between 0.8% and 1% across the country. Again, population growth is not uniform. It’s higher in markets like Texas, Florida, Arizona, so maybe the product coming on there can be absorbed by the above average population growth.

Do you feel like the rest of the industry is accelerating development faster than you as more capital comes into the system and they see the good fundamentals and so, while you maybe developing 2.7% of your base. As we move over the next 12 months that 2.7 is going to expect at least double from the last 12 month but it doubled again and rise to 5% of the stock as we go into ‘17 and ‘18?

I don’t want to rule out any possibility. Certainly the opportunity for developer to do what is referred to as the C of O deals with pretty much the other public companies are offering to buy properties newly developed, take away the fill-up risk, the operational risk and from what we’ve observed, pay close to retail prices on that. That’s certainly a very, very strong incentive if you’re a local or regional developer for you to build and sell product and into the public market be as a C of O deals. What that does to the volume, I don't know. And does our percentage reflective of the industry or maybe we start development a couple years ago, so maybe we’re at low ahead of the curve. But our feeling here, our observation is certainly development is accelerating, most regional and local operators that we talk to are all developing whether it’s one project or five. Lot of people are developing product.

That’s helpful. Thank you.

Our next question comes from the line of Omotayo Okusanya of Jefferies.

My questions have actually been answered. Thank you.

Next question is a follow-up from Todd Thomas of Keybanc Capital Markets.

Hi, guys. It’s Jordan Sadler here with Todd. Just a follow up on your last comment there regarding folks paying, I guess, your competitors paying retail for the C of O deals in your retail. How would you define retail versus wholesales or what do you think that is the premium level of the cost?

150%, its varies Jordan. I mean, I don’t have any information to say what we just -- we can look at what we're building for per foot approximately and see some of these deals and go. Okay, that is about 150% to 200% of what we’re building for those market.

That's interesting. Okay. And I have a totally separate question which is just, regarding dividend policy. Can you speak to I mean historically over the years I feel like you guys have try to maintain your dividend to add that taxable net income essentially. But by the same token as this is your portfolio had seasoned and your leverage had decline relative to the size, the overall portfolio your payout ratios have climbed. I think it peaked in the last cycle, you were probably paying out less than 50% of cash flow as a dividend. And today we’ve got you in low 80s or something like that. Can you speak to that at all and are there any strategies that you can employ besides sort of maybe levering up, where you would be able to sort of reduce that and is that on your mind?

Jordan, if you -- let's go back to the kind of middle of your question, you start to where we at the 2008-2009 kind of the great recession that we were at 50% payout, why where we that low? While we had done the Shurgard merger in 2006 and if you recall that was about $5.5 billion deal. We structured that, even though it was all stock as a taxable transaction. So, which was very important to us, so we picked up a lot of tax basis in that transaction in one shot. In addition, a lot of the merger costs and option exercise costs and severance costs we waited till the deal closed. And so we’ve got a lot of tax benefits from that transaction in ‘06, ‘07 or ‘08 which helps to keep our -- our earnings were growing, our payout wasn't changing and so the spread between earnings and payout got very low to your comment. As time has gone on, the portfolios continued to improve, we’ve delevered and some of those tax benefits have burned off to where we’re -- basically, our payout is still at a taxable income. That strategy has not changed in 25 years is still our taxable income. But as the portfolios grown, we are only able to retain $250 million, $300 million a year. So as the earning basis is growing, that has reduced our percentage of retaining cash flow. The absolute numbers about the same but percentage wise, therefore our payout ratios has gone up. John, you want to? In terms of -- if we did leverage, would that help us, if it was positive leverage it would probably exacerbate the problem.

And the other thing, George, as we just recently increased our dividend, so we increased it to a level that we think will sustain us probably for another year. So right now what you're seeing is that 80% that you threw out will probably get down into the 70s. So it's not -- you're looking at, I think for one quarter because we just bumped it this past quarter. But it'll get back down into 70s again. So, you are looking at the front end of that dividend increase relative to the current earnings. What we did is projected out earnings for the next 12 months and came up with that dividend level. So, I think you’ll see it come back a little bit more in line but it’s not going back down to 50%. I think it’s probably -- we pretty much hit the wall in terms of, I think what we can do to reduce taxable income. So, I think that’s where you are going to see our payout ratio for the foreseeable future.

That’s helpful. Does that factored at all when you're underwriting an acquisition, the ability to sort of utilize that depreciation and maintain that cash flow because on your base it's obviously pretty significant.

Well, each acquisition is about the same percentage of land, building, and a depreciable life with 29, 30 years.

Yeah. I meant more like portfolio or entity level acquisition.

You mean when we go to do something, similar to Shurgard where we can get a large all stocked taxable transaction?

Yeah. Well. It would be nice but…

Is that a piece of the equation as you look at portfolio and you look at M&A, looking at this potential free cash flow and freeing up this monstrous free cash flow, you get a tax benefit of.

Let me go back to the Shurgard transaction. So the way that was structured is -- what are the underlying cash flows, what’s the underlying real estate and how much real estate value are we giving up by issuing 20% of our stock, 25% of our stock in exchange for the Shurgard assets? So that was the way we structured the deal, the pricing we came up with the deal. We didn't factor in synergies and we didn't factor in the tax attributes. Those things were icing on the cake. And to take care of the things that we didn't know about in the transaction. But so our underwriting on real estate, the way we think about it, what markets, sub markets, really goes to that question I answered earlier about our strategy of building presence and dominance in markets, building and buying A and B locations, the tax side of it is not part of that underwriting analysis in terms of what we'll pay for something of our view on the quality of the real estate.

Okay. Thank you.

Thank you. I’ll now turn the call to Clem Teng for any additional or closing remarks.

Thank you all for your attendance this afternoon and your questions. We’ll speak to you again next quarter.

Thank you. That does conclude today’s Public Storage second quarter 2015 earnings conference call. You may now disconnect.