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Executives

Clemente Teng - Vice President of Investor Services

John Reyes - Chief Financial Officer, Principal Accounting Officer and Senior Vice President

Ronald L. Havner - Chairman, Chief Executive Officer and President

Analysts

Christy McElroy - UBS Investment Bank, Research Division

Todd M. Thomas - KeyBanc Capital Markets Inc., Research Division

Michael Bilerman - Citigroup Inc, Research Division

Smedes Rose - Keefe, Bruyette, & Woods, Inc., Research Division

Ki Bin Kim - Macquarie Research

Michael Knott - Green Street Advisors, Inc., Research Division

Paula J. Poskon - Robert W. Baird & Co. Incorporated, Research Division

Michael W. Mueller - JP Morgan Chase & Co, Research Division

Swaroop Yalla - Morgan Stanley, Research Division

Public Storage (PSA) Q1 2012 Earnings Call May 4, 2012 1:00 PM ET

Operator

Good afternoon. My name is Jackie, and I will be your conference operator today. At this time, I would like to welcome everyone to the Public Storage First Quarter 2012 Earnings Conference Call. [Operator Instructions] I would now like to turn the call over to Clem Teng. Mr. Teng, please go ahead.

Clemente Teng

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 4, 2012, 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.

I'll turn the call over to John Reyes.

John Reyes

Thank you, Clem. Our first quarter core FFO per share was $1.44 compared to $1.28 last year, a 13% increase. Five items contributed to this growth. First, our same-store net operating income increased by 6.3%, adding $0.09 per share. The non-same-store properties added $0.02. Last year's acquisition of affiliated partnership interest added $0.02. Lower financing cost added $0.02. And ancillary operations, primarily our tenant reinsurance business, added $0.01.

In the press release, we changed some of our presentation. First, we increased the size of our same-store pools to include properties that we have operated for the last 3 years at a stabilized occupancy level. For our U.S. same stores, we increased the pool by 10. For Shurgard Europe, the pool is increased by 13. We also modified our same-store expense classification to highlight other direct property costs, supervisory payroll and allocated overhead. Other self-storage companies may include some or all of these cost synergies in their G&A expenses. While we modified the presentation, we did not change what is included in our same-store expenses.

We completed several capital transactions in 2012. We issued $923 million of preferred securities with a blended rate of 5.8%, and redeemed $833 million with an average rate of 6.7%. We had about $4 million of negative carry in the first quarter associated with these issuances. In addition, on July 2, we will redeem $173 million of our 7% Series and preferred stock. We expect to record an EITF charge of approximately $5.4 million in the second quarter. Assuming no further issuances, preferred dividends are expected to be about $7 million lower in the second quarter as compared to last year. Our weighted average preferred coupon is now 6.3%.

With that, I will now turn it over to Ron.

Ronald L. Havner

Thank you, John. First quarter benefited from solid demand, resulting in higher occupancy and better pricing. Our same-store movements were up 2% year-over-year, offset in part by higher move-outs of 5%. At the end of April, occupancy, in-place rents and asking rents were all higher than the same period last year despite lower media spend for the period. In Q1, all of our markets achieved positive revenue growth. Dallas, Denver and Detroit markets led the country with revenue growth over 7%. The Miami market was second at 6.3%. Los Angeles, our largest market, grew 3.5%; and San Francisco, our second-largest market, increased revenues 6% for the quarter.

Given these positive trends in occupancies and rates, we expect our Q2 media spend will be comparable to last year. In Europe, same-store rental revenues were flat to last year, as higher realized rents were offset by lower occupancy. We did improve the year-over-year growth occupancy gap from 1.2% at the end of the year to 0.7% at the end of March. Operating expenses were lower, resulting in NOI growth of about 1%. We continue to expect a challenging operating environment in Europe for the remainder of the year. During the second quarter, we entered into contracts to purchase 4 facilities with about 300,000 square feet for $46 million.

With that, operator, let's open it up for questions.

Question-and-Answer Session

Operator

[Operator Instructions] Your first question comes from the line of Christy McElroy with UBS.

Christy McElroy - UBS Investment Bank, Research Division

Just looking at your occupancy trends, in Q4, you averaged 90.2% and then ended the year at 89.6%. So a natural sort of seasonal trend toward year end. But then this quarter, it looks like you were able to reverse course pretty early in the year and actually show a 10 basis point increase average occupancy in Q1 versus Q4, which is pretty abnormal in this industry. You've talked in the past about possibly trying to reduce some of the seasonality in occupancy during the slower months. So I'm wondering, is this Q1 trend reflective of that? And if so, maybe you can provide a little color on your efforts on that front.

Ronald L. Havner

Well, Christy, I think last quarter, in the third quarter, we did say after we had record occupancies during last summer, that we would be focusing on trying to mitigate the seasonal downturn as you pointed out. And so we did that in Q1. We were also doing it in Q4. And as we move into the rental season, you're going to see that occupancy gap narrow into Q2 and Q3, and we are going to be happy if we just really comp last year.

Christy McElroy - UBS Investment Bank, Research Division

Is it a function of how you're discounting or how you're setting rents? How are you able to sort of reduce that seasonality?

John Reyes

It's all that, Christy. It's the rents, it's the discounts. It's the level of advertising spend, be it on television or on the Internet. So it's all the above and working in concert. We're trying to maintain an even keel of occupancy as best we can, granted there's still going to be seasonality. But I think what you're seeing is a little bit of that smoothing out on a sequential basis looking from the fourth quarter to the first quarter.

Operator

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

Todd M. Thomas - KeyBanc Capital Markets Inc., Research Division

Just a question on expenses. I was just wondering if you could comment about the increase that we saw this quarter, not the 1.9% increases is real concerning but we saw declines from the other storage REITs this quarter and a lot of the pressure looked like stemmed from real estate taxes and payroll and some of the other overhead that you broke out this quarter. Should we expect to see sort of similar year-over-year increases on those lines throughout the year and are we starting to see some pressure build on expenses a bit?

Ronald L. Havner

I'll pick a couple of the expenses and John can take a couple. Probably the biggest swing item is R&M, and R&M has 2 categories. You've got what I'll call ongoing R&M, the usual kind of painting, fixing gates. That kind of stuff. And we accelerated that in Q1. So that was up due to the mild weather. That was up about $2.5 million. And you can see that both on that line, as well as if you go further back in the press release, the maintenance CapEx was also up about 20% for the quarter over prior year, also due to mild weather. Offsetting that in the R&M line was about $1.2 million, $1.3 million reduction in snow removal. So you've got 2 different things going on there. Our best guess is that as the year goes on, the ongoing R&M will moderate. So that we hopefully, in the year flat to maybe slightly down year-over-year and realize some of the benefit from the snow removal. The supervisory payroll is higher headcount on DMs versus last year, as well as some state unemployment taxes. And then the allocated overhead is also slightly higher headcount. We expect the allocated overhead growth to moderate as we go through the balance of the year. Property taxes?

John Reyes

On property taxes, we were up about, I think, about $1.7 million on property taxes and about $600,000 of that $1.7 million is due to the fact that last year, when we bought partnership interest in affiliated partnerships, that resulted in basically a technical termination of those partnerships, which meant that -- let me back up here, primarily California properties. So with the technical termination of the partnerships, it resulted in a step up basis for property tax purposes and therefore, increased property taxes. That was built into the acquisition and the yield when we bought those interests but what you're seeing here is now, a $600,000 a quarter bump in property taxes just as a result of doing that transaction last year. But aside from that, we still think property taxes are going to be up. From our budgets, we're still budgeting somewhere in the neighborhood of 3.5% to 4% for the entire year.

Operator

Our next question comes from the line of the Eric Wolfe with Citi.

Michael Bilerman - Citigroup Inc, Research Division

Michael Bilerman here. Ron, can you talk -- go into a little bit more detail on Europe and sort of what you're seeing on the ground? And I recognize that occupancy, I think you said came up a little bit. I know it is down year-over-year but it sounded like you had positive comments. But can you just talk a little bit what the trends are?

Ronald L. Havner

Sure, Michael. Europe has got a wide variety of things, depending on the country. Let me try to break down the same-store NOI for you by country. Belgium was up 6.3%. Occupancy was up 0.5% to 86.5% for the quarter. Holland, which has been our weakest market for probably 1.5 years, NOI was down 5.5% and occupancy in that portfolio is at 76% versus 78% last year. Germany, NOI was up 22% and occupancy was down a point to 89%. France, occupancy was down to 84%, down 1.5%. NOI was flat. Sweden, NOI was down 4%, occupancy down 2.5%. Denmark, occupancy down 2.5% to 83% but NOI was up 10% mainly due to changes in advertising. And then the U.K., our occupancy was up nicely to 86.8% for the quarter. That's up 3.8% over the last year and NOI was up about 2%. So it's a whole bunch of things going plus and minus across the continent. Overall, Europe's [indiscernible] and there's a lot of things going on in Europe and that's why our expectations are pretty modest for the year.

Michael Bilerman - Citigroup Inc, Research Division

That's helpful. And is there any other sort of changes in terms of the entity itself and how you're thinking about it and sort of the more medium to longer-term goal in Europe?

Ronald L. Havner

Well, our longer-term goal, I don't know whether I mentioned it or not. In January, we had our new CEO started in Europe. He's doing a great job. He's out on the field a lot. Our immediate term, the immediate focus is really on operations, especially in markets like Holland and Sweden, where we've gotten a little soft. But Holland's been a really big challenge and so we're really focused on that market. We've done some things on the Internet, in the U.K., both Internet marketing and on the website. And that appears to be working. So we're very encouraged by that, and we'll continue to focus on that. From a balance sheet management standpoint, we're really trying to delever Europe over the next 12 to 18 months, so that we hopefully can get it investment-grade rated and find alternative sources of financing rather than the banks. Long term, I mean, we're very positive on Europe and I hope in 1 year or 2 to be talking about growth in additional facilities and/or some development in Europe.

Operator

Your next question comes from the line of Smedes Rose with KBW.

Smedes Rose - Keefe, Bruyette, & Woods, Inc., Research Division

I was just wondering if you could talk about anything you're seeing on the acquisition front just in terms of deal flow, I guess, and other sectors, we're hearing that that's picking up considerably and I'm just wondering if you're seeing anything along the same lines.

Ronald L. Havner

Yes, we're up. We did about $40 million, $45 million in Q1 and that was a short sale. And we've got another $40 million or $45 million in the queue that's really not bank foreclosure kind of stuff. But we're seeing the pipeline from the, I'll call it short sales or bank foreclosure increase nicely. And so we're much more encouraged by the acquisition flow where we are today versus where we were last year.

Smedes Rose - Keefe, Bruyette, & Woods, Inc., Research Division

And has pricing kind of, I guess, stabilized or moving up or down either way?

Ronald L. Havner

It's a really bifurcated market. The stuff that is in the short sales with the banks. You're buying properties that have weak occupancies, not great NOI. And so it's a price per pound kind of acquisition, the one we did in Q1, I think, was about $80 a foot, which is probably $30 to $40 a foot below replacement cost. But only had $1 million or so of NOI. There's a lot of upside there. But going in cap rates pretty low. The stuff that's in the open market, trading, if there's a broker associated with it, you're buying more in a stabilized or current NOI basis and those cap rates have come down. But it's a more on an NOI, and for us, also price per pound. But those are much closer to replacement costs.

Operator

The next question comes from the line of Ki Bin Kim with Macquarie.

Ki Bin Kim - Macquarie Research

Just following up on a question about Europe. Is your pricing and advertising strategy the same in Europe as it is in U.S.? And if you could also comment on if the customers are inherently different there?

John Reyes

If I had a chart for you on customer duration, U.S. versus Europe, you would see that they're exactly the same, that they behave exactly the same to promotional discounts. So I would say that everything we've been able to analyze over in Europe and study with the customer base, it's the same type of usage, same kind of length of stay that we have in the U.S. Last year, we moved the pricing for product in Europe here to Glendale. And so we've integrated that into our pricing program here in the U.S. What we do in Europe though, is different. I touched on what we did in the U.K. on the Internet side. We're rolling out new websites across different platforms in Europe, each country. We're not able to really use TV effectively in Europe. So that's a big difference between the U.S. and Europe. But we will be able to use the web and I think, the Internet marketing in Europe as effectively as we do here in the U.S.

Ki Bin Kim - Macquarie Research

What are your internal projections on how much that will benefit new customers coming in or whichever measure you're looking at?

John Reyes

Well, we're really trying to drive customer flow. So the real tangible benefit, as I pointed out earlier, is, I think, the U.K. is a pretty good demonstration where occupancy has gone from 83.6% last year to 86.8%. Rates were up slightly and NOI is positive. And that, in large part, as a direct result of the website and the different pricing and promotional strategies that we've applied from the U.S. over to the U.K. market.

Operator

[Operator Instructions] The next question comes from the line of Michael Knott with Green Street Advisors.

Michael Knott - Green Street Advisors, Inc., Research Division

I was hoping to ask Clem about the Buffalo head comment that he was quoted on in a story last week. I found it interesting. Ron, how do you feel about the outlook for the rest of 2012 now compared to maybe late last year, early this year? How do you feel like your outlook has changed, if it has?

Ronald L. Havner

It's really hasn't. I think we had a great quarter. And we're going into Q2 with higher occupancy. So I'm really pleased with that we were able to actually gain occupancy in Q1. Rates are up, street rates are up, in-place rents are up and I think, as we go through the summer, you'll see us moderating the promotional discounts, I hope. And so I'm optimistic on 2012 as I was 3 months ago.

Michael Knott - Green Street Advisors, Inc., Research Division

Okay. And then as a follow-up to Michael's question on Europe, the public companies there traded big discounts to NAV. And so my question for you, do you see that as more of an opportunity for you or do you feel like if it's more permanent, that it's kind of a hurdle for Shurgard Europe's longer-term cost of capital and maybe the odds of ever being able to take that public at a reasonable cost to capital?

Ronald L. Havner

Michael, Europe markets are cyclical. And so Europe is down today. Will it return to pricing of real estate stocks at NAV or above? Probably. We're not predicating our business plan in Europe on that. We're really focused on, as I touched on, deleveraging Europe so we can hopefully attain investment-grade rating and then do something, either in the U.S. private placement market or in the Eurobond market. And again, an alternative source of financing rather than the European banks, which I don't view -- we really, John and I have never really viewed them as a prominent source of capital. But given the situation over in Europe over the last year, we definitely don't view them as a prominent source of capital. So we really need to get investment-grade rated over there and get a different kind of financing. And once that's in place, then we really have -- Europe generates EUR 110 million, EUR 115 million EBITDA. We've got plenty of cash to amortize a term loan and have capital to grow.

Operator

The next question comes from the line of Paula Poskon of Robert W. Baird.

Paula J. Poskon - Robert W. Baird & Co. Incorporated, Research Division

Ron, you've said in the past that you thought the third-party management business kind of wasn't worth it the effort given the margin that you can often get. Given the dynamics in the sector now where the mom and pop shops are really coming under increasing pressure relative to the institutional players taking more and more share, are you revisiting that at all?

Ronald L. Havner

Paula, first of all, we've done third-party management for years. I think we have 30 or 40 properties that we manage for others. We just haven't -- it's been more like a short movie for us versus a feature-length film for some of the other guys. We have looked at it. We continue to look at it. Our biggest concern on third-party management is cannibalization of our own properties. But I would not rule out expansion of the third-party business.

Operator

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

Michael W. Mueller - JP Morgan Chase & Co, Research Division

Going back here for a second, Ron, I was just wondering if you could follow-up a little bit on your comments on Europe and the deleveraging that you'd like to do? Maybe put a framework around it in terms of how you think you could come about, what sort of metrics you're looking to move from and to?

Ronald L. Havner

Yes, Mike. As I mentioned earlier, you think of Europe as about EUR 110 million to EUR 115 million EBITDA. Our debt in Europe is about EUR 525 million, considering the Public Storage loan, as well as the Wells Fargo loan that's over there. So to get investment-grade, we need to get that to about 4x to 4.5X debt to EBITDA. That will take us about 18 to 24 months to amortize the debt down to that level. And that's really the kind of metric, kind of the #1 metric that we need to achieve to walk into the rating agencies to then get an investment-grade rating. With the investment-grade rating, then we can evaluate, as I said, the U.S. private placement market or the Eurobond market. It's really taking the existing cash and amortizing down to a 4x to 4.5x debt to EBITDA.

Michael W. Mueller - JP Morgan Chase & Co, Research Division

Okay. Okay, so it's nothing on the equity side, nothing on the sale side, it's really just use of cash flow?

Ronald L. Havner

No, no. Europe's may not be growing very fast but it's generating lots of free cash flow, which is amortizing down that debt.

Operator

Your next question comes from the line of Ki Bin Kim with Macquarie.

Ki Bin Kim - Macquarie Research

I don't know if I missed this but did you comment on or could you comment on what you think cap rates are for good assets and good markets? And secondly, with your answer in mind, do you think the private market cap rates are just plainly wrong given that self storage isn't really a major food group?

Ronald L. Havner

Well, Ki, the second part of your question is probably a little bit of a lengthy answer for a conference call. I can't really talk to you about that. You can call me afterwards. As I touched on earlier, with respect to cap rates, there's 2 buckets of that hedge coming to market. One are the bank liquidations, the foreclosures, the short sales. And two, are the more established properties where you've got some partners that can't agree or someone wants a liquidity event and there's marketed or they picked 3 or 4 players to go bid the property. And those are what I would call more of a cap rate kind of buy and that depends on the market, as you mentioned. So somewhere between 6 and 7 on a stabilized basis. The foreclosure stuff, I mean, we're buying stuff that's break even, losing money or 1% yield on day one. Does that help you in terms of what we're seeing in the market?

Ki Bin Kim - Macquarie Research

Yes, definitely. So no preview on the follow-up question?

Ronald L. Havner

No. You can call me afterwards.

Operator

Your next question comes from the line of Swaroop Yalla with Morgan Stanley.

Swaroop Yalla - Morgan Stanley, Research Division

Just wondering if you can comment on the changes in the composition of self storage users? As we headed into the recession and as we we're coming out of recession, specifically small business users, homeowners who were downsizing to apartments and now maybe moving out to buy homes, if you can comment on the composition.

John Reyes

I will tell you, we've been asked this question many times and the response is basically the same. We don't pool or survey our customer base as to whether they're small business, large business, residential or what have you. So I can't sit here and tell you that the composition has changed one way or another. And it's a very localized business, and depending on where that self storage facility is located, for example, if it's located in a primarily residential area, most of the customers are going to be residential. If it's located in industrial area, it's going to be -- probably be those industrial businesses that are using it. But I can't tell you how it's changed because we simply don't ask. We're just more focused on just getting in people to occupy space and pay rent.

Swaroop Yalla - Morgan Stanley, Research Division

So right now, is there a way to find out what is the small business users in your...

John Reyes

No, no, no.

Operator

The next question comes from the line of Paula Poskon with Robert W. Baird.

Paula J. Poskon - Robert W. Baird & Co. Incorporated, Research Division

I'm sorry if I missed this in your prepared comments. Did you talk about the April trends, where you finished up April?

Ronald L. Havner

Yes, Paula. Hold on, I'll give those to you. I didn't give the exact numbers but I'll do that for you now. April occupancy was 91.4% versus 91.3%. Last year, in-place rents were higher by about $0.05, $0.06 a foot and asking rents were up about $0.06, $0.07 a foot.

Operator

The next question comes from the line of Mike Mueller with JPMorgan.

Michael W. Mueller - JP Morgan Chase & Co, Research Division

I was wondering -- this is probably a question for John, on the G&A. It looks like this quarter, the number was quite a bit higher than the past few quarters' run rates and it was my understanding that in 2012, we'd see part of the comp package or the comp plan, some of that burn off and theoretically lower G&A a little bit? I was just wondering if you can just comment on if there's anything onetime, what a better run rate is, anything like that?

John Reyes

Yes, Mike. The first quarter, we paid out -- the big increase is probably due to higher bonuses that were paid out in the first quarter this year relative to the first quarter of last year. As we move forward, all things being equal, assuming that we don't really do, excluding acquisitions I should say. And we think they probably be -- the run rate of G&A for the full year will probably be approximately the same as last year, probably a little bit less. But I think last year, we were at about $52 million. So we're probably looking somewhere around there. But I think it might be a little bit less than that.

Ronald L. Havner

Mike, you've got about a $2 million uptick in Q1. And for the year, as John mentioned, we'll probably be down $1 million or $2 million for the year. So you've got a $4 million swing that's got to get amortized over the balance of the year, excluding acquisition costs.

Operator

Our next question comes from the line of Christy McElroy with UBS.

Christy McElroy - UBS Investment Bank, Research Division

Ron, I heard you say that asking rents were higher year-over-year in Q1. What was the percentage change?

Ronald L. Havner

Christy, those were as of April. I thought that was Paula with the question, was April.

Christy McElroy - UBS Investment Bank, Research Division

You said on a cents per square foot. So it's less than 1%?

Ronald L. Havner

Asking rents?

Christy McElroy - UBS Investment Bank, Research Division

Asking rents, right?

Ronald L. Havner

For April, we're about $1.19 versus $1.13 or just over 5%.

Christy McElroy - UBS Investment Bank, Research Division

For the month, okay. And then I heard -- you said at the beginning of the call, the percentage increase in move-ins and I totally missed it.

Ronald L. Havner

Sure. move-ins, this is for the quarter, Christy?

Christy McElroy - UBS Investment Bank, Research Division

Yes.

Ronald L. Havner

You want April?

Christy McElroy - UBS Investment Bank, Research Division

Both would be great.

Ronald L. Havner

Okay. For the quarter, move-ins were up 2%. And for April, move-ins were down 1%.

Operator

The next question comes from the line of Eric Wolfe with Citi.

Michael Bilerman - Citigroup Inc, Research Division

Just a couple of follow-ups, this is Michael Bilerman. The stats you gave me for April, those are end for April or those are weighted average for the month?

Ronald L. Havner

I think these are end of month.

Michael Bilerman - Citigroup Inc, Research Division

Those are end of month?

Ronald L. Havner

Yes.

Michael Bilerman - Citigroup Inc, Research Division

Okay. And then Shawn Weidmann's been on the job now 7 months and I think when you originally hired him, you said you'd put him out in field for 6 months and figure things out. So I guess after that time, what's he come back with and what sort of initiatives and things as you're thinking about as he looks at the self storage business from the flower business?

John Reyes

Well, he's still on the field a lot. So maybe he needs a little longer than 6 months. But he's still out on the field a lot. We didn't hire Shawn to come in here and reinvent the business. But he's a good manager, knows how to hire people and he's got a good head on his shoulders. So I think what you should look for from Shawn is kind of a refinement of what we're doing and incrementally additive of value there in terms of refining our processes, continuing to focus on execution, customer service and hiring top talent.

Michael Bilerman - Citigroup Inc, Research Division

Okay. And just lastly on comp. So PSB put in a new comp plan tied to -- in part, to growth in NAV per share over 4 years. And so, I'm just curious, at PSA are you thinking about a longer-term comp plan? I wasn't sure if one was in place and whether we should expect that at all.

John Reyes

Nothing this year, Michael. We've got some -- some are issues tied to revenue growth. And if you recall to the -- if you went through the proxy for the last 3 years, the senior and middle management team were tied to an RSU plan that was directly linked to same-store revenue growth. Last year, the first 2 years, there was no payout under that plan and last year, there was a 2-for-1 payout, which is one of the reasons the G&A spiked up last year and it's still at a somewhat elevated level this year. But we have no -- nothing in the hopper right now for this year.

Michael Bilerman - Citigroup Inc, Research Division

My guess is -- you're Chairman of the board of PSB, right?

Ronald L. Havner

Yes.

Michael Bilerman - Citigroup Inc, Research Division

Yes. So as Chairman of the Board of PSB and in terms of instituting that plan for that company, do you not feel like that's not apropos in terms of NAV growth for PSA? I'm just trying to figure out if it was good for one, why is it good for the goose, not good for the gander type of thing?

Ronald L. Havner

Well, and again, that's a long conversation that I'm happy to have with you off-line. But there's slightly different businesses between PSB and PSA. And two, PSB has not had a long-term incentive plan in place for the last 2 or 3 years.

Michael Bilerman - Citigroup Inc, Research Division

So you don't view PSA as a more NAV growth story, you view it as a top line...

Ronald L. Havner

No. I view it definitely it as a good growth story. One of the principal determinants of NAV growth at PSA is top line revenue for same stores.

Operator

That was our final question. And now, I'd like to turn the floor back over to Clem Teng for any closing remarks.

Clemente Teng

I want to thank everybody for attending our conference call this morning. And we'll look forward to seeing some of you at NAREIT in a few weeks and also on the next quarter call. Thank you.

Operator

This concludes today's conference call. You may now disconnect.

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