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Executives

Dean Jernigan – President and Chief Executive Officer

Christopher P. Marr – Chief Financial Officer

Analysts

David Toti – Lehmann Brothers

Christeen Kim - Deutsche Bank Securities

Paula Poskon - Robert W. Baird & Co.

Christine Mcelroy – Banc of America Securities

Jordan Sandler – KeyBanc Capital Markets

Craig Melcher – Citibank

Michael Knott – Green Street Advisors

U-Store-It Trust (YSI) Q1 2008 Earnings Call May 9, 2008 10:00 AM ET

Operator

Hello, and welcome to the You Store It Trust conference call. All participants will be in a listen only mode. There will be an opportunity for you to ask questions at the end of today's presentation. (Operator Instructions). Please note, this conference is being recorded.

Now, I would like to turn the conference over to Mr. Dean Jernigan. Sir, you may begin.

Dean Jernigan

Good morning to all of you. Thanks for joining us. The company's remarks will include certain forward-looking statements regarding earnings and strategy that involve risks, uncertainties and other factors that may cause the actual results to differ materially from these forward-looking statements.

The risk factors that could cause our actual results to differ materially from forward-looking statements are provided in the documents the company files with the SEC, specifically, the Form 8-K being filed today, together with our earnings release filed with From 8-K, and the Business Risk Factor section of the company's annual report on Form 10-K.

In addition, the company's remarks include reference to non-GAAP measures; a reconciliation between GAAP and non-GAAP measures can be found on the company's website at www.cubesmart.com.

Thank you for joining us as I said. I will let Chris Marr, CFO lead off this morning and talk about our numbers and I will come back around with a few comments before Q&A. Chris?

Christopher P. Marr

Okay, thanks Dean. First quarter was a very positive quarter for us on all fronts. We met or exceeded our stated goals for same store physical occupancy and net operating income growth. Our general and administrative expenses were lower than the low end of our expectations.

We have smoothly integrated the assets we have acquired in the first quarter and our non-same store assets exceeded our internal goals. All of this contributed to our funds from operations per share exceeding our guidance and producing 15% FFO per share growth over the first quarter of last year.

With the right size dividend our FFO pay out ratio for the quarter was 75% and we were for the first time since I joined the company able to cover our dividend and capital expenditures from cash flow.

As I said on our last conference call, while the improvements and enhancements we have made are clearly bearing fruit, we have plenty of hard work to do over the balance of this year. We have made investments during the first quarter on our assets ensuring that the curb appeal is at its peak going into the prime rental months with a particular focus in San Bernardino where we invested approximately 85% of our total 2008 budgeted CapEx for those assets invested during the first quarter.

With our operating platform stabilized and our dividend covered, we believe we have a good match between our sources and uses of capital. However, we do believe that our shareholders will benefit from the company having greater liquidity and increased balance sheet capacity. Achieving these objectives will position us to take advantage of external growth opportunities that may evolve in 2009 and out into the future.

So we clearly have hard work to do in 2008 to grow our occupancy, control our expenses and shore up our balance sheet. We are committed to achieving our objectives and will continue to be appropriately conservative in our forecasts to allow us flexibility to meet and exceed our operating, financing and earnings expectations over both the near term and the long term.

Touching on the quarter specifically, at the end of the first quarter we have total portfolio debt of 1 billion 42 million at a weighted average rate of 4.89%. Our fixed rate debt has 2.3 million maturing in 2008 and 88 million maturing in late 2009.

Our floating rate debt consists primarily of borrowings under our unsecured term loan and credit facility which have a stated maturity of November of 2009 but provide for a one year extension at the company's option with the payment of a 15 basis point fee.

We have an interest covered ratio of 2.43 and a debt to gross assets ratio of 53% at quarter end. Of our total debt 42% or 435 million is unsecured. At March 31 we have approximately 488 million of debt that floats its spreads to LIBOR. That spread was 130 basis points for the first quarter and will be 150 basis points for the second quarter. We have swapped LIBOR for fixed rate on $100 million of that debt with the swaps in place through November 2009.

The credit markets remain challenging and we will continue to monitor our opportunities to refinance and be prepared to access the refinancing market or utilize our extension option when conditions present themselves.

We continue to forecast covering our dividend and capital investments in 2008 from cash flow. As an update to our dispositions program we now have closed on the sale of three assets in Florida so far in 2008 for proceeds of approximately $6.6 million, representing a $6.8 cap on 2007 NOI.

We currently have eight properties under contract for estimated proceeds of $21.6 million and closing expected during the second and third quarters. One of the 12 assets under contract when we discussed dispositions on our last call has fallen out of contract and we were unable to reach agreement on the 10 assets that were described on the last call as being under advance contract negotiations.

Six of the eight properties currently under contract have hard earnest money deposits. We remain very encouraged by the process while the current financing environment has not had an impact on our pricing expectations; it has resulted in a more cautious approach by investors interested in our assets and a longer period from contract to closing.

We do have an effort underway to explore raising capital through a joint venture program with institutional investors. We are analyzing the concept of a venture that would be seeded through a contribution of existing company assets.

In concept, we would consider contributing assets encumbered by existing CMBS debt. In addition, we are desiring a partner who would be interested in growing the venture through acquisitions, potentially the purchases of distressed debt, along with other potential sources of external growth. Clearly we are in an unusual period in the real estate capital markets and there is no guarantee we will be able to source a partner and/or find venture terms that meet our objectives at this time.

Moving on to our operating results. We generated a 6.6% increase in same store rental income through 100 basis point increase in average occupancy, a 1 million reduction in write-offs, 190 basis point increase in street rates and the impact of systematic rate increases to our existing tenants.

Comparing that growth to the self storage data service national average, they showed rental rates unchanged from Q1 of '07 versus our 6.6% increase and occupancies down 0.3% versus our 100 basis point average increase.

We did give back some of that rent growth as our other property related income decline 570,000 from the first quarter of '07. This primarily relates to a reduction in fee income as we have done such a great job in reducing our receivables we are assessing less late charges than we did last year.

Overall, we experienced a 5% increase in same store revenues Q1 '08 compared to Q1 '07. Revenue per occupied square foot grew 5.3% on the same store pool. Again, this compares to the SSDS national average of negative 1.2% first quarter '08 over the same quarter of '07 for the assets that that survey looks at.

Same store operating expenses grew 6.2% in the first quarter of '08. Advertising is down slightly primarily due to timing. We had promotions and giveaways in Q1 of '07 that we did not have in the first quarter of this year and we continue to eliminate legacy programs to advertise in multiple small Yellow Page directories in many markets.

We are focusing our spending on the internet and on other more direct marketing programs. R&M is up and that reflects our continued catch up on deferred maintenance items and investing in our assets to drive occupancy. However, we believe we are nearing the end of these programs.

Other expense variances largely reflect timing differences on the occurrence of expenditures and the dramatic increase in snow removal costs in the first quarter of '08 compared to the same quarter in 2007.

Same store NOI growth for the quarter at 4.3%. From a market perspective, same store revenue grew in all of our top 10 states with the exception of Florida where we saw a very modest 1.2% decline in our same store revenue growth. If you were to remove the Florida assets from the same store pool results our revenue growth moves from 5 to 6.4 and our same store NOI growth moves from 4.3 to 6.5.

Our best performing states were Texas with 10.9% revenue and 17.7% NOI growth and Colorado with 12.1% revenue and 30.5% NOI growth. Illinois was our best performing state from an occupancy growth perspective with a 6.4% increase in ending physical occupancy creating a 9% growth in revenue.

The GAAP between physical and economic occupancy on the same store pool improved 290 basis points from the first quarter of '07 to the first quarter of '08. Again, this reflects the reduction in write-offs, the reduction in nonstandard rents as we pass along rent increases to existing tenants offset by a slight increase in promotional discounting.

G&A at $5,495,000 was slightly below the low end of our expectations. We had an average LIBOR rate on our unhedged floating rate debt of 3.7% during the first quarter which resulted in lower interest costs compared to our internal forecasts.

Our FFO per share at $0.24 came in $0.03 above the upper end of our stated range. Internally we attribute $0.01 to out performance on the same store pool, out performance on the non same store pool, lower G&A and cost to manage expenses, and approximately $0.02 per share of our incremental FFO above the high end of our range was related to lower levels of interest expense.

We are increasing our full year 2008 guidance at 93 to 97 per share. We continue to be appropriately cautious and conservative in our expectations for the balance of the year. Looking at the risks and opportunities in our increased guidance we believe that the opportunities outweigh the risks.

On the opportunity side of the ledger, our expectation for same store revenue and NOI growth does assume that the softness the industry has seen in the Florida markets thus far in '08 continues. We have made some changes over the last few months in our district manager ranks in Florida and believe we have an opportunity for future improvement.

We have focused on increasing our tenant insurance revenues and that focus is beginning to demonstrate results. We have moved our new renter penetration from 34% in January to 57% in April and believe we can continue that trend up to 80% new renter penetration. This should translate into upside other revenue growth for us throughout the balance of '08 and particularly going into 2009. We have been experiencing good results under our program to contain our costs. Our same store expense growth on a percentage basis will peak in the second quarter as compared to the prior year and move back in line with CPI type increases for the latter half of the year.

As I mentioned earlier, we are focused on improving our liquidity and we continue our focus on disposing of non-core assets and our guidance continues to reflect asset sales between $85 and $105 million. As I said, we are also pursuing other sources of capital, including investigating the possibility of a JV and our guidance provides for an execution of this strategy and considers proceeds being used to reduce short term debt to increase liquidity. There are opportunities to our forecast to the extent we are unable to find an acceptable transaction, the execution timing is longer than anticipated, or as well if we allocate capital to executing under our share repurchase program or a creed of external growth opportunities.

Our second quarter guidance contemplates FFO of 24 to 26 per share. Timing of our marketing expenditures was a contributor to some lower same store expense growth in Q1 and we do expect to have a significant ramp up of our marketing costs in Q2, as we investing our dollars to generate the highest ROI heading into our busiest season. As we roll forward into April, our rentals were 6% above April of '07 and our net rental increase was 29% over April of last year. A very good month of April so we are feeling great going into the bulk of the second quarter.

As we mentioned, we did acquire an asset in D.C. during the quarter, a very well located facility and has been performing in line with our expectations. In summary, a very nice quarter. We are energized by our progress and ready to tackle the challenges for the rest of the year and we think we have a healthy balance to our expectations for the remainder of this year.

At this point I would like to turn the call back over to Dean.

Dean Jernigan

Okay, thanks Chris. It was about 18 months ago that we were on a call like this with you and told the story about the little boy playing right field and his team was down 15 runs but he wasn't concerned because his team hadn't been up to bat yet. And when I reflect on this company 18 months ago that is exactly where I think we were. The ownership had seen the wisdom to change the team, to invest in a new team. Change the manager, change the coaches.

And in that team saw the wisdom in investing in technology to better perform and I am happy to saw with the results you are seeing in this quarter, the previous quarter, and also all the way back to Q3 in '07, you could start to see some results with improved occupancy in Q3 '07. Of course in Q4 '07 some good numbers. And of course these numbers we are reporting to you today.

So we are chipping away. We are still down. We have not made up those 15 runs yet but we are putting some good numbers up on the board. And we are pleased with the progress. Someone invariably will ask what inning are we in, so I will tell you it feels like we are probably in the fourth inning.

We have plenty of work to do going forward, plenty of opportunity; we are improving the company at the margin in every respect. I hope some of you have had the opportunity to visit our website in the last 30 days. We have a new website that we rolled out and we are very proud of. We are taking reservations with taking payments from existing customers, doing many things that we could not do in the past.

We are pleased with where we are today but not satisfied. Where do we go from here and what can go wrong? You heard me speak consistently quarter in and quarter out that I have been unconcerned about the level of supply growth. That continues today. We have the disruption in the credit markets to thank somewhat for that I believe.

As these small entrepreneurs, it is very difficult for them to find debt to develop storage facilities with at this point in time. If those credit markets turned around today I can clearly see all the way through to 2009 that new supply would not be a factor. Because it will take 18 months for people to find their sites, get the properties developed, get them built and online where they would start to impact us in a negative way.

So from a supply standpoint we should have clear sailing through the balance of '08 and through '09. And as I have said many times, the crystal ball gets somewhat hazy at that point, past 18 months, but I will continue to update that as quarters go by.

The economy, of course, is a concern that everyone has in this day and time. But I can happily report to you that we are still not feeling it. We are still not feeling the negative effects of the economy. We continue to have rentals exceeding our expectations, exceeding our last year results. And the dislocation of people from their houses through foreclosure is unfortunate, but we can never forget the fact that we are a solution. We are benefit. We are a service to those people who are in transition. So anything that causes transition is a positive for us.

We are excited about entering the rental season. Early results are good as far as April and the first few days of May. And we are looking forward to better results as the quarter goes on and as the year goes on.

Back to my right fielder, we are enjoying being at bat. We are enjoying putting some numbers up on the board. We have got a ways to go. We are not there yet. We look to improve at every opportunity and I think we are in fact taking advantage of most of those opportunities.

With that I will stop and we can take some questions.

Question-and-Answer Session

Operator

Thank you. (Operator instructions) Our first question comes from David Toti from Lehman Brothers. Please go ahead.

David Toti - Lehmann Brothers

Hi everybody. I just wanted to ask, assuming that you make some progress on your capital plans, reducing your leverage, increasing liquidity, at what point do you foresee an increased appetite in resuming an acquisition strategy?

Dean Jernigan

Good morning David. It is interesting times out there as far as the acquisition market is concerned. There is still no bargain as far as I am concerned. We would hope to maintain our posture and wait for bargains to come our way. The properties owned by the small entrepreneurs today who would typically be sellers are performing very well. And so a compelling reason, I guess there are two that I always talk about. One is their financing coming to an end and secondly, if we do have a move in capital gains rate that could have some opportunity for us. But still no great bargains out there. I think we are really moving more into a development cycle so we do not anticipate big ramp ups but we would take advantage of an opportunity if we saw it.

David Toti - Lehmann Brothers

I have a question with regard to your revenue growth. Would you say that is largely driven by your pushing on prices through internal systems or do you think it is more demand driven at this point?

Christopher P. Marr

I really think it is a nice balance. We are clearly chipping away, as Dean mentioned, at the occupancy and increasing our ability to convert customers to renters by the enhancements of our website. We are seeing more and more find us through the web, reserve units online and then ultimately rent.

We are seeing the marketing efforts we have had in place and continue to put in place paying off. We are also using systems to price more intelligently with better data and to pass along rate increases to the existing tenants in a very systematic way. So I think it is actually a very nice blend of both of those items.

David Toti - Lehmann Brothers

Okay. Thank you.

Operator

Our next question comes from Christine Kim from Deutsche Bank.

Christeen Kim – Deutsche Bank

Hey, good morning. Chris on the dispositions, the ones that had been in advance contract and then fell out. Could you provide a little bit more color in terms of what happened there?

Christopher P. Marr

Sure. It was one specific buyer who was engaged in discussions with us on those assets and I think for financing reasons, timing reasons we were unable to come to agreement on timing and what made sense. And it was kind of a mutual decision that we were better off kind of stopping than moving forward.

Christeen Kim – Deutsche Bank

And just to clarify, you mention the potential JV and that is in your guidance or is not?

Christopher P. Marr

We are contemplating that in our guidance as we look at the balance of the year, giving ourselves the flexibility to execute on that and use the proceeds to reduce floating rate debt.

Christeen Kim – Deutsche Bank

So would the seeding of that JV would that number be encompassed in the total asset sales you have you projected for the year or is it separate?

Christopher P. Marr

It is not encompassed in that. Those asset sales figures that I used are directly related to the pure disposition of assets, not through a venture format.

Christeen Kim – Deutsche Bank

My last question is just since the same store pool approach has changed could you tell us what the sequential change was in the occupancy for the new same store pool?

Christopher P. Marr

The assets from Q4 into Q1.

Christeen Kim – Deutsche Bank

No, no. The Q1 same store pool, what the sequential change in occupancy was

Christopher P. Marr

From Q4? Yes, that is a great question and I do not have that answer for you right here but I will get you that answer.

Christeen Kim – Deutsche Bank

Okay great. Thanks

Operator

Our next question comes from Christy McElroy from Banc of America. Please go ahead.

Christy McElroy – Banc of America Securities

Good morning. Last quarter you mentioned that it looked like Florida was stabilizing and you were seeing signs of net in migration. But it looks like you are still seeing some weakness there. And this quarter Ray Wilson talked a little bit about signs of deterioration beyond the hurricane impact that may reflect the weakness in housing or the local economy. Can you comment on what you are seeing there?

Dean Jernigan

Sure. Good morning Christy. Yes we did have 400 base point drop in physical occupancy there but as Chris said in his remarks our income only dropped 1.2% so we have been able to pass along rate increases to our existing customers. The migrations as far as the state is concerned is balanced now.

The last numbers I saw about 90 days ago show that 2007 just over 50% of their migration trends were in migration versus out migration, which is a change from the previous two years. That said though, Florida customarily has had migration up closer to 60%, more like 60/40 in migration versus out migration. And there has just been a little bit of construction as there always is in Florida. Specifically some up in the Jacksonville area.

But I will tell you part of Florida is our problem. We have had some DM turnaround down there as Chris mentioned. So we think we have our personnel situation better in hand in Florida. I am not at all concerned about Florida on a long term basis. I do think from a migration standpoint it is stabilizing. If we can get through another hurricane season without a bad hurricane I see Florida is always going to be a good opportunity, a good state for us. I am happy with the assets that we have down there. So I am not at all concerned right now with Florida.

Christy McElroy – Banc of America Securities

Okay. And then kind of in a broader portfolio. As you have moved more toward a strategy of using concessions more as a tool to drive occupancy and try to gain some pricing power, have you found this strategy has worked for you in terms of improving your internal growth. And Dean I know you have not always savored using concessions but have your views changed at all?

Dean Jernigan

Well that is putting it nicely. You are right, I do not like giving away all the free rent that our sector tends to do. It is absolutely unnecessary in my opinion but we have met the market. We are competing head up with them in those regards. It is achieving, as you see our numbers we reported this quarter, we are having some success with it but I would still like to see it diminish or go away. But we are using it as a tool and it is working for us.

Christy McElroy – Banc of America Securities

Okay and then lastly, Chris, I may have missed this but regarding the increase in your full year guidance, did a lower LIBOR assumption have an impact and if so, what kind of LIBOR forecasts are in there today.

Christopher P. Marr

Yes. There are an awful lot of moving pieces here as we go into the full year. Our full year LIBOR assumption at this point is 3.2%, down from where we had it before. And then again, we provided ourselves an opportunity to offset some of that with the potential dilution to the extent that we are able to execute on a capital raise along the lines that we discussed and giving ourselves the flexibility to use that capital in the near term to reduce floating rate debt.

Christy McElroy – Banc of America Securities

Thank you.

Operator

Our next question comes from Jordan Sadler from Key Banc Capital Markets. Please go ahead.

Jordan Sadler – KeyBanc Capital Markets

Thank you. I am here with Todd Thomas as well. I just wanted to follow up on Christy's last question. So if you reduce the LIBOR assumption by 200+ basis points, that's across call it $380 million of floating rate debt-ish, that would be roughly somewhere between $0.10 and $0.13 savings. And you raised guidance by $0.04 so implicit in that is that you have got extra dilution possibly of $0.07 to $0.09, is that the right way to think about?

Christopher P. Marr

Yes it is.

Jordan Sadler – KeyBanc Capital Markets

Okay. And is that purely from a change Cap rate assumption on the dispositions?

Christopher P. Marr

No. It is allowing us the flexibility to do the 80 to 100, 85 to 105 that we talked about plus the ability to focus on institutional capital. And again, if we were to execute on something, giving us the opportunity to use those proceeds in the near term to reduce that floating rate debt.

But obviously as I said in my comments earlier we would look at other uses of proceeds including the potential of executing under the share repurchase program that the board has authorized, as well as external growth opportunities. But to the extent that those external opportunities do not make sense to us this year but may in '09, we are giving ourselves the flexibility to essentially use that money in the near term to simply pay down floating rate debt.

Jordan Sadler – KeyBanc Capital Markets

But the 85 to 105, use of proceeds would be to pay down some floating rate debt, okay.

Christopher P. Marr

That would as well, yes. But you know that marginal dilution giving where we are seeing Cap rates is no where to the extreme that we just talked about.

Jordan Sadler – KeyBanc Capital Markets

Okay. Did you mention the Cap rate on the twenty-one six under contract?

Christopher P. Marr

I did not but the twenty-one six that are currently under contract on trailing, those are looking at about a 7.69 Cap rate.

Jordan Sadler – KeyBanc Capital Markets

And markets?

Christopher P. Marr

Those are kind of in that Gulf Coast market, between the panhandle of Florida and New Orleans.

Jordan Sadler – KeyBanc Capital Markets

That is helpful. And lastly just dry powder. Can you maybe sum it up for us in terms of year access to liquidity today?

Christopher P. Marr

Today, if you look at just pure known access, pick up the phone, we have 15 million available under our credit facility. Should we want to move in the direction outside of dispositions or institutional capital we would have an opportunity given the unencumbered pool to put some secure debt on and raise capital in that fashion. But we currently have no plans to do that.

Jordan Sadler – KeyBanc Capital Markets

How big would that be?

Christopher P. Marr

Boy I think conceptually we could do $50 to 100 million, in that market.

Jordan Sadler – KeyBanc Capital Markets

That is helpful. I think Todd has one as well.

Todd Thompson – KeyBanc Capital Markets

What did occupancy look like through April?

Christopher P. Marr

We had net rentals in April of +900 units.

Todd Thompson – KeyBanc Capital Markets

What is that on..

Christopher P. Marr

Average unit size is about 100 square feet.

Todd Thompson – KeyBanc Capital Markets

Okay. And on a percent basis though, in terms of occupancy?

Christopher P. Marr

$24,500,000 same store square feet 900 units times 100 would be the math.

Todd Thompson – KeyBanc Capital Markets

Okay. It seems like on your same store portfolio, your full year guidance for occupancy is 82% to 84% but given the 79% in the first quarter you would need to do 84% to 85% through the rest of the year to get to that midpoint. Can you just elaborate on how you expect occupancy to trend through the rest of the year?

Christopher P. Marr

Sure. The 79 was right in line. Actually the 793 is a little bit higher than where we had hoped to get during the first quarter and while we did have a bit of a dip at the end of March, April came back strong and we are moving right into the prime rental season here in May, June and July. And to the extent that we are able to repeat the trend that we saw last year that gets back into that range that we always talk about on average.

Dean Jernigan

Let me just in for a second. Jordan I think you are the one that noted that 10 basis point dip at end of March there and the last day of March was on a Monday which is actually the worse day of the week to experience move-outs. So what happens is that people do tend to move out on those last three days of the month with the last day being Monday. At 10 basis point it is easily explained by just the day of the month, that Monday being the last day of the month.

Jordan Sandler – KeyBanc Capital Markets

Okay. Thank you.

Christopher P. Marr

I am sorry, while I have you to go back to Christine's question, we have that answer. The ending occupancy at the end of December on the same store or the current same store pool was 80.08. So that was about a 78 basis point change to March 31 of 2008.

Operator

Our next question comes from Michael Bilerman from Citibank

Craig Melcher – Citibank

Hi it is Craig Melcher here with Michael. Chris, what size of a contribution of existing assets do you consider in your guidance for this joint venture?

Christopher P. Marr

Yes, we are really at a point where I would hate to be too specific at this stage. As I said we are right into this. We are talking to a variety of different folks. The markets are very disjointed right now. No guarantee we are going to get something done, so we want to leave ourselves the flexibility to really look at what is out there in the market and be able to execute, if possible, on something that makes sense for us and would make sense for a partner. You know, could it be as small as $100 million, I think it could. Could it be as large as 300, I think it could be as large as 300.

Craig Melcher – Citibank

Okay. And the Cap rate they set it on the sales under contract but 7-7 is that reflective of an average for the portfolio or where do you think the portfolio would be relative to this?

Christopher P. Marr

No. I mean again, we sold these assets the first three went out at a 6-7. This next batch is an average of around a 7-7. We have said all along that this group of assets that we are looking to dispose of in the Gulf Coast are not core for us long term and we had expected to get a range between 7 and 8 on those, and everything from a pricing perspective is staying within that range. They are not indicative of arguably the top 65% of our portfolio.

Craig Melcher – Citibank

Okay. And if you could just remind us on those Cap rates, how you quote them. Whether there is any CapEx deduction?

Christopher P. Marr

There is no CapEx deduction and those numbers I was throwing out include only a 4% management fee. So if you took it to a market 6% and then wanted to look at it in that term obviously the Cap rates would move down a little bit.

Craig Melcher – Citibank

Okay. Then on your full year same store NOI guidance for the quarter your NOI beat the numbers but for the full year guidance the top end came down by 50 bips. Is that just being conservative?

Christopher P. Marr

Yes. Right. Mathematically, and no one likes my art and science comment last quarter so I will not repeat that one, but mathematically if you looked at the top end of the revenue and the low end of the expenses we could do a little better than where we brought the NOI growth down to. But I think we are trying to be conservative. We are trying to be conservative and cautious as we move forward here. We had two great quarters but there is plenty of work left to be done.

Craig Melcher – Citibank

Thank you.

Operator

Our next question comes from Michael Knott from Green Street Advisors. Please go ahead.

Michael Knott – Green Street Advisors

Hey guys. I am just curious if you can comment on the Amstel's [ph] current state of mind. I know they had been in the press saying they favored a sale of the company. What is the current status of their influence on the company and the pending expiration of their lock up I believe later this summer.

Dean Jernigan

Good morning Michael. I have no conversations with the Amstel's family and the only thing I can suggest you do is just pick up the telephone, call up and ask them. I really do not have any direct conversation with them and if you, it is hard to guess what their thoughts are at this point in time but they might be willing to share that with you.

Michael Knott – Green Street Advisors

Okay. Then Chris can you just comment on the one year option you have on the line of credit and the term loan that expires in 2009. Should we think of that as a 2010 maturity?

Christopher P. Marr

Yes. I think that is fair to say. It was structured back in '06 when life was a lot different and more borrower friendly and simply provided us the option, assuming we are in line with our covenants, which we would be to extend it. Again, we are looking at life between now and then and seeing where things are.

If the credit markets begin to move back into our favor and it would make any sense to do anything earlier, then November of '09 or even at November of '09 to take the deal out to market. Then obviously we would do so. If not, we would look to extend the $200 million term loan and the $250 million credit facility to November of 2010. Clearly today our deal is well below market in terms of what it would look like if we went out and tried to redo that deal today.

Michael Knott – Green Street Advisors

I may have missed this. I apologize if so. On the same store pool, the other property income was down pretty sharply. Can you just help me understand what was driving that, foxtails and administration fees?

Christopher P. Marr

It is exactly that. And I had touched on that on my comments a little bit earlier. The drop was primarily related to fee income and that drop was primarily related to the fact that we have done such a great job of collecting our rents, keeping our tenants current that the past due fees or the late fees that we assess to our tenants dropped significantly from Q1 '07 to Q1 '08.

Michael Knott – Green Street Advisors

Thank you.

Operator

(Operator instructions) Our next question comes from Paula Poskon from Robert W. Baird.

Paula Poskon – Robert W. Baird & Co.

Thank you. Two questions for you. One, could you provide a little bit of color on what you are seeing from potential buyers in terms of their appetite, any changes there as you are out marketing assets. And two, in keeping with your baseball analogy, in what inning do you think YSI's turnaround story is. Thanks

Dean Jernigan

I will take both of those Paula although Chris handles our dispositions for us. Our sense is that the pool of buyers out there today is a fairly shallow pool. A lot of people without capital and those with capital tend to be sitting on the sidelines.

So were very pleased with the interest that we stirred up, if you will, for the pool of properties we are presently marketing. But it is a shallow pool and that is what I see going forward as well. As far as the inning, I think fourth inning feels about right to me.

Paula Poskon – Robert W. Baird & Co.

Thanks very much.

Operator

We show no further questions at this time. I would like to turn the conference back over to Mr. Jernigan for any closing remarks.

Dean Jerrigan

Thanks. If you are still listening let me just clarify the fourth inning. Paula had mentioned the turnaround. I am really talking about the whole game. We made dramatic improvement in all aspects of the company from people to systems to procedures and policies, and now results as you are starting to see.

So from a turnaround standpoint the improvements we are making really are at the margins now with an improved call center that 12 months ago we had an abandoned call rate of about 34% and today it is about 1%. To the website that I mentioned, how much improved our website is. To simple things like new screening program we have for hiring general managers out there that will be personality tested to make sure we are getting a good sales person to answer that telephone for us and cut down our turnover, which we have dramatically year over year.

And so from a turnaround standpoint, I hate to characterize in innings because it is hard to do, but we really do have the major part of the work accomplished from that perspective. But the fun part of it is that we really do have a lot of opportunity going forward and my baseball analogy is that we have not gotten back to surpassing that 15 runs that we felt ourselves down early on. But we are making really good progress.

To paraphrase the international electronics firm, life is maybe not great for us in the self storage sector right now but life is very good. No new supply to speak of. No head winds from the economy. And we are doing a lot of things right. So we are excited for our company on a go-forward basis.

With that we will see many of you next month. I will look forward to that. If you have any questions or comments between now and then, give us call. I look forward to speaking to the rest of you at the end of the next quarter.

Operator

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.

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Source: U-Store-It Trust, Q1 2008 Earnings Call Transcript
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