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Public Storage (NYSE:PSA)

Q3 2012 Earnings Call

November 09, 2012 1:00 pm ET

Executives

Clemente Teng - Vice President of Investor Services

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

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

David F. Doll - Senior Vice President and President of Real Estate Group

Analysts

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

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

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

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

Todd Stender - Wells Fargo Securities, LLC, Research Division

Michael Bilerman - Citigroup Inc, Research Division

Steve Sakwa - ISI Group Inc., Research Division

Ross T. Nussbaum - UBS Investment Bank, Research Division

Omotayo T. Okusanya - Jefferies & Company, Inc., Research Division

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 Third 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

Thank you, Jackie. Good morning, and thank you for joining us for our third 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, November 9, 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.

Now, I'll turn the call over to John Reyes.

Edward John Reyes

Thank you, Clem. I have a few comments on the impact of Hurricane Sandy. We have 90 facilities in the New York, New Jersey market of which 70 in our Same Store pool of properties. These 70 facilities generated approximately $27 million in revenues during the third quarter. Within a few days, all of these facilities were open and operating. Damage to our facilities was minimal. We expect expenditures will be less than $1.5 million for repairs.

With respect to third quarter earnings, our FFO -- our core FFO per share was $1.76 compared to $1.56 last year, a 13% increase. This growth was primarily driven by a 7.9% increase in our same-store net operating income for $0.13 per share and lower preferred stock dividends of $0.05 per share.

As announced yesterday, we will be redeeming, on December 27, 3 series of our preferred securities totaling $363 million. As a result, we expect to record an EITF expense of approximately $12 million in the fourth quarter.

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

Ronald L. Havner

Thank you, John. The third quarter benefited from solid demand, resulting in record high occupancies and higher realized rents. In Q3, customer acquisition costs declined, and customer move-ins increased by 6,200 or about 3%. Customer move-outs declined by about 2,500.

At the end of October, occupancy and in-place rents were higher than last year. The Charlotte and Denver markets led the country with revenue growth of 8% followed by Houston and Miami with about 6%. Los Angeles, our largest market, grew by 4.4%. And San Francisco, our second largest market, increased by about 5.5%. In Europe, same-store NOI improved 2% despite a challenging operating environment.

We recently acquired 8 facilities and have 2 others under contract. Total 2012 acquisition volume for third parties will be just over $200 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 Michael Knott with Green Street Advisors.

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

Ron, just curious, your thoughts or level of worry about what happened in California this week. It seemed like with respect to the Prop 30, maybe that's actually good for the 99% versus the 1% so maybe that's actually good for your business. But what about the democratic supermajority and possibility of changing Prop 13 for commercial. Does that scare you a lot?

Ronald L. Havner

Well, Michael, I think it's a little early to comment on that since the election just happened this week.

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

You don't worry about that too much yet?

Ronald L. Havner

Well, we've always had the issue in California. It comes up from time-to-time on Prop 13. But in terms of saying that something imminent is going to happen when the legislature hasn't even convened, is a little premature.

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

Okay. Why do you think rents -- realized rent growth didn't accelerate from the 2Q pace?

Edward John Reyes

We didn't -- Michael, because we were in a position during the third quarter where we did more promotional discounting than we did in Q2, so on a relative basis, our growth slowed down.

Ronald L. Havner

Q2 -- or Q3, Michael, is a net move-out quarter versus Q2, which is up to flat. So as the quarter progresses, you trend down in terms of losing occupancy, so it tends to be a little more higher discounts in Q2. Q2, we peak in occupancy at 93-or-so percent.

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

Okay. Can I ask one more question? I forget if you guys have a limit or not.

Ronald L. Havner

We do, but go ahead.

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

Okay. Just the percent of tenants that have been in your facilities 1 year or more versus last year?

Ronald L. Havner

Yes, it's about 55%. Hold on a sec.

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

That sounds like that'd be about unchanged from 2Q?

Edward John Reyes

It's pretty much unchanged, Michael, for the most part. With that said, though, we have more tenants. So that's going to kind of put pressure on the percentage that's going to be greater than 1 year.

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

Right. Got it.

Ronald L. Havner

Michael, 2010 for Q3 we were at 54.9%; 2011, 55.3%; and this year, 55%, at the end of the quarter.

Operator

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

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

Just without much occupancy to gain at this point in the cycle, do you think that we are in an environment where you can continue to see realized rent increases of, say, 4% to 5%, just based on what you're seeing in the portfolio today?

Ronald L. Havner

Todd, I'll let John address the pricing. If you recall, last year we started talking about how we were going to try to get our average occupancy for the year up. And due to the seasonality of our business, historically Q4 and Q1 have been 300 to 500 basis points lower in occupancy versus Q2, Q3. So what we did at the beginning of this year and we're continuing here into the fourth quarter is really trying to drive that occupancy into Q4 so that we take some of the seasonality out of the business. You want to touch on pricing?

Edward John Reyes

Yes. And Todd, to do that, we've been keeping our pricing pretty much consistent with prior year. So people that are moving in are moving in at rates that are pretty much flat on a year-over-year basis. So one of the things that we have been able to do is reduce the level of discounting that we've been giving up. So we've been able to gain occupancy, reduce discounts, but the move-in rate is about flat.

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

Okay. And then my second question, you mentioned the redemptions, the preferred redemptions, that were announced last night, another $300 million and change or so. I think that there's strong demand for your preferreds. Do you expect to begin to lever up a little bit and continue to issue new preferreds, or should we continue to see you delever at this point?

Edward John Reyes

I would expect that we will be in the market sometime in the next couple of months to try to issue additional preferred securities and take advantage of the current rate environment that's very favorable. So we're not -- we don't have it as a goal to delever the company per se. We're right now just trying to reduce the overall cost of capital to the company.

Operator

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

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

Was wondering if you can just talk a little bit about what you've been seeing with market rates and just market rate growth. And Ron, I think in past calls you typically talked about occupancy levels up through the current month, so I was wondering if you could also comment on if that occupancy increase at quarter end was sticking through October?

Ronald L. Havner

Sure, Mike. At the end of October, our occupancy was 92.3% versus 90.9% last year. And with the rates...

Edward John Reyes

Rates are pretty much constant, Mike, pretty flat year-over-year on the street rates.

Operator

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

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

Guys, just going back to the preferred comment. John, do you -- John or Ron, do you expect that you can break that 5 1/4% barrier?

Edward John Reyes

Ron expects and I'm hoping that we can do it. So we will find out, but I don't know, Michael, right now.

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

And then, Ron, just on the $200 million of acquisitions, can you guys just talk a little bit about sort of your appetite for investments, what you see out there because I think one challenge people have with your stock and one reason maybe it's not done as well lately is we're all accustomed to is the $200 million on your asset base is almost nothing. So maybe just talk about what you're seeing and why not be maybe a little more aggressive given your low cost of capital.

Ronald L. Havner

Well, Michael, as you've heard me say before, it's easy to buy real estate. All you have to do is show up with the biggest check. So that's not that hard to do. Buying real estate at or below replacement cost-quality assets, that's hard to do. So I think we pretty much have a no-lose strategy. 60% to 70% of the stuff we bought this year was distressed in one form or another and was acquired at substantial discount to replacement cost. The other stuff was either marketed or off-market deals. And so I'm very, very pleased with the acquisitions that we're doing. And as I said, I don't think we can really lose with that.

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

Okay. And then last question for me would be just how this quarter's performance came in versus your own expectations.

Ronald L. Havner

A little better, a little better. We felt good coming out of Q2 with high occupancies. As we touched on in Q2, our promotional discounts were down. Media spend was down. And as we had in our second quarter call, the trend was good. So a little better, especially on the expense side than we anticipated, but overall, about as planned.

Operator

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

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

Just a follow-up on the acquisition conversation, are you not seeing the kinds of opportunities that are attractive and meeting your investment criteria, or is there just a complete dearth of an opportunity set broadly? And sort of a corollary to that, are you considering selling any assets?

Ronald L. Havner

Well, we're not considering selling any assets at this time. David Doll's here, so I'll let him give you some color on the acquisition market, but as I touched on with Michael, we look at properties. We look at replacement costs, and that's a key factor. And so sometimes we get outbid. But I'll let David give some more color on that.

David F. Doll

Thank you, Ron. Paula, we're not seeing a real change in the product that's coming to market. There are plenty of assets in markets that we're not interested that come to market. And the quality properties in major metro markets, no real change in terms of product supply at this point in time.

Operator

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

Todd Stender - Wells Fargo Securities, LLC, Research Division

Just looking at the properties you acquired recently and the stuff you have under contract, how did those look like compared to your other properties in those respective MSAs, just from an occupancy and a rent-per-square foot basis?

Ronald L. Havner

Well, most of this stuff as I touched on, Todd, 70 -- 60% to 70% of the stuff that we've acquired this year was in one form of stress or not. And so usually those -- not usually, they're always under occupied, generally mispriced, lots of fill-up opportunities. People ask what cap rates. Well, some of them are operating at losses, some of them are at 1% or 2% yields. But we have enough market knowledge to know that, okay, we can attain a $2-a foot rent, $2.50 rent. And our surrounding properties are 92%, 93% occupied. So we're not too worried about achieving a stabilized yield of 7%, 8% or 9% on those assets. But if you look at them on "what is the going in" yield, it's generally nominal and they're pretty under managed. Does that address your question?

Todd Stender - Wells Fargo Securities, LLC, Research Division

Yes, are the occupancies, say, 40% or are they closer to, say, 70%?

Ronald L. Havner

Generally, the assets we bought this year are probably in the 50% to 70% range.

Operator

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

Michael Bilerman - Citigroup Inc, Research Division

Michael Bilerman with Eric. John, just in terms of the preferred and you think about entering the market next year, with the redemptions announced last night, correct me if I'm wrong, the -- you have nothing left now from a redemption perspective until 2015, correct?

Edward John Reyes

That is correct, yes.

Michael Bilerman - Citigroup Inc, Research Division

And so from -- I guess, you'll certainly feel the accretive effects from the amount that you did this year in lowering the average cost of that. But how should we think about, I guess, going forward any issuance then just sits on cash until you use it and with Ron's comments on the acquisition market, I would just take it that -- I don't know at what point would you issue them just to sit on cash?

Edward John Reyes

Well, at that point, once we take care of, let's say, refinancing the $362 million that we called last night, we're not afraid to sit on cash. We've done that before. So we'll opportunistically issue preferred probably in 2013, put some cash on the balance sheet and hopefully opportunities come our way and we can utilize that cash. But we want to make sure that we're taking advantage of the current rate environment and load up the balance sheet with some cash if we need to be.

Ronald L. Havner

Michael, we also have about $250-or-so million of debt due in the first quarter.

Michael Bilerman - Citigroup Inc, Research Division

Of next year. So we should expect that you'll just take that out with capital -- with preferred?

Ronald L. Havner

Yes.

Michael Bilerman - Citigroup Inc, Research Division

And how -- I guess, maybe just -- and I jumped on late. So when you jump on late to a Public Storage call, you miss the opening comments. Could you talk a little bit about Europe, and I apologize if you did, just in terms of the operations but also the structure and financing and how we should think about that going forward?

Ronald L. Havner

Well, Europe, I made the comment, Michael, that same-store NOI was improved by 2% despite a challenging operating environment. That NOI growth was principally achieved by expense reduction, principally in the R&M and advertising area. Europe, itself, our European operation would be in what I would call a deleveraging mode. Last year, we acquired the JV interest and refinanced it in the fourth quarter with a third-party loan from Wells Fargo. And we're taking our cash from operations and paying down that credit facility pursuant to its terms. Our hope is, longer term, sometime in '13, maybe '14, that our debt-to-EBITDA will get in the 4 to 4.5 range. And we hope to qualify for an investment grade rating at which time we'll consider various opportunities to refinance out the balance of the Wells Fargo loan as well as possibly the Public Storage intercompany debt.

Michael Bilerman - Citigroup Inc, Research Division

And just last question. You just commented in terms of your feelings about how you performed in the third quarter and you made comments about heading into the third quarter how you felt. I guess, can you make some more commentary today about how you feel now in the fourth quarter about where things stand and sort of your outlook for the rest of the year?

Ronald L. Havner

Yes. Overall, I think Europe is -- well, I know it's doing better than we anticipated. John and I thought Europe would be a pretty negative same-store NOI growth this year, and the team over there has done a good job. While occupancy is back about 300 basis points, in-place rents are up about 3.5%. So we've been able to hold it in terms of the revenue line pretty well and then been pretty aggressive on cost management. So overall, it's a positive NOI year, which, quite frankly, is surprising. Our toughest market continues to be Holland where we're at 73% occupied at the end of the quarter, which is down 6.5% from last year. Despite very aggressive rental rate reductions and promotional discounts, we've been very challenged to get traction there in Holland. Most of the other markets are kind of chugging along. France is a little soft. Denmark, we've got some tough year-over-year comps. There was a big flood up in Denmark. London's doing great. Same-store NOI in London for the quarter was up 18% year-over-year and occupancy and rates are up. So London's kind of the bright spot for us in Europe.

Michael Bilerman - Citigroup Inc, Research Division

I meant more so about the just sort of your optimism or pessimism for the fourth quarter in the U.S. business, whether there's anything in the first effectively 6 weeks of the year that -- 6 weeks of the quarter that you sort of think how it will trend for the rest of the quarter.

Ronald L. Havner

So we're coming into Q4 very strong with higher year-over-year occupancies. Someone else earlier asked about the October occupancies. They're at 92.3% versus 90.9%, so they've gapped out about 1.4%, 1.5%. So we're heading into Q4 very strong. John touched on rates are about the same as last year. So we're feeling pretty good going into Q4 in U.S.

Operator

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

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

Ron, I know you look at replacement costs, but does issuing preferreds at that 5 1/4% or even lower change the threshold that you'll pay for acquisitions?

Ronald L. Havner

I don't think whether we issue 5% or 5 1/4% preferred changes what replacement cost has. Managing one side of the balance sheet is a little independent of the other.

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

Okay, but -- so I guess let me ask you a different way. How aggressive would you be to perhaps gain additional exposure in some markets that are attractive to you today? Does a portfolio or significant opportunity sort of change the mindset somewhat? And would you pay a premium on a price-per-square foot basis with having such a low cost of capital today?

Ronald L. Havner

Let me try to touch on being aggressive. We recently acquired 2 properties in Hawaii at $250 a foot? About $250 a foot, probably a 10% or 15% premium to replacement costs. There are 2 probably of 15 A properties in the Hawaii market. It was an off-market deal. So we definitely paid up for that. We'll we do that again? Yes. So A product in A markets, in my mind, we're very aggressive in terms of bidding or -- for that kind of product.

Operator

Your next question comes from the line of Seth Laughlin with ISI.

Steve Sakwa - ISI Group Inc., Research Division

Ron and John, it's Steve. I guess, a bunch of my questions were answered on Europe. But just in general, what are you seeing on kind of the new development side? I know you guys aren't really developing anything. But are you seeing anything changing on that? And is there a point at which you would actually kind of look to go back into the development business?

Ronald L. Havner

Steve, as I've touched on, in previous quarters, I think development is inevitable. We're starting to see it. We've been seeing it this year around the country in various markets. We took down a property in New York that you could consider it a large redevelopment or a development -- we're redeveloping a existing building there in the Bronx. So yes, I think you're going to see us a little more aggressive on the development and redevelopment front in 2013.

Operator

Your next question comes from the line of Michael Knott with Green Street Advisors.

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

Ron, do you feel like there's sort of a practical cap on rent growth that you can achieve? I think in the last cycle, you guys kind of peaked out at maybe at 5% -- 5% or 6% type of realized rent growth and that's almost where you're at here. Do you feel like you can get higher than that maybe next rental season or do you feel like just practically you can't really get there -- above that?

Ronald L. Havner

Well, Michael, just try to -- let's think about rent growth here for a couple of things. There's a couple of levers. One, occupancy, which is volume. I've touched on where our occupancies are at the end of September, where they are in October. So you're going to see some growth in the rental revenue line from that gap in occupancy, which we hope to maintain or expand in Q4 and into Q1. The second thing is with respect to rental rate increases to existing customers and John can touch on that, but we've been running -- a lot of our growth comes from that and I think it's been 3.5%, 4% of our growth comes from those. And then the third factor that's been a -- probably a bigger impact in 2012 versus last 3 or 4 years is promotional discounts, which we've been able to modulate down, especially during the second and third quarter due to our high occupancy. So going into 2013, if we're able to sustain the higher level of occupancies, we hope to be able to modulate further down the promotional discounts. We've got 3 drivers to the rental revenue line: discounts, volume and rental rate increases to existing customers.

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

Okay. And then when we look at the operating expense line, you're down a little over 0.5% for the year. Obviously, the media spend is down a lot. Do you feel like that number starts to stabilize next year? Do you feel like there's continued savings there as you get even better at the Internet marketing side of the shop?

Ronald L. Havner

I think there's some opportunities on the expense side going into 2013, not a lot, but some. I would kind of go back to what I always tell people and that is you should assume a 2% to 3% expense growth on a long-term basis.

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

Yes, but does that start next year? It sounds like maybe not.

Ronald L. Havner

Michael, I'm not going to give you guidance. Thank you.

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

Last question would be just in terms of the $200 million of acquisitions for the year. Do you feel like that's sort of a baseline level that you could probably exceed next year or do you feel like that is sort of a fair betting line for next year as well?

Ronald L. Havner

I'd like to see us do $1 billion of acquisitions next year.

Operator

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

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

Two quick things. One, Ron, I was wondering you mentioned Hawaii acquisition. You paid up for that. Can you throw out what the cap rate was or range on that? And then also on G&A, I think it was a quarter or 2 ago you were talking about maybe about a $50 million, $51 million run rate. Q3, it popped a little bit compared to prior quarters and I think your year-to-date's about $44 million, $45 million or so. Just wondering what you're thinking on a go-forward basis there.

Ronald L. Havner

I'll let John address G&A. The cap rate on Hawaii properties I think the going in was about 2%, 2.5% and they're about 45%, 50% occupied.

Edward John Reyes

And on G&A, Mike, most of the pop was due to stock-based compensation. We had a little higher in expenditures and legal fees. Expect a run rate for 2012 to be somewhere in the $57 million range. And then 2013, I would assume, as Ron said, an inflater off of that.

Operator

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

Ross T. Nussbaum - UBS Investment Bank, Research Division

Ron, can you talk about the discounts? Maybe I can tackle it a little different way. What percentage of customers who moved in, in the third quarter received discounts versus the same quarter a year ago?

Ronald L. Havner

Do you have that?

Edward John Reyes

Roughly about 82% probably were getting discounts, Ross, versus maybe about 92% last year.

Ross T. Nussbaum - UBS Investment Bank, Research Division

Discounts have clearly been a big part of the self-storage industry since almost its birth, I would guess. It would seem to me that your ability to continue to, I guess, drive that level of discounts down, do you think that's more a function of what your peers do that you're subject in some respects to the advertising and the marketing of the broad market as opposed to what you want to do?

Edward John Reyes

In some respects yes, it's what our peers are doing, Ross. But in a lot of respects, it's what our portfolio of tenants are doing. They're staying longer. They're more sticky now, which is enabling us to maintain occupancies without having to have the same -- necessarily the same level of move-in volume and giving away more and more promotion. So we're being conservative on the rate to get them in, but we're also being a little stingier on the discounts. And we've said this before, the whole game and growing the revenues, at least on the rate side, is sending increases to the existing tenant base. And Ron had mentioned that although our tenant base -- our aging tenant base is roughly a little bit less than last year, in absolute numbers that is actually growing. So as we come back around to 2013, we hope that the tenant base will be -- continue to be more stable and we will send out more increases in terms of absolute number of increases to tenants as we get into 2013. So it's really -- a lot has to do with the stabilization of our tenants.

Ross T. Nussbaum - UBS Investment Bank, Research Division

Understood. So that takes me to the next question, which is if street rates have been roughly flat year-over-year, as you send out the increases to existing customers, do you find -- I guess you'll find yourself in a position perhaps of having some level of rent roll-down on the portion of portfolio? Are you at that point yet?

Edward John Reyes

Well, there's always some rent roll-down, but on the increases that go on, we can send out increases of 9% to folks and it will result in an uptick in move-out activity. But on a net-net basis for those who stay and pay the 9%, it's a big win for us, so -- and what we are seeing is that, that uptick in move-out activity is starting to diminish somewhat, too. So again, the tenant base is becoming more sticky. They're accepting the increases more. And I think we're being a lot smarter in how we're going about sending out those increases, so yes.

Ross T. Nussbaum - UBS Investment Bank, Research Division

And last quick one from me. In your best markets, Ron, that you alluded to, are you seeing anything different from an economic perspective versus your worst markets? So is it a function of better job growth, migration patterns? Can you isolate anything that's driving the good versus the bad markets?

Ronald L. Havner

Ross, John and I were talking about this the other day. And pretty much across the portfolio, business is good, whether it's Kansas City, Austin, San Francisco, Houston, Miami. Across the portfolio, it's good. Probably our softer market is somewhere in the Northeast, Philly, D.C. but it's still good.

Operator

Your next question comes from the line of Tayo Okusanya with Jefferies.

Omotayo T. Okusanya - Jefferies & Company, Inc., Research Division

Just 2 quick questions. First, along the line of the hurricane. I believe you disclosed the number in regards to repairs, but could you give us a sense yet if that's starting to drive increased demand in any of the assets you own in any of the affected markets?

Ronald L. Havner

Well, in some of the sub-markets where the hurricane hit, yes. I mean, we've had -- as we've gotten properties back online, we've had pretty robust demand and we have a number of properties that are simply out of space.

Omotayo T. Okusanya - Jefferies & Company, Inc., Research Division

How many properties are those, roughly?

Edward John Reyes

Well, we have 90 facilities in the New York, New Jersey market. The properties that are benefiting the most, so to speak, from the storm are those along the Jersey coast and on the -- on Long Island. I can't tell you how many we have there because I don't know. So I'd just be guessing, but those properties are doing well. As Ron said, some of them are 100% occupied right now. But some of the other 90 properties that are in the New Jersey, New York market are, say, north of the city, and they're pretty much business as usual. We're not -- we didn't see any real uptick in demand.

Omotayo T. Okusanya - Jefferies & Company, Inc., Research Division

Got it. Okay, that's helpful. And then I have a second question just around the Internet being again a driver of reservations. Just curious just what you're seeing in regards to those trends and if that continues to impact how you think about media spend on a going-forward basis.

Edward John Reyes

Well, about a little more than half of our move-in volume is coming from the Internet, be it the Internet from search engines, organic searches, mobile devices, what have you. And yes, it has started to change our way of how we spend advertising dollars. I mean, we do spend a lot of money on keyword search as well as other Internet strategies. In fact, the bulk of our advertising spend is being done on the web for the most part.

Operator

At this time, we have no further questions.

Clemente Teng

Okay. Hi, this is Clem. I want to appreciate everybody's participation this afternoon. We look forward to seeing many of you next week in San Diego at the NAREIT conference. And if you're not going to be there, we'll talk to you next quarter. Have a good day and weekend. Bye.

Operator

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

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