On Friday, Public Storage (NYSE:PSA) reported its third quarter earnings and discussed the following topics in its earnings conference call. Take a look.
Michael Knott – Green Street Advisors: 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, Jr. – Chairman, CEO and President: Well, Mike, I think it’s a little early to comment on that since the election just happened this week.
Michael Knott – Green Street Advisors: You don’t worry about that too much yet?
Ronald L. Havner, Jr. – Chairman, CEO and President: Well, we’ve always had the issue in California. It comes up from time-to-time on prop 13. But it terms of saying that something imminent is going to happen when the legislature hasn’t even convened, it’s a little premature.
Michael Knott – Green Street Advisors: Okay, why do you think realized rent growth didn’t accelerate from the 2Q pace?
John Reyes – SVP and CFO: Michael because we were in a position during the third quarter where we did more promotional discounting that we did in Q2, so on a relative basis our growth slowed down.
Ronald L. Havner, Jr. – Chairman, CEO and President: Our 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.
Michael Knott – Green Street Advisors: Can I ask one more question, I forgot if you guys have a limit or not?
Ronald L. Havner, Jr. – Chairman, CEO and President: We do, but go ahead.
Michael Knott – Green Street Advisors: Just the percent of tenants that have been in your facilities one year or more versus last year?
Ronald L. Havner, Jr. – Chairman, CEO and President: Yes, about 55%, hold one a sec.
Michael Knott – Green Street Advisors: That sounds like that would be about unchanged from 2Q?
John Reyes – SVP and CFO: It’s pretty much unchanged Michael, the most part. With that said that we have more tenants, so that’s going to kind of put pressure on some percentage that’s going to be greater than one year.
Ronald L. Havner, Jr. – Chairman, CEO and President: Michael, 2010 for Q3 we were 54.9%, 2011 55.3% and this year 55% at the end of the quarter.
Rent Increase Insights
Todd Thomas – KeyBanc Capital Markets: Just without much occupancy the 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, Jr. – Chairman, CEO and President: 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 are 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?
John Reyes – SVP and CFO: Yeah. And Todd, to 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 out. So, we’ve been able to gain occupancy, reduce discounts but the move-in rate is about flat.
Todd Thomas – KeyBanc Capital Markets: 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 they is 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?
John Reyes – SVP and CFO: Well, 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 been 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.