SELF STORAGE MARKET OVERVIEW Third Quarter 2013 SUMMARY SELF STORAGE MARKET OVERVIEW Second Quarter 2014 Results Analysis of the Public Self Storage Companies SELF STORAGE GROUP Marc A. Boorstein Jeffrey L. Jacobson David E.Kohn Dennis Nyren [email protected] [email protected] [email protected] [email protected] Steven Schwartz Greg Owens Benjamin Johnson [email protected] [email protected] [email protected] 21 150 South Wacker Drive • Suite 450 • Chicago, Illinois 60606 • (312) 726-5800 • www.mjpartners.com SELF STORAGE MARKET OVERVIEW Second Quarter 2014 SUMMARY Overview • Occupancy levels for all public companies near all-time records; Public Storage at 94.8% at July 31. • Revenue increases ranging from 5.3% to 8.6%; Net Operating Income increases from 6.9% to 10.0%. • Street rates up significantly and discounts dropping. • Emerging market for purchasing newly developed properties at certificate-of-occupancy in lieu of in-house development Acquisition Market Very Competitive • New private equity capital and institutional capital joint ventures competing with public companies for properties leading to further going-in cap rate compression for existing properties. • “The single most valuable asset this company owns is now its data.” - Spencer Kirk, CEO, Extra Space Storage New Development De Minimis • “Demand continues to trend up. New supply... coming to some markets but most of it appears to be demand-driven and pretty sensibly thought out. We expect impact on us and the industry to be de minimis at least for the next couple of years” - David Rogers, CEO, Sovran Self Storage • The number of new projects remains well below the level of new supply historically. Despite the uptick in development, public companies believe new supply will not be impactful for another two to four years. According to F.W. Dodge, about 345 new self storage construction projects are underway or recently completed including additions, alterations, and renovations. 2 SELF STORAGE MARKET OVERVIEW Second Quarter 2014 SUMMARY Implied Cap Rates based on common share prices: Public Storage (PSA) 4.2% Extra Space Storage (EXR) 4.9% CubeSmart (CUBE) 5.6% Sovran Self Storage (SSS) 6.2% - BMO Capital Markets Macroeconomic Trends Impacting Self Storage • Non farm payrolls increased 209,000 in July after surging by 298,000 in June. July marked the sixth straight month that employment has expanded by more than 200,000 jobs, a stretch last seen in 1997, according to the U.S. Labor Department. • Seasonally adjusted existing-home sales on an annualized pace of 4.87 million during the quarter, a 3.8% decline from a year earlier, according to the National Association of Realtors. • New-home sales fell 8.1% in June, to an annual rate of 406,000, according to the U.S. Commerce Department. • Aggregate wealth of U.S. households, including stocks and real estate holdings, just hit new high of $81.8 trillion. That’s more than $26 trillion in wealth added since 2009 (more wealth to acquire goods to store). - Kevin Warsh, Stanford University’s Hoover Institution Mobile Spending Reaching Milestones • Spending on mobile advertising, which includes both smartphones and tablets, will increase 83% to nearly $18 billion in 2014. After less than one decade of existence, mobile advertising will draw more advertising dollars than newspapers’ nearly $17 billion and radio’s $15.5 billion, according to eMarketer. Television advertising spending • Of the public companies, only Public Storage spends significantly through television in select markets. 3 SELF STORAGE MARKET OVERVIEW Second Quarter 2014 SUMMARY United Kingdom Public Self Storage Companies • The European self storage market has yet to mature as compared to the U.S. market. There are an estimated 1,500 self storage facilities throughout Europe compared to about 45,000 in the U.S. The U.K. self storage market represents the largest in Europe, and has grown from about 350 stores ten years ago to 850 nationwide presently. • The U.K. is more concentrated than the U.S., with the top 5 operators controlling nearly one-half of the overall market, versus about 12% in the U.S. The two U.K.-based public companies have larger share of their market than U.S. companies, although much lower storage use per capita, about 0.5 square feet versus 7.3 square feet. Big Yellow Group (BYG) • Big Yellow is a premier self storage portfolio within the U.K. and owns or has stakes in 77 properties throughout the country. Current market capitalization for Big Yellow is approximately £710 million ($1.2 billion U.S.). Big Yellow stores are 80% concentrated in affluent and densely populated London and South East markets. Overall portfolio rents average about £25.63 per square foot ($43.15). • Big Yellow’s overall occupancy is 71%, which represents a 1.7% increase over the previous quarter, and on pace for 500 basis point increase this year. The 22 new stores in lease-up recently saw occupancy grow from 54.3% to 62.8%. Safestore (SAFE) • Safestore is the largest operator in the U.K., with over 100 properties throughout the U.K. and 25 in Paris, France. Current market capitalization is approximately £425 million ($715 million). • Safestore has more short leasehold stores than Big Yellow, comprising about 35% of all of their properties. The portfolio features overall occupancy of about 65.3%, representing an increase of 2.2% over the previous year. 4 SELF STORAGE MARKET OVERVIEW EARNINGS RESULTS Second Quarter 2014 Same-Store Comparisons Public Storage Extra Space CubeSmart Sovran Number of Properties: 2,200 U.S. 1,071 539 500 (approximate) 187 Europe Third-Party Management: 264 23 Joint Venture Management: 272 55 Total Managed: 42 536 173 79 Revenue: +5.3% +7.9% +7.6% +8.6% Net Operating Income: +6.9% +9.9% +9.7% +10.0% Occupancy: 94.7% 92.4% 92.4% 91.0% vs. previous year: 94.0% 90.8% 90.1% 88.3% Rent Per Occupied Square Foot: $14.52 $14.41 $13.76 $11.36 5 SELF STORAGE MARKET OVERVIEW PORTFOLIO OCCUPANCY Second Quarter 2014 Same-Store Comparisons Portfolio Occupancies PUBLIC STORAGE EXTRA SPACE STORAGE 94.0% 94.4% 94.7% 93.0% 93.0% 92.4% 92.4% 92.6% 92.4% 92.2% 91.8% 90.8% 90.8% 90.8% 90.2% 90.4% 89.2% 89.0% 88.9% 88.6% 88.6% 88.0% 86.9% 85.7% 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 2011 2012 2013 2014 2011 2012 2013 2014 CUBESMART SOVRAN 92.4% 90.5% 90.9% 91.0% 90.1% 89.5% 89.3% 89.5% 88.9% 88.9% 88.4% 88.3% 87.7% 87.4% 87.6% 85.7% 84.1% 84.6% 82.9% 81.2% 81.5% 81.5% 79.1% 79.3% 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 2011 2012 2013 2014 2011 2012 2013 2014 6 SELF STORAGE MARKET OVERVIEW REVENUE GROWTH Second Quarter 2014 Same-Store Comparisons Revenues Changes from same quarter a year earlier PUBLIC STORAGE EXTRA SPACE STORAGE 7.8% 7.8% 7.9% 7.9% 5.8% 7.5% 5.4% 5.5% 5.4% 5.3% 6.8% 5.1% 5.1% 5.1% 6.7% 6.5% 6.6% 5.0% 4.8% 4.8% 4.9% 6.3% 5.8% 4.9% 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 2011 2012 2013 2014 2011 2012 2013 2014 CUBESMART SOVRAN 9.0% 8.9% 8.6% 8.3% 8.0% 8.2% 8.1% 7.6% 7.3% 7.2% 7.0% 6.8% 6.7% 6.6% 5.2% 5.3% 5.1% 4.0% 4.1% 3.9% 3.4% 3.4% 3.0% 2.7% 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 2011 2012 2013 2014 2011 2012 2013 2014 7 SELF STORAGE MARKET OVERVIEW NET OPERATING INCOME GROWTH Second Quarter 2014 Same-Store Comparisons Net Operating Income Changes from same quarter a year earlier PUBLIC STORAGE EXTRA SPACE STORAGE 9.5% 11.4% 8.9% 10.8% 10.8% 8.6% 8.4% 10.2% 10.4% 8.3% 9.7% 9.9% 7.9% 8.0% 9.3% 9.4% 7.2% 8.9% 6.9% 8.5% 6.1% 6.3% 7.3% 5.6% 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 2011 2012 2013 2014 2011 2012 2013 2014 CUBESMART SOVRAN 13.1% 13.1% 12.2% 11.7% 10.6% 10.0% 10.0% 9.7% 9.3% 9.3% 9.0% 8.6% 7.9% 7.9% 7.9% 7.4% 7.4% 7.6% 7.3% 7.2% 5.7% 5.2% 4.5% 4.1% 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 2011 2012 2013 2014 2011 2012 2013 2014 8 SELF STORAGE MARKET OVERVIEW Second Quarter 2014 EARNINGS RESULTS Public Storage Extra Space CubeSmart Sovran Market Capitalization $30.31 billion $6.23 billion $2.78 billion $2.58 billion Funds From Operations $1.99/share $0.64/share $0.27/share $1.08/share (Adjusted Quarter) (+8.7%) (+25.5%) (+17.4%) (+14.9%) Dividend Per Common Share $1.40/share $0.47/share $0.13/share $0.68/share (Quarter) (+17.5%) Dividend Yield 3.20% 3.60% 2.80% 3.50% Common Stock Price September 2, 2014: $175.30 $53.37 $18.74 $78.30 52-Week Range: $147.14 to $178.26 $40.13 to $54.87 $15.06 to $19.69 $62.66 to $80.24 9 SELF STORAGE MARKET OVERVIEW Second Quarter 2014 INVESTMENT ACTIVITY PUBLIC STORAGE: • For 2013 property acquisitions, yield of 5.1% in first six months this year, excluding merchandise and tenant insurance.