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Self-storage property markets are unappealing, but Public Storage has found deals anyway, CEO says

The marketfor storage properties has more product, lower quality and higher prices than in2015, but Public Storagenevertheless has found assets to buy, Chairman, President and CEO Ronald HavnerJr. said in an April 27 earnings conference call.

Havner'sassessment came in response to an analyst who noted that the company has increasedits acquisitions in 2016, and in fact has purchased more properties in the yearso far than it did in all of 2015.

The companyhas not changed its investment criteria, Havner said, adding that he was describingthe broad market as a whole.

"Insideof that are some good products, some reasonably priced, so we're able to do sometransactions here and there," he added. "But historically, we tend todo what makes sense for the franchise, what makes sense for the platform, what makessense on a price per foot. It varies by market. And that strategy's not changed.It's consistent. We continue to build out the platform in the markets where we are,both submarkets as well as markets in general."

DavidDoll, the company's president of real estate, added: "I think the only reasonwe're seeing a little more activity is we've got a team out looking for some ofthose one-off, off-market properties that can fill in some … markets where we'retrying to build out scale."

Capitalizationrates on storage assets have contracted by roughly 50 to 75 basis points, Havnersaid.

Laterin the call, he was asked whether, considering the state of the transaction market,the company has contemplated putting properties of lower quality or in noncore marketsup for sale to generate development funding.

"Wehave thought about that," Havner said. "We continue to think about that.In terms of needing that as capital for development, we have plenty of firepowerhere on the balance sheet to undertake our development program."

At itscurrent pace of development, the company is essentially using its retained cashflow to underwrite its development program, Havner said. The company also looksat selling in some markets where it does not want to grow and does not have a significantpresence, he added.