The self-storage industry in the United States consists of approximately 1.3 billion rentable square feet at approximately 37,000 facilities. The industry is highly fragmented, comprised mainly of numerous local operators that own single facilities and a few national owners and operators. The industry presents opportunities for consolidation owing in part to its highly fragmented composition, the lack of skilled operators, the economies of scale available to a real estate company with a significant number of self-storage facilities, and the relative scarcity of capital available to the smaller operators. Due to recent consolidation activity and new construction undertaken by the larger operators, the aggregate market share, by rentable square footage, of the top ten operators in the United States has increased from approximately 15% in 1996 to approximately 18% in 2003.

Demand for self-storage tends to remain relatively stable because the causes of such demand are present throughout the various stages of an economic cycle. Economic expansions generate demand as individuals relocate to new jobs and make more purchases and businesses expand their storage and distribution needs. Conversely, economic downturns also initially create additional needs for self-storage as a result of the relocation and residential downsizing associated with reduced income or job losses.

Many self-storage facility customers have a low sensitivity to price increases partly due to the low cost of self-storage relative to other storage alternatives and the inconvenience of moving stored belongings to another location.

The self-storage industry has continued to benefit from the significant mobility of a growing population. According to the U.S. Census Bureau, 40.1 million United States residents, or approximately 14.2% of the total U.S. population, relocated between 2002 and 2003. Consumer awareness of self-storage has grown significantly as more facilities have been built nationwide and overall usage has risen. Self-storage operators continue to induce additional demand by opening facilities in new geographic markets, offering higher quality product with enhanced features, and actively marketing their facilities to attract first-time residential and commercial users.

The Company derives its revenues principally from rents received from the Company’s customers who rent units at the Company’s self-storage facilities under month-to-month leases. Therefore, the Company’s operating results depend materially on the Company’s ability to retain its existing customers and lease its available self-storage units to new customers while maintaining and, where possible, increasing the Company’s pricing levels. In addition, the Company’s operating results depend on the ability of the Company’s customers to make required rental payments to the Company. The Company’s decentralized approach to the management and operation of the Company’s facilities, which places an emphasis on local, market level oversight and control, allows the Company to respond quickly and effectively to changes in local market conditions, where appropriate increasing rents while maintaining occupancy levels, or increasing occupancy levels while maintaining pricing levels.

The Company experiences minor seasonal fluctuations in the occupancy levels of the Company’s facilities, which are generally slightly higher during the summer months due to increased moving activity.

Property operating expenses increased from $7.1 million for the three months ended March 31, 2003 to $7.7 million for the three months ended March 31, 2004, an increase of $0.6 million or 8.5%.

Management fees increased from $1.0 million for the three months ended March 31, 2003 to $1.1 million for the three months ended March 31, 2004, or 10.0%.

Depreciation decreased from $5.0 million for the three months ended March 31, 2003 to $4.7 million for the three months ended March 31, 2004, or 6.0%.

Interest expense decreased from $3.9 million for the three months ended March 31, 2003 to $3.7 million for the three months ended March 31, 2004, or 5.1%.