ATTRACTIVE RETURNS DRAWING Executive …

1 2005 Annual ReportSelf-storage is gaining favor as an alternative to other commercial real estate. Salesvelocity throughout the country was up 10 percent last year, driven by activity inthe North Central and Northeast regions, where velocity more than doubled. Overalldollar volume reached nearly $800 million, up 50 percent from the prior year andmore than two times the volume reported in 2001. The favorable lendingenvironment, combined with significant investor competition in core propertysectors, fueled increased capital flows to alternative real estate sectors, such as self-storage. As a result, cap rates dipped by more than 50 basis points to an average percent. While all five regions experienced a decrease in cap rates, the mostsignificant decline was posted in the South Central region, where the average fell bymore than 200 basis points, to Markets Not Limited to the West CoastConstruction activity was brisk in 2004, as almost 15 million square feetcame online.

2 In the coming year, however, developers will dramatically slow thepace of deliveries by nearly 70 percent to slightly more than million squarefeet. The largest decline will be in the South Central region, where only 400,000square feet is slated for delivery, down from million square feet last year. Inthe West, the combination of slower construction activity, solid job growth andstrong net in-migration trends will keep markets such as Los Angeles, Riversideand San Diego on investors radar screens. Outside of the West, favorableeconomic and supply trends will entice investors to search for assets inWashington, , Fort Lauderdale, Atlanta, Phoenix and Chicago. We alsoexpect favorable supply conditions to attract attention to Minneapolis, Orlando,Las Vegas and Gaining AttentionLenders are starting to view self-storage real estate more favorably, as thesector has one of the lowest default rates when compared to multi-family, officeand retail properties.

3 In addition to individual private investors, REITs have alsotaken note of the potential for stronger RETURNS in the self-storage sector. One suchexample is U-Store-It. After launching its IPO during the fourth quarter of 2004,U-Store-It paid $184 million for the Metro Storage portfolio of 42 facilities,making it the sixth-largest operator of self-storage facilities in the United a slowdown in salesactivity over the last year, caprates in the West dropped 40basis points, to percent. Investors in the South Centralregion put their capital to workin properties between $ and$ million, as sales in this pricerange accounted for 78 percentof the total transactions last in the Southeast regiondrove cap rates down 30 basispoints, to percent, over thelast 12 months.

4 The median priceper square foot increased 12percent over the same in the Northeastconcentrated the majority oftheir funds in the $10 million-plus category. Transactions inthis price range totaled nearly$130 million, accounting for two-thirds of total dollar volume the North Central region,sales volume and activity rosesubstantially last year, as higher-quality product in top-tierlocations traded hands, many ofwhich were in Summary 2/18/2005 12:54 PM Page 1 Marcus & Millichap Self-Storage Research ReportWestFollowing a decline in investment activity last year, self-storage transaction velocity in the West is forecast to rise thisyear. In 2004, many owners elected to hold properties due tothe significant rent growth they were able to achieve, but witha year of strong NOI growth under their belts and interestrates forecast to rise, many are expected to begin offeringproperties for sale.

5 Markets such as Los Angeles, San Diegoand Riverside had very little construction over the last fewyears. This, combined with strong demand for self-storageproduct, and positive demographic and economic trends, willmake these markets top performers. Even metros that haveexperienced high levels of construction in recent years,including Phoenix and Las Vegas, will attract investors asstrong job growth and in-migration overshadow temporarysupply issues. In 2005, the greatest challenges facing investors in the West are saturation andcompetition. Fortunately, construction is forecast to fall by approximately 66 delivered large quantities of rentable square footage in recent years instates such as Arizona, Oregon, Colorado, Nevada, Washington and Utah, dampeningimprovement in market fundamentals.

6 In 2004, the region registered a 110 basis pointincrease in occupancy to percent, driven largely by properties in the RockyMountain States. The increase in occupancy allowed owners to achieve healthy rentgrowth, thereby further increasing NOIs. The West boasts the highest rents andposted the strongest growth in the nation last year, with 10x10 units nowcommanding more than $126 per month. South CentralA decline inconstruction activity for theSouth Central region will aidoperators in increasingoccupancy in 2005. Lastyear, occupancy for SouthCentral properties remainedthe lowest in the nation percent. This did not,however, dampen investordemand for self-storageproduct in the region.

7 Totaldollar volume climbed 64percent to $55 million, andthe median price per squarefoot rose 54 percent to $44. Increased demand for properties was generated by the ability of operators toprovide better RETURNS . Property owners were able to increase per-unit rents by over the last year, to an average of $ per month. The strongest growthwas among 10x10 units, which registered an increase of percent to $ persquare foot, following a decline of percent the previous year. In addition, 69percent of facilities in the South Central region reach 70 percent occupancy within thefirst 18 months of opening, the highest mark in the nation. While development activity is on the decline, the South Central region willcontinue to battle the abundance of supply added in recent years.

8 Within a five-mileradius, the number of competitors increased 43 percent to 10, while constructionclimbed to facilities within a five-mile radius, up from one facility the previousyear. We expect, however, that MSAs such as Dallas-Fort Worth will overcome supplyissues with strong net in-migration and job growth. In fact, the Dallas area is expectedto be one of the leading metro areas in net in-migration this year, as more than 42,000new residents call the market home. Houston will also counter supply issues withstrong demographic and job growth. Regional Occupancy78%82%86%90%990001020304 Sources: Marcus & Millichap Research Services, MiniCoOccupancyWestSouth CentralNationalRegional Rents for 10x10s$0$50$100$150990001020304 Per MonthWestSouth CentralNationalSources: Marcus & Millichap Research Services, MiniCopage 2self 2/18/2005 12:54 PM Page 2 Marcus & Millichap Self-Storage Research ReportSoutheastThe Southeast will continue to be one of the strongest performing regions, asseveral MSAs in the area are projected to register above-average job and populationgrowth in 2005.

9 Fort Lauderdale is forecast to post the second-highest job growth inthe country this year, in addition to leading the nation insingle-family home permits. Fort Lauderdale s hothousing market, combined with job growth and itscurrent low supply of rentable square footage, will makethe MSA one of the leading markets for self-storageinvestment in 2005. Investment activity is forecast to remain at highlevels in the Southeast. Markets such as Washington, , and Atlanta will remain ATTRACTIVE to investors, asboth will boast strong job and population gains, and havecompelling supply constraints. Developers brought lessthan 5 million square feet to market in the Southeast in2004 and are only projected to complete millionsquare feet this year.

10 Occupancy improved by 250 basispoints in 2004 to percent, and rents experienced thefourth consecutive year of growth, rising and West Palm Beach will boast strongfundamentals in 2005. Orlando s supply is on par with its population , which alongwith nation-leading job growth of percent will lure investors. West Palm Beach isforecast to record employment growth of percent and is considered undersuppliedfor self-storage, both factors that will aid operators in raising occupancy and rentsover the next year. Investors seeking value in the region will focus their attention onRaleigh-Durham and Charlotte, in hopes that stronger economic and demographicfundamentals will alleviate any oversupply supply and relatively high cap rates spurred significant investmentactivity in the Northeast last year.