The following discussion should be read in conjunction with the financial statements and notes thereto appearing elsewhere in this report. The Company makes certain statements in this section that are forward-looking statements within the meaning of the federal securities laws. For a complete discussion of forward-looking statements, see the section in this report entitled "Forward-Looking Statements." Certain risk factors may cause actual results, performance or achievements to differ materially from those expressed or implied by the following discussion. For a discussion of such risk factors, see the section entitled "Risk Factors" in the Company's Annual Report on the Form 10-K for the year ended December 31, 2008 and in Part II, Item 1A - Risk Factors, in our subsequent quarterly reports.

Overview

The Company is an integrated self-storage real estate company, which means that it has in-house capabilities in the operation, design, development, leasing, and acquisition of self-storage facilities. The Company has elected to be taxed as a REIT for federal tax purposes. As of September 30, 2009 and December 31, 2008, the Company owned 368 and 387 self-storage facilities, respectively, totaling approximately 23.8 million rentable square feet and 25.0 million rentable square feet, respectively.

The Company derives revenues principally from rents received from our customers who rent units at our self-storage facilities under month-to-month leases. Therefore, our operating results depend materially on our ability to retain our existing customers and lease our available self-storage units to new customers while maintaining and, where possible, increasing our pricing levels. In addition, our operating results are affected by the ability of our customers to make required rental payments to us. We believe that our decentralized approach to the management and operation of our facilities allows us to respond quickly and effectively to changes in local market conditions. Emphasis on local, market level oversight and control enhances our ability to optimize occupancy and pricing levels.

Currently, the United States is in a recession that has resulted in higher unemployment, shrinking demand for products, large-scale business failures and tight credit markets. Our results of operations are sensitive to changes in overall economic conditions that impact consumer spending, including discretionary spending, as well as to increased bad debts due to recessionary pressures. A continuation of ongoing adverse economic conditions affecting disposable consumer income, such as employment levels, business conditions, interest rates, tax rates, fuel and energy costs, and other matters could reduce consumer spending or cause consumers to shift their spending to other products and services. A general reduction in the level of discretionary spending or shifts in consumer discretionary spending could adversely affect our growth and profitability.

In the future, the Company intends to focus on increasing our internal growth and selectively pursuing targeted dispositions and selective acquisitions and developments of self-storage facilities. We intend to incur additional debt in connection with any such future acquisitions or developments.

The Company's self-storage facilities are located in major metropolitan areas as well as rural areas and have numerous tenants per facility. No single tenant represents 1% or more of our revenues. The facilities in Florida, California, Texas and Illinois provided approximately 18%, 15%, 10% and 7%, respectively, of total revenues during the three months ended September 30, 2009. During the nine months ended September 30, 2009, the facilities in Florida, California, Texas and Illinois provided approximately 18%, 15%, 9% and 7%, respectively, of total revenues.

Summary of Critical Accounting Policies and Estimates

Set forth below is a summary of the accounting policies and estimates that management believes are critical to an understanding of the unaudited consolidated financial statements included in this report. These policies require the application of judgment and assumptions by management and, as a result, are subject to a degree of uncertainty. Due to this uncertainty, actual results could differ from estimates calculated and utilized by management.

Self-Storage Facilities

The Company records self-storage facilities at cost less accumulated depreciation. Depreciation on the buildings and equipment is recorded on a straight-line basis over their estimated useful lives, which range from 5 to 39 years. Expenditures for significant

renovations or improvements that extend the useful lives of assets are capitalized. Repairs and maintenance costs are expensed as incurred.

When facilities are acquired, the purchase price is allocated to the tangible and intangible assets acquired and liabilities assumed based on estimated fair values. When a portfolio of facilities is acquired, the purchase price is allocated to the individual facilities at fair value which may include an income approach or a cash flow analysis using appropriate risk adjusted capitalization rates, which take into account the relative size, age and location of the individual facility along with current and projected occupancy and rental rate levels or appraised values, if available. Allocations to the individual assets and liabilities are based upon comparable market sales information for land, buildings and improvements and estimates of depreciated replacement cost of equipment.

In allocating the purchase price, the Company determines whether the acquisition includes intangible assets or liabilities, which may include the value of in-place leases, above or below market lease intangibles, and tenant relationships. Substantially all of the leases in place at acquired facilities are at market rates, as the majority of the leases are month-to-month contracts. Accordingly, to date no portion of the purchase price has been allocated to above- or below-market lease intangibles. To date, no intangible asset has been recorded for the value of tenant relationships, because the Company does not have any concentrations of significant tenants and the average tenant turnover is fairly frequent.

Long-lived assets classified as "held for use" are reviewed for impairment when events and circumstances indicate that there may be impairment. The carrying values of these long-lived assets are compared to the undiscounted future net operating cash flows attributable to the assets. An impairment loss is recorded if the net carrying value of the asset exceeds the undiscounted future net operating cash flows attributable to the asset. The impairment loss recognized equals the excess of net carrying value over the related fair value of the asset. Future events, or facts and circumstances that currently exist, that we have not yet identified, could cause us to conclude in the future that our long-lived assets are impaired. Any resulting impairment loss could have a material adverse impact on our financial condition and results of operations. No impairment was recorded for the three and nine month periods ended September 30, 2009 and 2008.

The Company considers long-lived assets to be "held for sale" upon satisfaction of the following criteria: (a) management commits to a plan to sell a facility (or group of facilities), (b) the facility is available for immediate sale in its present condition subject only to terms that are usual and customary for sales of such facilities, (c) an active program to locate a buyer and other actions required to complete the plan to sell the facility have been initiated,
(d) the sale of the facility is probable and transfer of the asset is expected to be completed within one year, (e) the facility is being actively marketed for sale at a price that is reasonable in relation to its current fair value, and
(f) actions required to complete the plan indicate that it is unlikely that significant changes to the plan will be made or that the plan will be withdrawn.

Typically these criteria are all met when the relevant assets are under contract, significant non-refundable deposits have been made by the potential buyer, the assets are immediately available for transfer and there are no contingencies related to the sale that may prevent the transaction from closing. In most transactions, these contingencies are not satisfied until the actual closing of the transaction; and, accordingly, the facility is generally not identified as held for sale until the closing actually occurs. However, each potential transaction is evaluated based on its separate facts and circumstances. Properties classified as held for sale are reported as the lesser of carrying value or fair value less estimated costs to sell.

The Company recognizes gains on disposition of properties only upon closing in accordance with the guidance on sales of real estate. Payments received from purchasers prior to closing are recorded as deposits. Profit on real estate sold is recognized using the full accrual method upon closing when the collectability of the sales price is reasonably assured and the Company is not obligated to perform significant activities after the sale. Profit may be deferred in whole or part until the sale meets the requirements of profit recognition on sales under this guidance.

Revenue Recognition

Management has determined that all of our leases with tenants are operating leases. Rental income is recognized in accordance with the terms of the lease agreements or contracts, which generally are month-to-month. Revenues from long-term operating leases are recognized on a straight-line basis over the term of the lease. The excess of rents recognized over amounts contractually due pursuant to the underlying leases is included in deferred revenue, and contractually due but unpaid rents are included in other assets.

Share-Based Payments

We apply the fair value method of accounting for contingently issued shares and share options issued under our equity incentive plans. Accordingly, share compensation expense is recorded ratably over the vesting period relating to such contingently issued shares and options. The Company has elected to recognize compensation expense on a straight-line method over the requisite service period.

Recent Accounting Pronouncements

The FASB established the FASB Accounting Standards Codification™ ("Codification") as the source of authoritative GAAP recognized by the FASB to be applied by nongovernmental entities in the preparation of financial statements issued for interim and annual periods ending after September 15, 2009. The Codification has changed the manner in which U.S. GAAP guidance is referenced, but did not have an impact on our consolidated financial position, results of operations or cash flows.

The FASB issued authoritative guidance on accounting for transfers of financial assets in June 2009, which we will adopt on a prospective basis beginning November 15, 2009. The guidance requires entities to provide more information regarding sales of securitized financial assets and similar transactions, particularly if the entity has continuing exposure to the risks related to transferred financial assets. It also eliminates the concept of a "qualifying special-purpose entity," changes the requirements for derecognizing financial assets and requires additional disclosures. The application will not have an impact on our consolidated financial position, results of operations or cash flows.

The FASB issued authoritative guidance on how a company determines when an entity that is insufficiently capitalized or is not controlled through voting (or similar rights) should be consolidated in June 2009, which we will adopt on a prospective basis beginning November 15, 2009. The guidance clarifies that the determination of whether a company is required to consolidate an entity is based on, among other things, an entity's purpose and design and a company's ability to direct the activities of the entity that most significantly impact the entity's economic performance. The guidance requires an ongoing reassessment of whether a company is the primary beneficiary of a variable interest entity. It also requires additional disclosures about a company's involvement in variable interest entities and any significant changes in risk exposure due to that involvement. The application will not have an impact on our consolidated financial position, results of operations or cash flows.

The FASB issued authoritative guidance on determining whether instruments granted in share-based payment transactions are participating securities in June 2008, which we adopted on a prospective basis beginning January 1, 2009. The guidance states that unvested share-based payment awards that contain nonforfeitable rights to dividends or dividend equivalents (whether paid or unpaid) are participating securities and should be included in the computation of earnings per share pursuant to the two-class method. The application did not have an impact on our consolidated financial position, results of operations or cash flows.

The FASB issued authoritative guidance regarding disclosures about derivative instruments and hedging activities in March 2008, which we adopted on a prospective basis beginning January 1, 2009. The guidance enhances required disclosures regarding derivatives and hedging activities, including enhanced disclosures regarding how an entity uses derivative instruments, how derivative instruments and related hedged items are accounted for under prior guidance and the impact of derivative instruments and related hedged items on an entity's financial position, financial performance and cash flows. The application did not have an impact on our consolidated financial position, results of operations or cash flows.

The FASB issued authoritative guidance regarding noncontrolling interests in consolidated financial statements in December 2007, which we adopted on a prospective basis beginning January 1, 2009. The guidance requires that ownership interests in subsidiaries held by parties other than the parent be clearly identified. In addition, it requires that the amount of consolidated net income attributable to the parent and to the noncontrolling interest be clearly identified and presented on the face of the income statement. The application resulted in the elimination of minority interests, and the inclusion of noncontrolling interests in our Consolidated Balance Sheets. Additionally, certain Statement of Operations captions were reclassified to conform to the required format of the guidance.

Results of Operations

The following discussion of our results of operations should be read in conjunction with the unaudited consolidated financial statements and the accompanying notes thereto. Historical results set forth in the consolidated statements of operations reflect only the existing facilities and should not be taken as indicative of future operations.

Acquisition and Development Activities

The comparability of the Company's results of operations is affected by acquisition and disposition activities in 2009 and 2008. At September 30, 2009 and 2008, the Company owned 368 and 394 self-storage facilities and related assets, respectively. The following table summarizes the change in number of self-storage facilities from January 1, 2008 through September 30, 2009:

                                 2009   2008
Balance - Beginning of year       387    409
Facilities acquired                 -      1
Facilities consolidated             -      -
Facilities sold/eminent domain    (19 )  (23 )
Balance - End of period           368    387

The facility acquired in January 2008 was purchased for a gross purchase price of $13.3 million, is located in Washington, DC and is commonly referred to as the Uptown asset. Results of operations for the Uptown asset from and after the acquisition date are included in the consolidated statements of operations.

Comparison of the Three Months Ended September 30, 2009 to the Three Months
Ended September 30, 2008



The following table and subsequent discussion provides information pertaining to
our portfolio for the three months ended September 30, 2009 and 2008 (dollars in
thousands):



                               Same Store Property Portfolio             Properties Acquired         Other/ Eliminations                   Total Portfolio
                                                Increase/      %                                                                                     Increase/      %
                           2009       2008     (Decrease)    Change       2009          2008        2009            2008        2009       2008     (Decrease)    Change

REVENUES:
Rental income            $ 49,497   $ 52,326   $    (2,829 )     -5 % $      1,001    $     569   $       -      $        -   $ 50,498   $ 52,895   $    (2,397 )     -5 %
Other property related
income                      3,982      3,903            79        2 %          379          509           -               -      4,361      4,412           (51 )     -1 %
Total revenues             53,479     56,229        (2,750 )     -5 %        1,380        1,078           -               -     54,859     57,307        (2,448 )     -4 %

OPERATING EXPENSES:
Property operating
expenses                   20,724     22,134        (1,410 )     -6 % $        656    $     755       1,773           1,852     23,153     24,741        (1,588 )     -6 %
Subtotal                   20,724     22,134        (1,410 )     -6 %          656          755       1,773           1,852     23,153     24,741        (1,588 )     -6 %
NET OPERATING INCOME:      32,755     34,095        (1,340 )     -4 %          724          323      (1,773 )        (1,852 )   31,706     32,566          (860 )     -3 %
Depreciation and
amortization                                                                                                                    17,894     18,433          (539 )     -3 %
General and
administrative                                                                                                                   5,556      5,849          (293 )     -5 %
Subtotal                                                                                                                        23,450     24,282          (832 )     -3 %
Operating income                                                                                                                 8,256      8,284           (28 )      0 %
Other Income
(Expense):
Interest:
Interest expense on
loans                                                                                                                          (12,008 )  (12,786 )        (778 )     -6 %
Loan procurement
amortization expense                                                                                                              (489 )     (486 )           3        1 %
Interest income                                                                                                                    150         34           116      341 %
Other                                                                                                                                -         49           (49 )   -100 %
Total other expense                                                                                                            (12,347 )  (13,189 )        (842 )     -6 %
LOSS FROM CONTINUING
OPERATIONS                                                                                                                      (4,091 )   (4,905 )         814       17 %
DISCONTINUED
OPERATIONS
Income from
discontinued
operations                                                                                                                         684      1,735        (1,051 )    -61 %
Net gain on
disposition of
discontinued
operations                                                                                                                      10,910      7,544         3,366       45 %
Total discontinued
operations                                                                                                                      11,594      9,279         2,315       25 %
NET INCOME                                                                                                                       7,503      4,374         3,129       72 %

NET INCOME
ATTRIBUTABLE TO
NONCONTROLLING
INTERESTS
Noncontrolling
interests in the
Operating Partnership                                                                                                             (512 )     (354 )        (158 )    -45 %
Noncontrolling
interests in
subsidiaries                                                                                                                      (173 )        -          (173 )    100 %

Total Portfolio

Total Revenues

Rental income decreased from $52.9 million for the three months ended September 30, 2008 to $50.5 million for the three months ended September 30, 2009, a decrease of $2.4 million, or 5%. This decrease is primarily attributable to a decrease of rental income from the same-store properties of $2.8 million due to decreased occupancy levels during the three months ended September 30, 2009 as compared to the three months ended September 30, 2008 offset by an increase in rental income of $0.4 million from assets that do not meet the same-store criteria.

Other property related income remained constant at $4.4 million for the three months ended September 30, 2009 and for the three months ended September 30, 2008.

Total Operating Expenses

Property operating expenses decreased from $24.7 million for the three months ended September 30, 2008 to $23.2 million the three months ended September 30, 2009, a decrease of $1.5 million, or 6%. The decrease is primarily attributable to a $0.7 million decrease in advertising expenses, a $0.3 million decrease in utility expenses, a $0.2 million decrease in property tax expenses, and a $0.1 million decrease in repairs and maintenance expenses during the 2009 period as compared to the 2008 period.

Depreciation and amortization decreased from $18.4 million for the three months ended September 30, 2008 to $17.9 million for the three months ended September 30, 2009, a decrease of $0.5 million, or 3%. The decrease is primarily attributable to amortization expense of $1.4 million incurred during the three months ended September 30, 2008 related to two in-place lease intangible assets acquired in conjunction with property acquisitions during 2008 and 2007, with no similar activity during the three months ended September 30, 2009, offset by an increase in depreciation expense during the 2009 period of $0.9 million as compared to the 2008 period related to capital improvements during 2008 and 2009.

Total Other Expenses

Interest expense decreased from $12.8 million for the three months ended September 30, 2008 to $12.0 million for the three months ended September 30, 2009, a decrease of $0.8 million, or 6%. The decrease is attributable to lower interest rates on unsecured debt as well as lower outstanding borrowings on the credit facility during the 2009 period as compared to the 2008 period resulting in an overall decrease in interest expense during 2009 as compared to 2008.

Discontinued Operations

Income from discontinued operations decreased from $1.7 million for the three months ended September 30, 2008 to $0.7 million for the three months ended September 30, 2009, a decrease of $1.0 million, or 61%. The decrease is primarily attributed to income generated in the 2008 period with no similar income generated in the 2009 period for the 2008 dispositions as the Company did not own the properties in 2009. Net gains on disposition of discontinued operations increased from $7.5 million for the three months ended September 30, 2008 to $10.9 million for the three months ended September 30, 2009 as a result of the sale of nine assets during the three months ended September 30, 2008 compared to the sale of thirteen properties sold through September 30, 2009, two properties that were considered held-for-sale at September 30, 2009, and one property that was removed due to eminent domain proceedings.

Same-Store Property Portfolio

The Company considers its same-store portfolio to consist of only those facilities owned at the beginning and at the end of the applicable years presented. Same-store results are considered to be useful to investors in evaluating our performance because it provides information relating to changes in facility-level operating performance without taking into account the effects of acquisitions, developments or dispositions.

Same-store revenues decreased from $56.2 million for the three months ended September 30, 2008 to $53.5 million for the three months ended September 30, 2009, a decrease of $2.7 million, or 5%, primarily attributable to a 5% decrease in average occupancy

rates offset by a 1% increase in realized annual rent per occupied square foot on the same-store portfolio in the 2009 period as compared to the 2008 period. Same-store property operating expenses decreased from $22.1 million for the three months ended September 30, 2008 to $20.7 million for the three months ended September 30, 2009, a decrease of $1.4 million or 6%. Decreases include $0.6 million in advertising expenses, $0.2 million in utility expenses, $0.1 million in repairs and maintenance expenses and $0.1 million in real estate taxes in the 2009 period as compared to the 2008 period.

Comparison of Operating Results for the Nine Months Ended September 30, 2009 and September 30, 2008

Total Revenues

Rental income decreased from $156.4 million for the nine months ended September 30, 2008 to $151.8 million for the nine months ended September 30, 2009, a decrease of $4.6 million, or 3%. This decrease is primarily attributable to a decrease of rental income from the same-store properties of $5.5 million due to decreased occupancy levels during the nine months ended September 30, 2009 as compared to the nine months ended September 30, 2008 offset by an increase in rental income of $0.9 million from assets that do not meet the same-store criteria.

Other property related income increased from $11.7 million for the nine months ended September 30, 2008 to $12.5 million for the nine months ended September 30, 2009, an increase of $0.8 million, or 7%. This increase is primarily attributable to increased insurance commissions and merchandise sales income of $0.9 million across the portfolio of storage facilities during the nine months ended September 30, 2009 as compared to the nine months ended September 30, 2008.

Total Operating Expenses

Property operating expenses decreased from $72.2 million for the nine months ended September 30, 2008 to $71.8 million for the nine months ended September 30, 2009, a decrease of $0.4 million, or 1%. The decrease is primarily attributable to a $0.4 million decrease in property insurance expenses . . .