The following discussion and analysis of the Company's consolidated financial condition and results of operations should be read in conjunction with the unaudited financial statements and notes thereto included elsewhere in this report.

DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS

When used in this discussion and elsewhere in this document, the words "intends," "believes," "expects," "anticipates," and similar expressions are intended to identify "forward-looking statements" within the meaning of that term in Section 27A of the Securities Act of 1933 and in Section 21E of the Securities Exchange Act of 1934. Such forward-looking statements involve known and unknown risks, uncertainties and other factors, which may cause the actual results, performance or achievements of the Company to be materially different from those expressed or implied by such forward-looking statements. Such factors include, but are not limited to, the effect of competition from new self-storage facilities, which would cause rents and occupancy rates to decline; the Company's ability to evaluate, finance and integrate acquired businesses into the Company's existing business and operations; the Company's ability to effectively compete in the industry in which it does business; the Company's existing indebtedness may mature in an unfavorable credit environment, preventing refinancing or forcing refinancing of the indebtedness on terms that are not as favorable as the existing terms; interest rates may fluctuate, impacting costs associated with the Company's outstanding floating rate debt; the Company's ability to comply with debt covenants; any future ratings on the Company's debt instruments; regional concentration of the Company's business may subject it to economic downturns in the states of Florida and Texas; the Company's reliance on its call center; the Company's cash flow may be insufficient to meet required payments of operating expenses, principal, interest and dividends; and tax law changes that may change the taxability of future income.

RESULTS OF OPERATIONS

FOR THE PERIOD JANUARY 1, 2012 THROUGH MARCH 31, 2012, COMPARED TO THE PERIOD JANUARY 1, 2011 THROUGH MARCH 31, 2011

We recorded rental revenues of $53.2 million for the three months ended March 31, 2012, an increase of $6.1 million or 12.9% when compared to rental revenues of $47.1 million for the same period in 2011. Of the increase in rental revenue, $1.4 million resulted from a 3.0% increase in rental revenues at the 350 core properties considered in same store sales (those properties included in the consolidated results of operations since January 1, 2011). The increase in same store rental revenues was a result of a 270 basis point increase in average quarterly occupancy which was offset by a slight (0.8%) decrease in rental income per square foot. The remaining increase in rental revenue of $4.7 million resulted from the continued lease-up of our Richmond, Virginia property constructed in 2009 and the revenues from the acquisition of 29 properties completed since January 1, 2011. Other operating income, which includes merchandise sales, insurance commissions, truck rentals, management fees and acquisition fees, increased by $1.5 million for the three months ended March 31, 2012 compared to the same period in 2011 primarily as a result of increased commissions earned on customer insurance and from fees for managing the properties in the new joint venture (Sovran HHF Storage Holdings II) which began operations in July 2011. We also earned a $0.1 million acquisition fee from the new joint venture in the three months ended March 31, 2012. There was no acquisition fee in the same period of 2011.

Net operating income increased $6.3 million or 20.3% as a result of a 7.9% increase in our same store net operating income and the acquisitions completed since January 1, 2011.

Net operating income or "NOI" is a non-GAAP (generally accepted accounting principles) financial measure that we define as total continuing revenues less continuing property operating expenses. NOI also can be calculated by adding back to net income: interest expense, amounts attributable to noncontrolling interests, impairment and casualty losses, depreciation and amortization expense, acquisition related costs, general and administrative expense, and deducting from net income: income from discontinued operations, interest income, gain on sale of real estate, and equity in income of joint ventures. We believe that NOI is a meaningful measure of operating performance, because we utilize NOI in making decisions with respect to capital allocations, in determining current property values, and comparing period-to-period and market-to-market property operating results. NOI should be considered in addition to, but not as a substitute for, other measures of financial performance reported in accordance with GAAP, such as total revenues, operating income and net income. There are material limitations to using a measure such as NOI, including the difficulty associated with comparing results among more than one company and the inability to analyze certain significant items, including depreciation and interest expense, that directly affect our net income. We compensate for these limitations by considering the economic effect of the excluded expense items independently as well as in connection with our analysis of net income. The following table reconciles NOI generated by our self-storage facilities to our net income presented in the March 31, 2012 and 2011 consolidated financial statements.

                                                 Three Months ended March 31,
    (dollars in thousands)                        2012                  2011
    Net operating income
    Same store                               $       32,955         $      30,539
    Other stores and management fee income            4,313                   439

    Total net operating income                       37,268                30,978

    General and administrative                       (7,565 )              (5,772 )
    Acquisition related costs                            (7 )                 (42 )
    Depreciation and amortization                   (10,245 )              (8,625 )
    Interest expense                                 (8,253 )              (7,897 )
    Interest income                                       3                    18
    Equity in income of joint ventures                   68                    40

    Net income                               $       11,269         $       8,700

Same Store Summary



                                                       Three Months ended March 31,            Percentage
(dollars in thousands)                                  2012                  2011               Change
Same store rental income                           $       48,476        $       47,044                3.0 %
Same store other operating income                           2,437                 1,969               23.8 %

Total same store operating income                          50,913                49,013                3.9 %

Same store property operations and maintenance             12,788                13,444               -4.9 %
Same store real estate taxes                                5,170                 5,030                2.8 %

Total same store operating expenses                        17,958                18,474               -2.8 %

Same store net operating income                    $       32,955        $       30,539                7.9 %


                                                                                                 Change
Quarterly same store move ins                              36,779                32,509              4,270
Quarterly same store move outs                             32,593                33,006               (413 )

We believe the increase in same store move ins was a result of more effective online marketing and improved rental rate management.

General and administrative expenses increased $1.8 million or 31.1% from 2011 to 2012. The key drivers of the increase were a $0.8 million increase in salaries and performance incentives, $0.4 million increase in internet advertising, and a $0.1 million increase in costs associated with training and onboarding new owned and/or managed stores. The remaining $0.5 million increase is the result of increases in various other administrative costs as a result of managing the increased number of stores in our portfolio as compared to the 2011 period.

Acquisition related costs were minimal in the three months ended March 31, 2012 and 2011 as no acquisitions were completed during these periods.

Depreciation and amortization expense increased to $10.2 million in the three months ended March 31, 2012 from $8.6 million in the same period of 2011, primarily as a result of depreciation on the 29 properties acquired in 2011.

Interest expense increased from $7.9 million in the three months ended March 31, 2011 to $8.3 million in the same period in 2012 due to the increase in our debt outstanding as a result of our financing a portion of the 2011 acquisitions with debt.

Net income attributable to noncontrolling interest decreased from $0.4 million in the three months ended March 31, 2011 to $0.1 million in the same period in 2012 as a result of our May 2011 additional investment in Locke Sovran II, LLC in which we purchased the remaining noncontrolling interest in that entity.

FUNDS FROM OPERATIONS

We believe that Funds from Operations ("FFO") provides relevant and meaningful information about our operating performance that is necessary, along with net earnings and cash flows, for an

FFO is defined by the National Association of Real Estate Investment Trusts, Inc. ("NAREIT") as net income available to common shareholders computed in accordance with generally accepted accounting principles ("GAAP"), excluding gains or losses on sales of properties, plus impairment of real estate assets, plus depreciation and amortization and after adjustments to record unconsolidated partnerships and joint ventures on the same basis. We believe that to further understand our performance, FFO should be compared with our reported net income and cash flows in accordance with GAAP, as presented in our consolidated financial statements.

In October and November of 2011, NAREIT issued guidance for reporting FFO that reaffirmed NAREIT's view that impairment write-downs of depreciable real estate should be excluded from the computation of FFO. This view is based on the fact that impairment write-downs are akin to and effectively reflect the early recognition of losses on prospective sales of depreciable property or represent adjustments of previously charged depreciation. Since depreciation of real estate and gains/losses from sales are excluded from FFO, it is NAREIT's view that it is consistent and appropriate for write-downs of depreciable real estate to also be excluded. Our calculation of FFO excludes impairment write-downs of investments in storage facilities.

Our computation of FFO may not be comparable to FFO reported by other REITs or real estate companies that do not define the term in accordance with the current NAREIT definition or that interpret the current NAREIT definition differently. FFO does not represent cash generated from operating activities determined in accordance with GAAP, and should not be considered as an alternative to net income (determined in accordance with GAAP) as an indication of our performance, as an alternative to net cash flows from operating activities (determined in accordance with GAAP) as a measure of our liquidity, or as an indicator of our ability to make cash distributions.

Reconciliation of Net Income to Funds From Operations (unaudited)



                                                                Three months ended
(in thousands)                                       March 31, 2012            March 31, 2011
Net income attributable to common
shareholders                                        $          11,138          $         8,260
Net income attributable to noncontrolling
interest                                                          131                      440
Depreciation of real estate and amortization
of intangible assets exclusive of deferred
financing fees                                                 10,153                    8,625
Depreciation and amortization from
unconsolidated joint ventures exclusive of
deferred financing fees                                           390                      198
Funds from operations allocable to
noncontrolling redeemable Operating
Partnership Units                                                (254 )                   (206 )
Funds from operations allocable to
noncontrolling interest in consolidated
joint venture                                                      -                      (340 )

FFO available to common shareholders                $          21,558          $        16,977

Our line of credit and term notes require us to meet certain financial covenants measured on a quarterly basis, including prescribed leverage, fixed charge coverage, minimum net worth, limitations on additional indebtedness, and limitations on dividend payouts. At March 31, 2012, the Company was in compliance with all debt covenants. The most sensitive covenant is the leverage ratio covenant contained in certain of our term note agreements. This covenant limits our total consolidated liabilities to 55% of our gross asset value. At March 31, 2012, our leverage ratio as defined in the agreements was approximately 46.2%. The agreements define total consolidated liabilities to include the liabilities of the Company plus our share of liabilities of unconsolidated joint ventures. The agreements also define a prescribed formula for determining gross asset value which incorporates the use of a 9.25% capitalization rate applied to annualized earnings before interest, taxes, depreciation and amortization and other items ("Adjusted EBITDA") as defined in the agreements. In the event that the Company violates debt covenants in the future, the amounts due under the agreements could be callable by the lenders and could adversely affect our credit rating requiring us to pay higher interest and other debt-related costs. We believe that if operating results remain consistent with historical levels and levels of other debt and liabilities remain consistent with amounts outstanding at March 31, 2012, the entire availability under our line of credit could be drawn without violating our debt covenants.

Our ability to retain cash flow is limited because we operate as a REIT. In order to maintain our REIT status, a substantial portion of our operating cash flow must be used to pay dividends to our shareholders. We believe that our internally generated net cash provided by operating activities and the availability on our line of credit will be sufficient to fund ongoing operations, capital improvements, dividends and debt service requirements through September 2013, at which time $100 million of term notes mature.

Cash flows from operating activities were $8.5 million and $11.2 million for the three months ended March 31, 2012, and 2011, respectively. The decrease in operating cash flows from 2011 to 2012 was primarily due to a decrease in accounts payable and other liabilities.

Cash used in investing activities was $6.9 million and $4.6 million for the three months ended March 31, 2012 and 2011 respectively. The increase in cash used from 2011 to 2012 was due to the additional investment in an unconsolidated joint venture to fund the Company's 15% share of the purchase price of 10 self-storage facilities acquired by the Sovran HHF II joint venture in the first quarter of 2012.

Cash provided by financing activities was $4.6 million for the three months ended March 31, 2012, compared to cash used of $7.5 million for the same period in 2011. In 2012, we borrowed under our line of credit to fund (i) capital improvements, (ii) our additional investment in an unconsolidated joint venture, and (iii) other operating activities. Capital improvements for the three months ended March 31, 2011 were funded with operating cash flow and smaller draws on the line of credit. We made no additional investment in the unconsolidated joint venture in the first quarter of 2011.

In addition, on August 5, 2011, the Company secured an additional $100 million term note with a delayed draw feature that was used to fund the Company's mortgage maturities in December 2011. The delayed draw term note matures August 2018 and bears interest at LIBOR plus a margin based on the Company's credit rating (at March 31, 2012 the margin is 2.0%).

On August 5, 2011, the Company also entered into a $100 million term note maturing August 2021 bearing interest at a fixed rate of 5.54%. The interest rate on the term note increases to 7.29% if the notes are not rated by at least one rating agency, the credit rating on the notes is downgraded or if the Company's credit rating is downgraded. The proceeds from this term note were used to fund acquisitions and investments in unconsolidated joint ventures.

The Company also maintains an $80 million term note maturing September 2013 bearing interest at a fixed rate of 6.26%, a $20 million term note maturing September 2013 bearing interest at a variable rate equal to LIBOR plus 1.50%, and a $150 million unsecured term note maturing in April 2016 bearing interest at 6.38%. The interest rate on the $150 million unsecured term note increases to 8.13% if the notes are not rated by at least one rating agency, the credit rating on the notes is downgraded or the Company's credit rating is downgraded.

Our line of credit facility and term notes have an investment grade rating from Standard and Poor's and Fitch Ratings (BBB-).

In addition to the unsecured financing mentioned above, our consolidated financial statements also include $4.4 million of mortgages payable that are secured by three storage facilities.

On September 14, 2011, the Company entered into a continuous equity offering program ("Equity Program") with Wells Fargo Securities, LLC ("Wells Fargo"), pursuant to which the Company may sell from time to time up to $125 million in aggregate offering price of shares of the Company's common stock. Actual sales under the Equity Program will depend on a variety of factors and conditions, including, but not limited to, market conditions, the trading price of the Company's common stock, and determinations of the appropriate sources of funding for the Company. No shares were issued under this program for the three months ended March 31, 2012. The Company expects to continue to offer, sell, and issue shares of common stock under the Equity Program from time to time based on various factors and conditions, although the Company is under no obligation to sell any shares under the Equity Program.

Our Dividend Reinvestment and Stock Purchase Plan was suspended in November 2009, and therefore we did not issue any shares under this plan in 2012 or 2011. We expect to reinstate our Dividend Reinvestment Plan in 2012.

During the three months ended March 31, 2012 and 2011, we did not acquire any shares of our common stock via the Share Repurchase Program authorized by the Board of Directors. From the inception of the Share Repurchase Program through March 31, 2012, we have reacquired a total of 1,171,886 shares pursuant to this program. From time to time, subject to market price and certain loan covenants, we may reacquire additional shares.

Future acquisitions, our expansion and enhancement program, and share repurchases are expected to be funded with draws on our line of credit, issuance of common and preferred stock, the issuance of unsecured term notes, sale of properties, and private placement solicitation of joint venture equity. Should the capital markets deteriorate, we may have to curtail acquisitions, our expansion and enhancement program, and share repurchases as we approach September 2013, when certain term notes mature.

ACQUISITION AND DISPOSITION OF PROPERTIES

We did not acquire any self-storage facilities for the Company in the three months ended March 31, 2012. Sovran HHF Storage Holdings II LLC, a joint venture in which the Company is a 15% owner, acquired 10 self-storage facilities in the three months ended March 31, 2012 for approximately $29 million. The Company's share of the capital required for these purchases was $2.1 million.

In 2011, we acquired 29 self storage facilities comprising 2.0 million square feet in New Jersey (3), Florida (1), Georgia (1), Missouri (1), Texas (22), and Virginia (1) for a total purchase price of $155.1 million. Based on the trailing financials of the entities from which the properties were acquired, the weighted average capitalization rate was 7.6% on these purchases and ranged from 5.3% to 8.4%.

We may seek to sell properties to third parties or joint venture programs in 2012.

Our external growth strategy is to increase the number of facilities we own by acquiring suitable facilities in markets in which we already have operations, or to expand into new markets by acquiring several facilities at once in those new markets. We are actively pursuing acquisitions in 2012 and at March 31, 2012 we had 3 properties under contract to be purchased for approximately $36.1 million. The purchase of these facilities by the Company is subject to customary conditions to closing, and there is no assurance that these facilities will be acquired.

In the three months ended March 31, 2012, we added 81,000 square feet to existing Properties, for a total cost of approximately $4.9 million. In 2011, we added 118,000 square feet to existing Properties, and converted 2,000 square feet to premium storage for a total cost of approximately $7.2 million. Although we do not expect to construct any new facilities in 2012, we do plan to expend an additional $15 million to expand and enhance existing facilities.

We also expect to continue making capital expenditures on our properties. This includes roofing, paving, and remodeling of the office buildings. For the first three months of 2012 we spent approximately $2.4 million on such improvements and we expect to spend approximately $11.6 million for the remainder of 2012.

REIT QUALIFICATION AND DISTRIBUTION REQUIREMENTS

As a REIT, we are not required to pay federal income tax on income that we distribute to our shareholders, provided that the amount distributed is equal to at least 90% of our taxable income. These distributions must be made in the year to which they relate, or in the following year if declared before we file our federal income tax return, and if it is paid before the first regular dividend of the following year. As a REIT, we must also derive at least 95% of our total gross income from income related to real property, interest and dividends.

Although we currently intend to operate in a manner designed to qualify as a REIT, it is possible that future economic, market, legal, tax or other considerations may cause our Board of Directors to revoke our REIT election.

UMBRELLA PARTNERSHIP REIT

We are formed as an Umbrella Partnership Real Estate Investment Trust ("UPREIT") and, as such, have the ability to issue Operating Partnership Units in exchange for properties sold by independent owners. By utilizing such Units as currency in facility acquisitions, we may obtain more favorable pricing or terms due to the seller's ability to partially defer their income tax liability. As of March 31, 2012, 339,025 Units are outstanding. These Units had been issued in . . .