Question-and-Answer Session
Operator
(Operator Instructions) The first question comes from the line of Analyst for Michael Bilerman – Citi.
Analyst for Michael Bilerman - Citi
Relative to Shurgard Europe and the transaction that occurred relative to your ownership position, do you believe there is any gain driven impairment given the NOI decline trajectory either to the investment or to any of the securities related to the investment?
John Reyes
No we don’t. It is still cash flowing very positive either on an EBITDA basis or even subsequent to backing out the debt service. By the way a bulk of the debt is Public Storage service debt. We have no impairment charge. We don’t expect to have an impairment charge. The answer to your question is no.
Analyst for Michael Bilerman - Citi
As a follow-up to that topic, can you provide any discussion around why the JV partner withdrew the exit notice?
Ron Havner
We don’t know.
Operator
The next question comes from the line of Todd Thomas and Jordan Sadler - KeyBanc Capital.
Todd Thomas and Jordan Sadler - KeyBanc Capital
Just curious on your capital deployment plans. You are being patient. Are you blinking at all on the cap rate? Previously you were looking for 10+% cap rate.
Ron Havner
Am I blinking? You mean have I lowered our target?
Todd Thomas and Jordan Sadler - KeyBanc Capital
Right.
Ron Havner
In this environment cap rate is important but with declining NOI I would say price per pound or per square foot is possibly a more relevant matrix.
Todd Thomas and Jordan Sadler - KeyBanc Capital
Where would you want to be relative to price per pound? What is currently replacement cost?
Ron Havner
Price per pound or price per square foot varies across the country. If you are in Kansas City it is $50 a foot. If you are in the Burroughs of New York it can be anywhere from $150 to $400 a foot. It is a function of whatever rental rate. So with the declining NOI, increased cap rate and limited capital I think you are in an environment where certainly development makes no sense. Assets when they really start trading I am reasonably confident they will trade at a reasonable discount to replacement costs.
Operator
The next question comes from the line of Jay Habermann - Goldman Sachs
Jay Habermann - Goldman Sachs
Just following up on the last question, where do you think you can issue preferred’s today? I assume that is significantly different versus March. If so, I guess that would then change the return expectation?
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