By Suren Naidoo
Stor-Age – South Africa’s largest self-storage group – posted a strong set of results yesterday, declaring a dividend of 98 cents for the year to March 2018, up 11.1% year-on-year.
The group said this represented a continued unbroken dividend growth trend, since it listed on the JSE in November 2015. “Stor-Age’s ongoing double-digit growth in investor returns outperformed the local economy and JSE property sector where many peers are under strain,” it enthused in a statement on its latest results.
Stor-Age’s total listed portfolio is valued at R3.9 billion. The Real Estate Investment Trust (REIT) continues to dominate the country’s niche self-storage property sector. It ended the year on a R3.9 billion market capitalisation, reflecting an approximate 300% increase since its debut. The group said this “demonstrated the strength of its sector specialisation and resilient product”.
Gavin Lucas, CEO of Stor-Age said: “The significant increases in property revenue and operating profit of 86.1% and 86.5% respectively, are excellent when considering the prevailing tough macro environment and challenged local property sector.” He added, that that while the group has been on the acquisition trail locally and into the UK, a significant portion of earnings growth continues to be derived from the existing portfolio.
Rental income grew whether measured organically or including the year’s acquisitions. On a like-for-like basis rental income increased 10.6% due to a higher average occupancy coupled with an 8.8% increase in the average rental rate. Purely organic drivers delivered a 9.2% increase in the closing rental rate of the South African portfolio. Lucas said this was an exceptional achievement, in the context of SA’s current macro-economic landscape.
In the year, Stor-Age broke ground at two new properties in Bryanston and Craighall in Johannesburg, and continued with the ongoing expansion at certain existing stores. Stor-Age further successfully concluded three acquisitions, taking the total number of significant acquisitions to five in 18 months.
“These acquisitions have demonstrated not only our ability to identify and then close value-add transactions, but also our ability to integrate newly acquired trading stores seamlessly onto our operating platform,” commented Lucas.
The group said, Storage RSA that was acquired just before the previous year-end for R475 million, performed in-line with expectations and a year later was fully integrated into the Stor-Age platform. Unit Self Storage in Cape Town and StorTown in Durban added approximately 28,000m² GLA to its portfolio.
Meanwhile, Stor-Age said the group’s first international foray – Storage King in the UK – was performing in line with expectations for the first quarter of FY2019.
Commenting on its international expansion, Lucas said: “Not only has Stor-Age debuted successfully into the growing UK self storage market, but via a proven operation with an on-the-ground self storage team and a scalable platform for further offshore expansion.”
The UK portfolio delivered year-on-year growth in net self-storage rental income of 9%, including like-for-like organic growth of 6.2% to March 2018. Lucas said that the greater maturity of the UK self-storage market relative to South Africa, offered significant opportunity for meaningful expansion through consolidation.
Post year-end, Stor-Age announced the further acquisition of All-Store in Cape Town’s northern suburbs, at a cost of R52 million. All-Store has 5,500m² GLA, with an additional 1 600 m² already under development. Stor-Age said the property also offered significant additional development bulk.
Notwithstanding the ongoing acquisition push, Stor-Age’s gearing remains conservative at only 16%. The Storage King acquisition in the UK and the local StorTown acquisition were funded by a heavily oversubscribed book-build in October 2017 that raised R1.3 billion.
“The eager take-up of investment in the group reflects the market’s confidence in our business strategy, acquisitions to date and healthy growth prospects,” said Lucas.
Looking ahead, the group said it would remain a primarily South Africa-focused business, with a targeted 30%-40% UK exposure for in the medium term. Stor-Age expects 9-10% distributions growth for the year ahead to March 2019.
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