JSE REIT Stor-Age has closed its accelerated bookbuild.
The significantly oversubscribed bookbuild saw R400 million of equity raised at a price of R12.00 per share, representing a 3.5% discount to the thirty-day volume weighted average traded price.
The company initially sought to raise R350 million, demand for Stor-Age stock saw the quantum of capital raised increase, despite the constrained domestic environment and subdued JSE REIT sector.
In a strong vote of confidence for management’s strategy, the capital raised will allow the company to take advantage of new opportunities in the pipeline both locally and in the UK. These include the recently opened Stor-Age Bryanston and an additional twelve properties located in key locations across South Africa following the acquisition of the Managed Portfolio earlier in September.
The Managed portfolio is dominated by bespoke ‘Big Box’ self storage properties and it includes locations such as Claremont in Cape Town, Brooklyn and Silver Lakes in Pretoria, Mount Edgecombe in Durban and Sunninghill in Johannesburg. The Managed Portfolio offers a combined Gross Lettable Area of 86 300 square meters and occupancy levels of 73%, post-acquisition Stor-Age’s property assets will increase to R5-billion.
Stor-Age continues to showcase their success despite the tough local trading conditions, according to Stor-Age CEO, Gavin Lucas: “Self storage is a niche, specialised asset class which is not subject to the same macro-economic factors that drive demand and supply dynamics for traditional REITs. Self storage benefits from having a consistent level of demand throughout the different economic cycles. It’s this consistent level of demand which sustains the performance of the assets through the economic cycle.”
“In today’s market, it would be extremely difficult to replicate a portfolio of self storage properties like those in our Managed Portfolio in South Africa as the barriers to entry are high.”
“On average, it could take one to two years to secure just one prime location at fair market value, and to successfully negotiate the town planning consent would be two years at best. You then need to consider the time to both construct the property and lease it up to a state of maturity, which is generally four years or more. Thus in total, one is looking at a total time period of approximately eight to ten years from site identification to trading at a mature occupancy level, for just one prime self storage asset.”
Stor-Age’s strategy is centred on acquiring high-quality properties in outstanding locations. In November last year, the company made a strategic entry into the UK self storage market with the acquisition of Storage King, the sixth largest UK self storage brand.
“Despite the uncertainty created by Brexit, self storage as a sub-sector of the commercial property market continues to trade positively in the UK. Our Storage King brand continues to deliver in line with our forecasts and we remain excited about the growth prospects for our UK platform” comments Lucas.
Stor-Age now trades from and manages a combined portfolio of 74 properties locally and the UK (64 trading and 10 new developments), covering a Gross Lettable Area of more than 413 000 square meters.
The trading portfolio is concentrated in the four major South African cities – Johannesburg, Cape Town, Pretoria and Durban, with the United Kingdom portfolio having a bias towards the East and South-East of England.