South Africa’s largest self-storage property fund, Stor-Age has announced robust results and a 5% higher dividend of R1.12 per share, reflecting the group’s resilience during the Covid-19 pandemic.
Despite the negative impacts and ensuing national risk measures, the group collected over 93% and 83% of rentals due in South Africa and the UK in the two months since year end. The company raised R250 million in a significantly oversubscribed bookbuild in May 2020.
“Stor-Age’s operational performance in both geographies remained strong against a backdrop of economic uncertainty. Our intensified operational focus and discipline at property level, supported by our digital marketing capabilities, generated ongoing occupancy and revenue growth. We believe that our hands-on management involvement is a key competitive driver of the group’s performance” commented CEO Gavin Lucas.
Stor-Age has maintained an uninterrupted dividend trajectory since its listing in November 2015:
“Assuming an investor invested R100 on our listing day, at Friday,19 June 2020 and provided the full pre-tax dividends had been reinvested, the investment would be worth R196.75, compared to the same investment in the JSE All Share Index (ALSI) now worth R123.20, or in the SA Property Index (SAPY) now worth R60.69.” He attributes Stor-Age’s competitive strength to disciplined portfolio management and single-sector specialisation in line with a directioned and adaptable growth strategy” Lucas explains.
Since listing, the number of Stor-Age’s properties in its total portfolio has risen from 24 to 71 with the gross lettable area almost quadrupling to 448 200m² and property value increasing from R1.3 billion to R7.0 billion.
South African occupancy closed at 85% for the year in review while the UK closed at 78.8%. Total property revenue grew 32% to R698.8 million, including organic and acquisitive growth. The closing South African rental rate was up 6%, and on a like-for-like basis (excluding acquisitions and new store openings). South African rental income increased by 6.5%.
“The like-for-like growth is pleasing given that local residential and commercial tenants remain under increasing financial strain in the prevailing landscape”.
Operationally, Stor-Age’s portfolio achieved numerous successes. The new Craighall property opening in August 2019 and the group broke ground in Tygervalley and Cresta, with both new properties planned to cater for separate receipting and dispatch areas to accommodate rising demand from commercial users. The group also concluded a joint venture with Garden Cities for the development of a new property in Sunningdale, Cape Town. Lucas says the Sunningdale development will complement the existing Table View property for a strong group presence in the fast-developing west coast region.
The South African portfolio closed at 365 400m2 gross lettable area, up by 7 800m2 year-on-year because of the opening of Craighall and expansion of existing properties.
In the UK, like-for-like rental income grew by 5%, driven mainly by average occupancy growth of 4.5%. The portfolio closed at 82 800m2 gross lettable area, up 25.3% year-on-year due to the acquisition of the five-property Flexi Store portfolio in December 2019. The portfolio, which added 16 700m2 had previously been trading under license of the Storage King brand.
“The Flexi Store portfolio boasts a number of well-located self-storage properties which complement our existing stores in the UK.” Excluding the acquisition, the UK closing occupancy was 3% higher at 81%.”
During the period, Stor-Age successfully launched a comprehensive third-party management product in the UK. The product enables Stor-Age to leverage its existing platform and infrastructure to generate a new revenue stream by supporting similar operators in the UK who lack the benefits of scale, while at the same time, exposing a natural acquisitions pipeline in the region. The company also entered a development joint venture with a UK-based private equity property group to co-develop new high-profile properties in London and the South East.
Stor-Age continues to boast a healthy balance sheet. Lucas says that gearing loan-to-value of 30.1% is both within the group’s intended loan-to-value range of 25-35%, and further, at the low end of the industry benchmark. He adds that this 30.1% calculation was before considering the positive impact of the R250 million new equity raised post year end.
Lucas points out that in cognizance of the group’s sustainability in these unprecedented times, Stor-Age acted quickly to offer complimentary storage space to a number of relief and government-based entities including the Western Cape Government, Community Chest and the National Health Service (NHS) in the UK: “We continue to support these authorities, charities and NGOs by offering the use of our properties to support relief efforts.”
Looking ahead, he says that Stor-Age has entered the prevailing economic downcycle from a position of strength and should continue to benefit from a high-quality property portfolio, well-managed balance sheet and resilient product. He is both optimistic and pragmatic:
“The Covid-19 pandemic has caused uncertainty and disruption, exacerbated in SA by sovereign credit downgrades and a deepening recession. However, self-storage is uniquely-positioned to support life-changing events that lead to fundamental shifts in how consumers behave and how businesses operate, whether that be down scaling, the adoption of work-from-home due to the forced change in the commercial office sector or the increase in demand of e-commerce.”
Supporting his viewpoint, demand levels for self-storage at the group in SA and the UK in May and June month-to-date are in line with pre-lockdown expectations and to add, ahead of the same period last year in both countries. He concludes that Stor-Age will continue to pursue selective growth opportunities in both markets, with acquisitions and new developments remaining a priority.
Given the uncertainty around the enduring impacts of Covid-19, Stor-Age has responsibly elected not to provide a formal distribution guidance for the year ahead.
The share closed on Friday at R14.50.