Stable and reliable growth from old-time favourite
WE HAVE TO stomach bad news from old-time JSE favourites weekly, but now and then we are pleasantly surprised by stable and reliable growth from resorts we don’t necessarily expect. Even more surprising is any company in South Africa having success in offshore markets. Moving under the radar, but moving upwards is our only storage listing on the JSE; Stor-Age Property Reit with JSE code SSS. From its listing, in November 2015 the share price moved slowly but steadily to just more than R14, a gain of 43 percent in less than four years.
The well-known red branded Stor-Age is the leading and largest self-storage property fund and brand in South Africa. Stor-Age had successfully developed, acquired and managed self-storage properties across South Africa for more than a decade. Stor-Age is a local market pioneer that introduced high-profile Big Box self-storage properties in high-visibility, easily accessible prime suburban locations in South Africa’s major cities.
It now services more than
24 000 tenants, and the company’s 49-property portfolio covers
350 000m² of gross lettable area, which is strategically concentrated in South Africa’s largest cities.
In the UK, they have 66 000m² of total lettable area servicing
8 000 tenants. In both countries, the occupancy rate is more than 80 percent. Stor-Age entered the UK market in 2017, a growing and undersupplied market relative to first world peers. They established a management team with significant “on the ground” experience in the UK, using an established platform and acquiring high-quality properties and pipeline of opportunities. The storage sector growth in the UK is positive, and demand is increasing.
Supply is constrained in comparison to more established markets like the US and Australia and thanks to the undersupply revenue and occupancies across the UK are growing attractively. Despite Brexit (2016) and the imposition of VAT on rentals (2012), the sector remains resilient and is viewed as an attractive investment.
Self-storage products are homogenous across first and developing world (drivers of demand, user profiles, length of stay, asset operating metrics) and are globally viewed as a growth sector. Stor-Age executives have spent significant time in first world markets over the previous decade to optimise the execution of their business plan. Furthermore, it is a familiar jurisdiction, and the UK is governed by language, culture, business practices, banking and legal systems familiar to South Africans.
Of their revenue, they derive 59 percent from South Africa, and 41 percent from the UK. They recently reported full-year results and the dividend increased by 9 percent.
In South Africa 45 of the 49 properties are fitted with generators and power is seamlessly generated to support all their systems.
Stor-Age has a very attractive investment case; a niche asset class uncorrelated to traditional drivers of property and recession.
The management teams have considerable operations experience and operational excellence, and they developed sophisticated operating platforms which bring benefits of scale. The financials seem to be healthy, with a solid balance sheet. The share appears to be well-priced at the moment, and any weakness might be an opportunity.
Amelia Morgenrood is a PSG Wealth financial adviser based in Pretoria. Views are of the author and not necessarily the general view of the entire PSG entity. Stor-Age shares are held personally and on behalf of clients.