Safe­store Hold­ings out­per­form­ing its peers

Finweek English Edition - - PRO PICK - BY TIF­FANY JONES In­vest­ment an­a­lyst at Cat­a­lyst Fund Man­agers

Safe­store Hold­ings (SAFE) is the largest self-stor­age group i n t he UK a nd prov i des stor­age to around 48 000 per­sonal and busi­ness cus­tomers. Founded in the UK in 1998, Safe­store went on to ac­quire the French busi­ness Une Pièce en Plus in 2004, which was founded by the cur­rent group CEO Fred­eric Vec­chi­oli.

To­day the group has nearly 100 stores in the UK op­er­at­ing un­der the Safe­store brand and a fur­ther 24 stores in Paris trad­ing as Une Pièce en Plus. The com­pany has been listed on the Lon­don Stock Ex­change since 2007 and op­er­ates as a real es­tate in­vest­ment trust (REIT).

The rel­a­tively young Euro­pean self­s­tor­age sec­tor tells a com­pelling story. Im­prov­ing macro con­di­tions are lead­ing to in­creas­ing self-stor­age de­mand, while new sup­ply is be­ing kept con­fined by ris­ing land val­ues and strict plan­ning reg­u­la­tions. Strong fun­da­men­tals and the op­por­tu­nity to grow or­gan­i­cally by im­prov­ing oc­cu­pan­cies and stor­age rates should yield strong for­ward-look­ing growth for the sec­tor.

The ma­jor op­er­a­tors, such as Safe­store and Big Yel­low, with strong po­si­tions in their home mar­kets, are favoured. This is be­cause they can ex­ploit their scale to in­vest in on­line plat­forms and fur­ther pro­mote brand and prod­uct aware­ness through mar­ket­ing ef­forts. Safe­store aims to take po­si­tion as in­dus­try leader in dig­i­tal ca­pa­bil­i­ties – and for the 2014 fi­nan­cial year, 79% of Safe­store en­quiries were gen­er­ated on­line, with mo­bile rep­re­sent­ing 36% of th­ese.

SAFE’s port­fo­lio was val­ued at £ 704m (R12.7bn) as at 31 Oc­to­ber 2014, the lat­est fi­nan­cial year end, with a 55% ex­po­sure to centrally lo­cated, prime Lon­don and Parisian stores.

In­vest­ment (to­tal re­turn in USD)

Safe­store

1 yr

11.69

An­nu­alised re­turns %

3 yrs

37.33

5 yrs

20.03 UBS UK Real Es­tate In­vestors In­dex

SOURCE: Bloomberg, Cat­a­lyst Fund Man­agers cal­cu­la­tion. As at 27 Fe­bru­ary.

10.82 Oc­cu­pancy cur­rently stands at 67.2% and with a max­i­mum let t i ng area (MLA) of 1.53m square me­tres, 0.5m square me­tres are cur­rently va­cant. This rel­a­tively high va­cancy level, while not un­com­mon to the UK stor­age in­dus­try, pro­vides am­ple head­room for t he up­side, in com­par­i­son to more ma­ture mar­kets, such as the US self-stor­age and (AS AT 27 FE­BRU­ARY 2015) Com­pany name: Safe­store Hold­ings Plc Com­pany head­quar­ters: United King­dom In­dus­try: Real es­tate (self-stor­age fo­cused) CEO: Fred­eric Vec­chi­oli Pri­mary ex­change: Lon­don Stock Ex­change

Bloomberg ticker:

23.97

17.36 other UK prop­erty sec­tors (oc­cu­pancy typ­i­cally in high 90%).

Safe­store’s re­cently ap­pointed CEO has re­newed the com­pany’s op­er­a­tional fo­cus, af­ter lead­ing the French port­fo­lio for the past decade. The com­pany’s new strat­egy that was im­ple­mented last year in the UK, and that con­cen­trates on im­prov­ing the con­ver­sion rate of en­quiries into new lets while at the same time re­duc­ing dis­count­ing on stor­age rates, is gain­ing head­way and driv­ing rev­enue growth.

The re­sults of this strat­egy have been im­pres­sive. Dur­ing the quar­ter end­ing 31 Jan­uary, en­quiries grew by 12.4%, new lets by 35.7% and prices strength­ened i n t he UK, with t he av­er­age stor­age rate up 7% on the prior year and up 1.8% for the quar­ter. From a group per­spec­tive, rev­enue in­creased by 8.9% on the prior year and oc­cu­pancy saw an an­nual im­prove­ment of 3%.

A n op er at iona l ly-foc used man­age­ment team, with at­trac­tively lo­cated UK and Parisian stores, has led to out­per­for­mance in com­par­i­son to most main­stream prop­erty sec­tors. A clear com­pany strat­egy, cou­pled with 0.5m square me­tres of space to f i l l and a pos­i­tive macroe­co­nomic mar­ket out­look should set the com­pany in good stead to con­tinue on this growth path as oc­cu­pancy im­proves and the in­dus­try ma­tures.

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