Safestore Holdings outperforming its peers
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)
Annualised returns %
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
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.