Space, and scope, for even more growth

Financial Mail - Investors Monthly - - Analysis - Alis­tair An­der­son

Stor-Age is the only spe­cialised owner of self­s­tor­age as­sets listed in SA. It was formed by the Lu­cas fam­ily about a decade ago. The com­pany listed its R1.3bn port­fo­lio in Novem­ber 2015.

Its listed port­fo­lio has grown to about R2.1bn, in­clud­ing 31 prop­er­ties. It is fo­cused on Jo­han­nes­burg, Cape Town, Pre­to­ria, Dur­ban, Port El­iz­a­beth and Bloem­fontein.

“Since list­ing, Stor-Age has out­per­formed the Reit sec­tor by some 30%, con­form­ing with the out­per­for­mance that self­s­tor­age plays have demon­strated glob­ally,” says Chris Lo­gan of Op­por­tune In­vest­ments.

CEO Gavin Lu­cas says Stor­Age has met its prelist­ing goals and is on track to own 60 prop­er­ties across SA’s ma­jor cities by 2020.

In its most re­cent fi­nan­cial re­sults, Stor-Age grew its div­i­dend 10% for the year to March, fol­low­ing a strong trad­ing per­for­mance across its port­fo­lio and the ac­qui­si­tion of Stor­age RSA in Fe­bru­ary.

Growth of 10% was 3.5% ahead of prospectus.

“Stor-Age’s per­for­mance re­flects the re­ces­sion-re­silient na­ture of our prod­uct. De­mand re­mains strong . . . The self­s­tor­age mar­ket . . . is hold­ing steady, in con­trast with other prop­erty sub­sec­tors lo­cally. It of­fers us a lot of scope for growth,” Lu­cas says.

Oc­cu­pancy in the port­fo­lio, ex­clud­ing group new­comer Stor­age RSA, in­creased 4,000 m² on the prior year, with a 9.4% in­crease in the av­er­age rental rate achieved.

Stor-Age, which has a mar­ket cap­i­tal­i­sa­tion of R2bn, will grow as long as it can get South Africans to take up space. There are con­cerns that the per­sonal stor­age mar­ket is rel­a­tively small in SA, but noth- ing is stop­ping Stor-Age from branch­ing out into other coun­tries when it claims mass con­trol of the SA mar­ket.

Be­fore this hap­pens, it could be­come a takeover tar­get. High-qual­ity in­dus­trial prop­erty owner Equites Prop­erty Fund could de­cide to buy Stor-Age if it were to di­ver­sify its as­sets.

Its share price is up 14% since list­ing and about 3.76% in the year to date.

Keillen Ndlovu, Stan­lib’s head of listed prop­erty funds, says self-stor­age is an at­trac­tive as­set class glob­ally and Stor-Age un­der­stood this and cre­ated a sim­i­lar busi­ness here.

“Stor-Age is an in­ter­est­ing in­vest­ment op­tion with lim­ited com­pe­ti­tion though [it is] rel­a­tively small,” he says, adding that it would per­form well in eco­nomic down­turns and up­turns. Pro­vided the lo­ca­tion is right and the fa­cil­ity func- tional, you could have peo­ple down­grad­ing from big­ger homes or re­lo­cat­ing and need­ing space for ex­cess be­long­ings. When the econ­omy is strong, peo­ple buy more than they can store at their houses and self-stor­age tends to be “an es­sen­tial as op­posed to dis­cre­tionary spend”, he says.

Stor-Age has ef­fec­tively pi­o­neered the de­vel­op­ment of high-pro­file Big Box self-stor­age prop­er­ties in well-cho­sen lo­ca­tions in SA.

“Stor-Age’s ob­jec­tive is to de­liver an at­trac­tive in­come stream from a port­fo­lio of high­qual­ity self-stor­age prop­er­ties with po­ten­tial for in­come and cap­i­tal growth through in­creas­ing rentals and oc­cu­pancy lev­els, ex­pand­ing ex­ist­ing prop­er­ties and ac­quir­ing ad­di­tional self-stor­age prop­er­ties,” says Lu­cas.

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