Clinging to belongings for dear life
Humans are hoarders and can’t let go, not even in a recession. Which is great for self-storage company Stor-age
ý Unlike most of its listed property peers, which are reporting a pandemic-induced rise in vacancies and falling rentals, Stor-age — the JSE’S only self-storage company — is still seeing solid demand for its products. In fact, inquiries from people looking for a place to stash their goods have increased by about 10% year-onyear since May 1, when less stringent lockdown restrictions took effect.
The company has also experienced a gain in overall take-up rates over the past seven weeks (there were more move-ins than move-outs).
Stor-age’s portfolio is worth R7bn and is split 60/40 by value between SA and the UK. The company owns and operates 71 sites across the two countries.
About 65% of Stor-age’s 55,000-strong tenant base are individual residential users. The rest are commercial users such as SMES.
Stor-age CEO Gavin Lucas, the chartered accountant who co-listed the company on the JSE with his brother, Stephen Lucas, and varsity friend Steven Horton in November 2015, believes Covid-related changes in the way people live and work is underpinning fresh demand for self-storage across the globe.
At the release of Stor-age’s annual results for the year to March earlier this week, Lucas said demand is typically driven by life-changing events and not economic cycles — death, divorce, marriage, having children or renovating a house.
He argued that Stor-age is well-placed to benefit from the trends of “dislocation and mobility” brought about by Covid-19 and accompanying lockdowns.
The company is profiting from the work-fromhome trend; the growth of home-run online retail businesses that require temporary storage space for their goods; cashstrapped homeowners and tenants who are forced to downscale to smaller properties; and students who are vacating shared digs and campus residences.
Lucas said the flexible nature of the company’s products will further support higher take-up rates in the months ahead.
Self-storage tenants typically renew leases on a month-to-month basis. Unlike the retail, office and industrial sectors, self-storage tenants aren’t locked into fixed, long-term leases with annual rental escalations.
Even so, the average length of use for a Storage tenant is about two years.
Investors are clearly buying into Stor-age’s growth story — the stock has in recent weeks recouped virtually all of its year-to-date share price losses. It was down about 30% in the first three months of the year but is now back to the levels of early January. In comparison, the SA listed property index is still down about 38% in the year to date despite a strong rebound earlier this month.
Stor-age also continues to deliver on its income growth promises. For the year to the end of March, management declared a dividend of 112.05c a share, which is up 5.03% from the previous year.
That’s an impressive achievement at a time when most other real estate investment trusts
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Source: Infront
Mar 17 Apr 2020
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