Self-storage puts Stor-Age among top three property industry performers
Though it is 80% exposed to the SA market, the company is set to expand overseas
Stor-Age Property’s dividend growth in the six months to September makes it the third-best SA-focused property stock in the latest reporting season.
The company, which is the only listed self-storage provider on the JSE, grew its dividend 9.1% to 51.3c per share in the period, as it was able to beat competitors when it came to signing up customers in this segment of the market.
In terms of property funds with an asset base that is at least 80% exposed to SA, Stor-Age was beaten only by industrial warehouse owner Equites Property Fund and rural retail owner Fairvest.
Equites Property Fund grew its dividend 11.7% in the six months to August while Fairvest grew its dividend 9.9% in the year to June.
CEO Gavin Lucas said Stor-Age’s dividend growth was driven by various factors, notably its advanced operating platform, which had been successfully tested and implemented in the three years since Stor-Age listed in 2015. The platform was also being used in the UK, where Stor-Age first invested in November 2017.
The platform means Stor-Age can respond to customers’ requests on its website and mobile portals within seconds. It helps the company manage thousands of customers.
Lucas said Stor-Age Property could also expand in markets beyond SA and the UK in time, because its operating platform is so robust. The billing side of the system had also been efficient, he said.
“This performance outstripped the JSE property sector in which dividend growth has been severely curtailed by weak economic growth, which has led to growing vacancies at a number of properties held by listed funds,” said Lucas.
Stor-Age’s occupancy across its SA and UK assets was 72,400m² at the end of September 2018 and total property revenue almost doubled to R225.8m.
Operating profit grew 86% to R166m. On a like-for-like basis, excluding Storage King and other SA acquisitions, rental income increased 9.4%, driven by a 0.7% rise in average occupancy levels and an 8.7% hike in the average rental rate. Excluding acquisitions, the closing rental rate grew 8.7% to R93.5/m².
The company also bought 12 properties it had previously managed but did not own, for R1.12bn, which added another 86,300m² of gross lettable area.
Nine of the 12 properties were high-quality, “big-box”-type stores and six operated at mature occupancy levels, Lucas said.
Stor-Age’s UK portfolio, which is made up of the Storage King business, also performed well during the reporting period.
The UK portfolio’s occupancy increased by 4,000m² year on year and like-for-like occupancy by 1,300m².
Storage King contributed R64m or 40% of the group’s total net property operating income.
Richard Colburn, equity analyst at Sanlam Private Wealth, said Stor-Age had been clever to invest in the UK, whose market was lagging behind other developed countries’ self-storage markets, including those in the US and Canada.
Stor-Age expected 9%-10% distribution growth for the full year to March 2019.
Lawrence Koikoi, an analyst at Stanlib, said Stor-Age was proving to be defensive in a challenging economic environment with “strong operating metrics”.
“Like-for-like net property income growth of 9.8% off a high base from previous periods seems to indicate that the business model is proving itself as counter cyclical compared to traditional office, industrial and retail sub-sectors," he said.