Stor-Age races past property rivals
The JSE's only listed personal storage landlord has grown its dividend 9.05% despite a weak SA environment
SA’s only listed self-storage property fund has defied SA’s weakest economic environment in a decade and is expecting to grow its dividends at three times the level of its struggling peers in the JSE’s real estate sector over the next 36 months, as more struggling South Africans look to downscale and place their goods in safekeeping.
Stor-Age Property Reit, whose largest investors include Stanlib and Sanlam, has become a stand-out investment for property fund managers since it listed in November 2015. It has managed to grow its dividend at inflation beating rates, as well as expanding into the UK and trebling its asset base’s value.
Stor-age now owns 65 properties worth R6bn. Of this, 49 of them worth R4bn are located in SA and 16 valued at R2bn situated in the UK. The company grew its dividend 9.05% in the year to March to 106.68c, while most other funds struggled to breach 3% growth if they achieved any growth at all.
Customers use self-storage assets throughout different economic cycles, especially in bad times, when they have to downsize and need to store goods temporarily, CEO Gavin Lucas said at a financial results presentation in Sandton.
“We are in a sweet position right now being the only listed storage company in SA and having achieved significant scale since listing in November 2015. We are now able to be cautious when we make acquisitions but continue on a healthy growth path. We can focus on providing consistent dividend growth which is attractive especially while larger diversified funds with mature assets find the going tougher,” he said.
The value of Stor-Age’s property portfolio climbed 56% to R6bn during the year, while its rental income was 63.2% higher at R482.1m. The company’s average SA rental rate rose 9.3%, and on a like-for-like basis excluding acquisitions, increased 7.5%.
Four new acquisitions were completed in the period, namely a managed portfolio and three standalone trading properties.
Stor-Age acquired a managed portfolio in October 2018, increasing the total gross lettable area of its portfolio by 86,700m². In the six-month period to March since the acquisition, occupancy grew 4,400m² and for the full year, the rental rate increased 10.1%.
The company’s UK portfolio has also performed well since it first invested there in 2017. It acquired Viking Self Storage in Bedford and The Storage Pod in Weybridge in the reporting period.
Net property operating income for the UK portfolio increased 11%, with 6.3% of that on a like-for-like basis. Occupancy grew 8,400m² and closed 2.1% higher at 80.3%.
Lucas said Stor-age expected to grow its dividend between 7% and 9% in the 2020 financial year to March but this forecast was conservative and took into account potential shocks such as power blackouts in SA.
Head of listed property funds at Stanlib, Keillen Ndlovu, said Stor-Age was “a market outperformer that operates in a niche market”.
“Its guidance of 7% to 9% dividend growth is above the market average outlook of 2%,” he said. — With Nick Wilson