Stor-age Property Reit Ltd. · JSE:SSS
Stor-age Property Reit — H1 FY2021 Earnings Presentation
72 slides from Stor-age Property Reit's earnings presentation, November 2020
Slide 1: Interim Results Presentation
STOR-AGE PROPERTY REIT INTERIM RESULTS PRESENTATION PERIOD ENDED 30 SEPTEMBER 2020 STOR-AGE PROPERTY REIT LIMITED 1
Slide 2: Presentation Outline
PRESENTATION OUTLINE Page Introduction 4 Financial review 11 Strategy 20 Property review 23 Environmental, Social and Governance 42 Operations review 46 Outlook 56 STOR-AGE PROPERTY REIT LIMITED 2
Slide 3: Annexures
ANNEXURES Page A: Trading environment – South Africa 58 B: Trading environment – UK 60 C: Schedule of properties 62 D: Pipeline 65 E: Our customers 66 F: Overview of UK & European self storage industry 69 G: Valuation methodology 71 STOR-AGE PROPERTY REIT LIMITED 3
Slide 4: Introduction
INTRODUCTION STOR-AGE PROPERTY REIT LIMITED 4
Slide 5: Highlights
HIGHLIGHTS Interim dividend 52.00 cents per share (2019:54.89 cps) Rental income and net property operating income up 21.3% and 13.3% respectively Like-for-like rental income up 6.1% (SA) and 2.8% (UK) Closing total occupancy of 86.0% (SA 86.2%; UK 85.0%) Total portfolio occupancy up 26 100m2 (SA 11
Slide 6: Snapshot
SNAPSHOT Listing date November 2015 JSE sector Speciality REITs Profile Highly specialised, low risk, income paying self storage REIT Self storage 10 publicly traded self storage REITs universe (US: 5, UK: 2, EU1: 1, Aus: 1, SA: 1) Market capitalisation R5.2 billion² Total South Africa United Kingdo
Slide 7: Investment Case
INVESTMENT CASE • Niche growth sector globally, driven by societal trends – consumerism, densification and an increasingly mobile population • Sector resilience continues to be demonstrated – despite the impact of lockdowns, a robust operating performance has been delivered, including strong growth
Slide 8: Share Price Performance – Relative to SAPY
SHARE PRICE PERFORMANCE – RELATIVE TO SAPY Consistently outperformed the listed property index and SA REITs since listing in 2015, with ever improving liquidity 4-year performance: positive divergence relative to SAPY 160 45 150 40 140 130 35 2 123 1 Number of shares (Millions) 120 May 2020 30 3 110
Slide 9: Share Price Performance – Relative to UK Peers
SHARE PRICE PERFORMANCE – RELATIVE TO UK PEERS Share price performance in GBP since listing in 2015 Stor-Age has a c.40% exposure to GBP assets through Storage King Stor-Age is significantly diversified and entrenched within developed markets. This geographic underpin is coupled with an attractive y
Slide 10: Price / NAV Comparison – SAPY and UK Peers
PRICE / NAV COMPARISON – SAPY AND UK PEERS Publicly traded self storage REITs trading at premiums to NAV Self storage REITs trading at premiums to NAV • Self storage businesses which operate sizable portfolios benefit from a unique operational platform overlay which is embedded ‘on top of’ the real
Slide 11: Financial Review
FINANCIAL REVIEW STOR-AGE PROPERTY REIT LIMITED 11
Slide 12: Occupancy and Tenant Profile
OCCUPANCY AND TENANT PROFILE OCCUPANCY PROFILE 30 Sep 2020 30 Sep 2019 GLA m2 Occupied m2 % occupied GLA m2 Occupied m2 % occupied SA 365 800 315 400 86.2 363 100 303 900 83.7 UK 82 800 70 400 85.0 66 300 55 800 84.2 Total 448 600 385 800 86.0 429 400 359 700 83.8 TENANT PROFILE 30 Sep 2020 30 Sep 2
Slide 13: Trading Results
TRADING RESULTS 30 Sep 2020 30 Sep 2019 % Variance SA UK Total SA UK Total SA UK Total Rm Rm Rm Rm Rm Rm Property revenue 220.1 170.7 390.8 213.4 117.4 330.8 3.1% 45.4% 18.1% Rental income1 200.4 154.5 354.9 186.8 105.9 292.7 7.3% 45.9% 21.3% Rental underpin 4.8 - 4.8 6.3 - 6.3 (23.8)% -% (23.8)% Re
Slide 14: Distribution Analysis
DISTRIBUTION ANALYSIS 30 Sep 2020 30 Sep 2019 Rm Rm Net property operating income 280.7 247.8 Management fees 1.9 3.1 Administration expenses (37.1) (27.1) Interest income 10.8 11.2 Interest expense (59.6) (49.7) Net CCIRS 14.9 15.5 ↑ Earnings 211.6 200.8 5.4% Non-controlling interest (Storage King)
Slide 15: Balance Sheet – Summarised
BALANCE SHEET – SUMMARISED 30 Sep 30 Sep 30 Sep 30 Sep 2020 2019 2020 2019 Rm Rm Rm Rm ASSETS LIABILITIES Non-current assets Non-current liabilities Investment properties 7 278 6 166 Bank debt 1 813 1 742 SA 4 489 4 148 SA 706 916 UK freehold 2 398 1 831 UK 1 107 826 UK leasehold 391 187 Derivatives
Slide 16: Capital Structure
CAPITAL STRUCTURE 30 Sep 2020 ZAR facilities GBP facilities GBP facilities Total facilities Rm £m Rm Rm Total debt facilities 1 555.0 60.0 1 300.1 2 855.1 Undrawn debt facilities 425.3 3.2 70.3 495.6 Gross debt 1 129.7 56.8 1 229.8 2 359.5 Gross debt net of cash held in debt facilities 865.2 56.8 1
Slide 17: Currency Hedging
CURRENCY HEDGING HEDGING OF NET INVESTMENT IN STORAGE KING 30 Sep 2020 30 Sep 2019 GBP m GBP m Investment property 141.7 117.9 Bank debt (56.8) (43.8) Other assets 8.2 6.5 Leasehold liabilities (13.0) (9.7) Other liabilities (7.4) (5.6) Net investment 72.8 65.3 Nominal value of currency hedging inst
Slide 18: Currency Hedging (continued)
CURRENCY HEDGING (continued) HEDGING OF GBP EARNINGS Six month period ended Hedging level Forward rate Sep 20 100% R 23.02 Mar 21 100% R 23.02 Sep 21 85% R 23.23 Mar 22 85% R 23.48 Sep 22 80% R 24.56 Mar 23 60% R 24.65 Hedging policy based on projected forward GBP earnings 12 13-24 25-36 months mont
Slide 19: COVID-19 – Resilience in Crisis
COVID-19 – RESILIENCE IN CRISIS • Priority remained ensuring the safety of employees and customers • Provided PPE and immediately educated staff on / and introduced new safety protocols – including sanitisers and social distancing measures • Activated an online e-sign capability in SA and the UK for
Slide 20: Strategy
STRATEGY STOR-AGE PROPERTY REIT LIMITED 20
Slide 21: Strategy
STRATEGY Strategic planning to 2025 • Highly strategic in planning – completed in 5-year cycles • Successful track record of executing 5-year strategies to 2015 and 2020 • Business strategy traditionally led by property strategy – for first time complemented by digital strategy (completed in 2019) •
Slide 22: Strategy (continued)
STRATEGY (continued) Stor-Age is a sector specialist with deep product understanding, significant emerging and first-world market experience, and boasting a successful track-record of managing self storage assets. The business benefits from outstanding real estate expertise, an excellent dual-market
Slide 23: Property Review
PROPERTY REVIEW STOR-AGE PROPERTY REIT LIMITED 23
Slide 24: Portfolio Overview
PORTFOLIO OVERVIEW 71 The portfolio comprises 50 properties in SA and 21 properties in the UK SA PORTFOLIO UK PORTFOLIO1 50 properties 21 properties R4.5bn R2.8bn 365 800m² GLA 82 800m² GLA 26 200 tenants 10 600 tenants 50 21 1. An additional 7 properties trade under license of the Storage King bran
Slide 25: Portfolio Analysis
PORTFOLIO ANALYSIS Total number of Total property value Total number of tenants Total GLA properties R7.3bn 36 800 448 600m2 71 Value of properties Number of tenants GLA Number of properties 18% 29% 38% 30% 62% 71% 70% 82% South Africa UK STOR-AGE PROPERTY REIT LIMITED 25
Slide 26: South Africa
SOUTH AFRICA Strategy • Clear strategic growth plan to 2025 • Continue to see opportunities for third party acquisitions – highly selective • Continue to develop high barrier-to-entry big box properties in outstanding locations • Seeking SA institutional funding partner to replicate Moorfield JV mod
Slide 27: Tygervalley – Current Development
TYGERVALLEY – CURRENT DEVELOPMENT Located in Cape Town’s northern suburbs, the property is situated on Durban Road with visibility to the intersection of Durban Road and the N1 highway. The property will comprise an estimated 7 100m² of GLA over six levels with the Durbanville design catering for a
Slide 28: Cresta – Current Development
CRESTA – CURRENT DEVELOPMENT Located prominently on the corner of Weltevreden Road and Valley Lane, the new BMW Northcliff Stor-Age Cresta will sit directly opposite the open parking area to the Cresta Shopping Cresta Shopping Mall. Mall Virgin Active Cresta The property will comprise an estimated 7
Slide 29: Sunningdale – Current Development
SUNNINGDALE – CURRENT DEVELOPMENT Table Bay Mall Located prominently on the corner of Berkshire Boulevard and Whitehall Way and close to the new Table Bay Mall, the property will comprise an estimated 6 350m² of Atlantic Beach GLA with excellent visibility to commuters accessing the retail and resid
Slide 30: Digitalisation and Urbanisation – Growth Trends
DIGITALISATION AND URBANISATION – GROWTH TRENDS The e-commerce revolution is changing the face of retail and logistics for parcel delivery. Demand for industrial property is growing in tandem with e-commerce, while a shortage of suitably located land in many cities is creating higher barriers to ent
Slide 31: Last Mile Delivery Hubs – Exploring the Opportunity
LAST MILE DELIVERY HUBS – EXPLORING THE OPPORTUNITY Stor-Age partnership with Picup • Convergence of e-commerce, last mile delivery technology and prime located self storage properties • Working partnership established in 2019 (www.picup.co.za) • Picup › Digitally native technology business providin
Slide 32: Craighall Hub – Typical Delivery Cycle
CRAIGHALL HUB – TYPICAL DELIVERY CYCLE 1. Online purchases / e-commerce 2. Fulfilment leg of the transaction 3. Mid-mile vehicles • Customers make online • On the Dot¹ Distribution Centre – • Orders in transit purchases for home or office Olifantsfontein (OTD DC) • Mid-mile vehicles collect parcels
Slide 33: Storage King (UK)
STORAGE KING (UK) Overview • Stor-Age entered the UK self storage market through the strategic acquisition of Storage King in November 2017 › 6th largest UK self storage brand – operating 28 properties throughout England › Post market entry – concluded the acquisition of three operators, comprising
Slide 34: UK Property Strategy
UK PROPERTY STRATEGY Five-year property strategy ending 2025 • Highly strategic – 6 geographical target areas, with a growth target of 2 to 4 properties per annum • Four key levers to growth – acquisitions, new developments, Management 1st and Digital 1st New developments • Prominent, visible (main
Slide 35: Chester – Extension
CHESTER – EXTENSION Storage King Chester is located to the east Chester Retail Park Matalan of Chester City Centre and enjoys good B&M Homestore To Chester City Centre visibility at the entrance to a Tesco Ford Supermarket. Land Rover The extension includes the development of a Storage King – stand-
Slide 36: Doncaster – Extension
DONCASTER – EXTENSION Storage King Doncaster is located 1.5km to the south east of Doncaster City Centre. To Doncaster The store enjoys good visibility on a City Centre roundabout as one approaches the local Football stadium football stadium and the Lakeside Village Storage King Outlet Shopping Cent
Slide 37: Bedford – Extension
BEDFORD – EXTENSION Storage King Bedford is located to the east of Bedford City Centre and enjoys good visibility on Goldington Road which links to a large retail park with tenants such as Tesco, Waitrose, Wicks and Home Base. To Bedford City Centre The extension includes the development of a Wicks
Slide 38: Moorfield Development JV
MOORFIELD DEVELOPMENT JV • Development JV entered with Moorfield, a leading UK real estate fund manager • To develop a portfolio of self storage assets focused on London and the South East • Initial portfolio value of approximately £50 million and the potential to increase to £100 million • Key term
Slide 39: Management 1st – Third Party Management Platform
MANAGEMENT 1ST – THIRD PARTY MANAGEMENT PLATFORM Rationale • Large operators own an estimated 30%¹ of self storage properties in the UK • Significant majority of properties owned by a multitude of smaller operators • Without the benefits of scale, smaller operators find it increasingly difficult to
Slide 40: Digital 1st – Digital Marketing Agency
DIGITAL 1ST – DIGITAL MARKETING AGENCY The opportunity • Over the past decade Stor-Age has developed a highly-skilled in-house digital marketing capability • Google and Facebook are global platforms – SA and UK markets form part of EMEA¹ region (both managed out of Dublin) • Opportunity to leverage
Slide 41: Digital 1st – Digital Marketing Agency (continued)
DIGITAL 1ST – DIGITAL MARKETING AGENCY (continued) Key features • Full service digital marketing agency, focused on the self storage sector – Proven capability to capitalise on launched in July 2020, in ‘discovery’ phase fast-changing digital landscape • Stor-Age = accredited Google and Facebook mar
Slide 42: Environmental, Social and Governance
ENVIRONMENTAL, SOCIAL AND GOVERNANCE STOR-AGE PROPERTY REIT LIMITED 42
Slide 43: ESG Strategy
ESG STRATEGY ESG reporting framework aligns our Vision and Core Values with relevant UN Sustainable Development Goals (SDGs) and the Task Force on Climate-related Financial Disclosures (TCFD). Long-term ESG reporting framework adoption Environmental Social Governance Governance Strategy Risk managem
Slide 44: ESG Framework
ESG FRAMEWORK Decent work and economic growth Industry, innovation and infrastructure Underpinned by: Our Vision and Core Values, UN SDGs and TCFD Job creation Developing environmentally friendly buildings Learning and development Energy consumption SME support Water consumption Employee wellness Cy
Slide 45: Environmental Performance
ENVIRONMENTAL PERFORMANCE Focus on reducing the already low impact of our properties Renewable energy LED lighting • Properties fitted with solar PV – 14 • LED light fittings installed internally and externally at all properties • Total system size – 410 kW • Fitted at optimum distances • Solar ener
Slide 46: Operations Review
OPERATIONS REVIEW STOR-AGE PROPERTY REIT LIMITED 46
Slide 47: The Platform
THE PLATFORM • Highly sophisticated and scalable dual-market platform – can be leveraged into new markets • Unique benefit relative to UK peers – cost effective SA head office infrastructure, homogenous product, same language and similar timeline Operations platform – • Vastly experienced management
Slide 48: Platform Overview
PLATFORM OVERVIEW STOR-AGE PROPERTY REIT LIMITED 48
Slide 49: Platform Advantage
PLATFORM ADVANTAGE Digital opportunity • Customer journey – presents an opportunity to be highly personalised • Customer acquisition strategy – inhouse capability to identify new acquisition opportunities in SA and the UK, develop solutions, deploy, measure and evaluate results at speed, and then re
Slide 50: Contact Centre
CONTACT CENTRE Our Contact Centre supports both the SA and UK platforms. The centralised platform manages enquiries 61 000 + 17 000 + from the phone and web, which includes direct online chat. Calls in the year Online enquiries Centralisation benefits responded to • Real-time data driven decision-ma
Slide 51: Extensive Digital Marketing Capabilities
EXTENSIVE DIGITAL MARKETING CAPABILITIES Highly skilled, specialised and scalable with significant capabilities to react to changing digital landscapes Accredited digital marketing agency Google and Facebook partners Data driven approach led by specialists Organic, paid and social media Expert SEO a
Slide 52: Demand Creation Capability
DEMAND CREATION CAPABILITY Driving conversions through audience targeting enhanced by AI machine learning Social media Google My Beta Search YouTube Business Top funnel and Zero click Differential Machine learning Life changing re-targeting advantage vs best practice events • Understanding customers
Slide 53: Digital Marketing – Quick Facts
DIGITAL MARKETING – QUICK FACTS 375 000 + web page visits 36.5m + ad impressions 52 000 + organic website enquiries 170 + Google campaigns R14.0m + digital marketing spend c. 20 000 keyword bids daily 580 000 + unique website visitors 95 000 + conversions (received a price) Google & Facebook partner
Slide 54: Power of the Platform – Storage Pod Acquisition
POWER OF THE PLATFORM – STORAGE POD ACQUISITION In March 2019 we acquired The Storage Pod, a 5 100m2 property located in Weybridge (UK). Post acquisition the property was rebranded and a full digital marketing strategy implemented. Positive results achieved thus far include: ↑ 56% ↑ 22% ↓ 55% ↑ 58%
Slide 55: Power of the Platform – Flexi Store Acquisition
POWER OF THE PLATFORM – FLEXI STORE ACQUISITION In December 2019 we acquired the five-property Flexi Store portfolio located in Nottingham, West Bromwich, Dudley, Shrewsbury and Warrington (UK). Post acquisition a full digital marketing strategy was implemented for each property. Positive results ac
Slide 56: Outlook
OUTLOOK • Stor-Age has remained focused and responded to the challenges of the global pandemic by delivering growth in its key underlying operating metrics › Demonstrating resilience of the core product and business • Anticipate the operating environment to remain uncertain and challenging until the
Slide 57: Annexures
ANNEXURES A. Trading environment – South Africa B. Trading environment – UK E. Our customers F. Overview of UK and European self storage industry C. Schedule of properties G. Valuation methodology D. Pipeline STOR-AGE STOR-AGE PROPERTY PROPERTY REITLIMITED REIT LIMITED 57
Slide 58: Trading Environment – South Africa
TRADING ENVIRONMENT – SOUTH AFRICA Annexure A Latest Comparative period period CPI % y-o-y 3.0 4.3 GDP % (Q2 2020 q-o-q) (51.0) 0.9 Consumer Confidence Index (Q3 2020) (23.0) (7.0) Business Confidence Index (Q3 2020) 24.0 21.0 Source: Stats SA, BER • South Africa entered a recession in the latter st
Slide 59: Trading Environment – South Africa (continued)
Y-o-y % change Gross % - 2 4 6 8 10 12 - 10 20 30 40 50 60 Jul-08 Sep-09 Dec-08 Mar-10 May-09 Sep-10 Oct-09 Mar-10 Mar-11 Aug-10 Source: Factset and Sharenet Sep-11 Jan-11 Mar-12 Jun-11 Nov-11 Sep-12 Apr-12 Mar-13 Sep-12 Sep-13 Feb-13 Jul-13 Mar-14 Dec-13 Sep-14 May-14 Mar-15 Oct-14 INFLATION Sep-15
Slide 60: Trading Environment – UK
TRADING ENVIRONMENT – UK Annexure B Latest Comparative period period CPI % y-o-y (September 2020) 0.5 1.7 GDP % (Q3 2020 q-o-q)) 15.5 0.3 Consumer Confidence (Q3 2020) (25.0) (12.0) Business Confidence (Q3 2020) (1.0) (32.0) Source: Office for National Statistics, GfK • Covid-19 pandemic – UK econom
Slide 61: Trading Environment – UK (continued)
Y-o-y % change Y-o-y % change - - 1 2 3 4 5 6 5 (1) (5) (25) (20) (15) (10) Aug-09 Jul-08 Jan-10 Dec-08 Jun-10 May-09 Oct-09 Nov-10 Mar-10 Apr-11 Aug-10 Source: Factset and Sharenet Sep-11 Jan-11 Feb-12 Jun-11 Jul-12 Nov-11 Dec-12 Apr-12 May-13 Sep-12 Feb-13 Oct-13 Jul-13 Mar-14 Dec-13 Aug-14 May-14
Slide 62: Schedule of Properties
SCHEDULE OF PROPERTIES Annexure C Store name (SA) Address Province STOR-AGE BELLVILLE Cnr of Peter Barlow and Kasselsvlei Road, Bellville, Cape Town W Cape STOR-AGE CITY VAULT MAITLAND1 255 Voortrekker Road, Maitland, Cape Town W Cape STOR-AGE DURBANVILLE Cnr of Pinehurst Drive and Okavango Road, Pi
Slide 63: Schedule of Properties (continued)
SCHEDULE OF PROPERTIES (continued) Annexure C Store name (SA) Address Province STOR-AGE ROOIHUISKRAAL 29 Rietspruit Rd, Samrand, Pretoria Gauteng STOR-AGE WEST RAND1 Portion 610, St Antonios Road, Muldersdrift, Johannesburg Gauteng STOR-AGE ZWARTKOP 70 Migmatite Street, Zwartkop Ext 13, Pretoria Gau
Slide 64: Schedule of Properties (continued)
SCHEDULE OF PROPERTIES (continued) Annexure C Store name (UK) Address Area STORAGE KING AYLESFORD Unit 2 and 3, New Hythe Business Park, Bellingham Way, Aylesford, ME20 7HP South East STORAGE KING BASILDON Unit 1, Carnival Close, Basildon, SS14 3WN East STORAGE KING CAMBRIDGE 505 Coldhams Lane, CB1
Slide 65: Pipeline
PIPELINE Annexure D Total committed pipeline subject to town planning consent c.53 000m² + Anticipated Site Location City Status GLA (m²) Highly visible location on Durban Road TYGERVALLEY CPT Under construction 7 100 just off the N1 highway Highly visible location on the corner of SUNNINGDALE CPT U
Slide 66: Our Customers
OUR CUSTOMERS Annexure E GEOGRAPHIC REPRESENTATION1 RESIDENTIAL / COMMERCIAL TENANT MIX BY GLA2 19 Gauteng Residential Western Cape Commercial 2 38 41 Eastern Cape 10 KwaZulu Natal 4 Free State 62 United Kingdom 24 GEOGRAPHIC FOCUS RESIDENTIAL vs COMMERCIAL Primary focus = high profile locations Res
Slide 67: Our Customers
OUR CUSTOMERS Annexure E AVERAGE LENGTH OF STAY – SA AVERAGE LENGTH OF STAY – UK 20 < 6 Months < 6 Months 28 31 30 6 - 12 Months 6 - 12 Months 12 > 12 Months > 12 Months 2 - 3 Years 11 12 2 - 3 Years 19 21 16 > 3 Years > 3 Years DEMAND PROFILE – SA DEMAND PROFILE – UK Two significant user groups nee
Slide 68: Our Customers – South Africa
OUR CUSTOMERS – SOUTH AFRICA Annexure E REASON FOR STORING – GENERAL REASON FOR STORING – BUSINESS Other Inventory / stock holding 7 5 4 17 12 Lifestyle choice 9 Moving office 4 11 Renovations 5 51 Document storage 6 Moving home Vehicle parking 53 16 Business needs Renovating offices Downsizing Work
Slide 69: Overview of UK and European Self Storage Industry
Annexure F OVERVIEW OF UK AND EUROPEAN SELF STORAGE INDUSTRY UK self storage industry European self storage industry 1 900 76.2% 2 931 Self storage properties, Occupancy on current Self storage properties includes 563 container lettable area operators 78.5% 64 million sqf Population 49 million sqf O
Slide 70: UK Self Storage Industry – Rate and Occupancy
UK SELF STORAGE INDUSTRY – RATE AND OCCUPANCY Annexure F Occupancy at stores with no expansion in Average net rental rate by region previous 2 years Source: The Self Storage Association UK annual industry report, 2020 STOR-AGE PROPERTY REIT LIMITED 70
Slide 71: Valuation Methodology
VALUATION METHODOLOGY Annexure G • 10 year DCF + terminal value • Key assumptions › Forecast cash flow – occupancy, lease-up profile, rental rate escalations, direct operating costs and central administration charge (7% of revenue) › Discount and capitalisation rate › Terminal value • Methodology co
Slide 72: Disclaimer and Confidentiality
DISCLAIMER AND CONFIDENTIALITY This document does not constitute or form part of any formal proposal or offer or solicitation to sell, or offer for sale or investment, or for the issue or sale of securities. This document does not (and nor does any part of it) constitute any contract, commitment or
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