Stor-age Property Reit Ltd. · JSE:SSS
Stor-age Property Reit — H1 FY2023 Earnings Presentation
65 slides from Stor-age Property Reit's earnings presentation, November 2022
Slide 1: Interim Results Presentation
STOR-AGE PROPERTY REIT INTERIM RESULTS PRESENTATION PERIOD ENDED 30 SEPTEMBER 2022 STOR-AGE PROPERTY REIT LIMITED 1
Slide 2: Presentation Outline
PRESENTATION OUTLINE Page Introduction 4 Financial review 10 Property review 23 Environmental, Social and Governance 32 Operations review 37 Outlook 42 STOR-AGE PROPERTY REIT LIMITED 2
Slide 3: Annexures
ANNEXURES Page A: Investment case 44 B: Strategy 45 C: Portfolio overview 47 D: Portfolio analysis 48 E: SA developments 49 F: UK developments 54 G: The platform 57 H: Our customers 58 I: Last mile delivery hubs – overview 60 J: Digital First – overview 61 K: UK and European self storage industry –
Slide 4: Introduction
INTRODUCTION STOR-AGE PROPERTY REIT LIMITED 4
Slide 5: Highlights
HIGHLIGHTS Distributable income and interim dividend per share up 6.1% to 60.05 cents Total return of 19.3%¹ for the 12-month period Rental income and net property operating income up 18.6% and 16.5% respectively Same-store rental income up 9.7% (SA 9.0%; UK 11.4%) Same-store SA and UK average renta
Slide 6: Snapshot
SNAPSHOT Listing date November 2015 JSE sector Speciality REITs Profile Highly specialised, low risk, income paying self storage REIT Self storage 11 publicly traded self storage REITs universe (US: 6, UK: 2, EU1: 1, Aus: 1, SA: 1) Market R6.2 billion² capitalisation Total South Africa United Kingdo
Slide 7: 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 Multi-year performance1: Positive divergence relative to SAPY, outperforming by c.181% January 2022 170 R575m equity raise, 45 0.92% discou
Slide 8: 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. 50% exposure to GBP assets through Storage King Stor-Age is entrenched in the UK market. This geographic underpin is coupled with an attractive yield spread relative to UK peers. 420
Slide 9: The Market
THE MARKET • UK self storage market¹ less developed than the United States and Australia • Supply of self storage space is estimated to be 0.76 sqf per head of population in 2the 050UK, compared to slightly less than 10 sqf in the US and 2 sqf in Australia 83.3% 3 375 •Self Market remains fragmented
Slide 10: Financial Review
FINANCIAL REVIEW STOR-AGE PROPERTY REIT LIMITED 10
Slide 11: Occupancy Summary
OCCUPANCY SUMMARY SA 30 September 2022 30 September 2021 GLA m2 Occupied m2 % occupied GLA m2 Occupied m2 % occupied Own portfolio 384 300 338 300 88.0% 356 500 310 400 87.1% JV portfolio 6 300 5 100 81.2% 4 100 2 700 65.9% Total 390 600 343 400 87.9% 360 300 313 100 86.8% Same-store 361 000 322 700
Slide 12: Tenant Profile
TENANT PROFILE Customer profile 30 September 2022 30 September 2021 SA UK SA UK Number of properties 55 30 54 22 Number of tenants 28 700 14 700 26 200 12 200 Commercial 38% 22% 39% 26% Residential 62% 78% 61% 74% Average length of stay - months (existing tenants) 24.4 29.2 23.6 30.8 Average length
Slide 13: Trading Results SA
TRADING RESULTS SA Rm 30 September 2022 30 September 2021 % change Non same- Non same- Same-store Total Same-store Total Same-store Total store store Rental income Self storage 231.6 11.6 243.2 212.5 3.5 216.0 9.0% 12.6% Other 4.0 0.3 4.3 4.0 0.3 4.3 (0.7)% (0.5)% Ancillary income 9.5 0.6 10.1 8.7 0
Slide 14: Trading Results UK
TRADING RESULTS UK £’000 30 September 2022 30 September 2021 % change Non same- Non same- Same-store Total Same-store Total Same-store Total store store Rental income Self storage 9 560 1 142 10 702 8 580 - 8 580 11.4% 24.7% Other 268 213 481 271 - 271 (1.1)% 77.5% Ancillary income 973 187 1 160 870
Slide 15: Distribution Analysis
DISTRIBUTION ANALYSIS Rm 30 Sep 2022 30 Sep 2021 Total Total Net property operating income - SA 196.4 176.1 Net property operating income - UK 176.1 145.4 Rental underpin 3.5 1.9 Waterfall insurance claim proceeds 5.3 3.8 Management fees 17.4 3.0 - Property management fees 5.9 2.1 - Digital First 2.
Slide 16: Balance Sheet – Summarised
BALANCE SHEET – SUMMARISED 30 Sep 31 Mar 30 Sep 31 Mar R’000 2022 2022 2022 2022 ASSETS LIABILITIES Non-current assets Non-current liabilities Investment properties Bank debt 2 875 2 599 9 823 9 264 ZAR 1 022 1 141 SA Freehold 5 011 4 929 GBP 1 853 1 458 SA Leasehold 137 116 Derivatives mark-to-mark
Slide 17: Net Asset Value per Share
NET ASSET VALUE PER SHARE Rm 30 Sep 2022 31 March 2022 Net asset value (NAV) excluding NCI 6 966.4 6 597.0 Less: Goodwill and intangible assets (149.3) (145.7) Net tangible asset value (NTAV) 6 817.1 6 451.3 Deferred tax relating to UK investment property revaluations 324.2 287.4 Adjusted NTAV 7 141
Slide 18: Capital Structure
CAPITAL STRUCTURE ZAR facilities GBP facilities GBP facilities Total facilities Rm £m Rm Rm Total debt facilities 1 867.0 105.4 2 114.4 3 981.4 Undrawn debt facilities 582.3 11.6 233.2 815.5 Gross debt 1 284.7 93.8 1 881.2 3 165.9 Gross debt net of cash held in debt facilities 1 196.7 93.8 1 881.2 3
Slide 19: Property Valuations
PROPERTY VALUATIONS VALUATION BREAKDOWN Average % of Discount Exit cap Rm value per portfolio m² rate rate • External valuation policy SA › SA – 50% at each reporting period Freehold and long leasehold 5 010.8 97.3% (year end and interims) Short leasehold 137.3 2.7% › UK – 100% at year end. For Sep
Slide 20: Currency Hedging
CURRENCY HEDGING HEDGING OF NET INVESTMENT IN STORAGE KING £m 30 Sep 2022 31 Mar 2022 30 Sep 2021 Investment property 246.6 232.6 168.6 Leasehold liabilities (13.5) (11.8) (12.2) Net investment property 233.1 220.8 156.4 Bank debt (85.9) (77.7) (51.1) Cash 2.8 2.7 2.6 Other assets 11.4 7.8 5.9 Other
Slide 21: The Big Picture
THE BIG PICTURE • Global economic growth outlook clouded – surging inflation, rising interest rates and European energy crisis • Self storage business model – proven track record of resilience • Demand – underpinned by life-changing events and dislocation Macro and › Positive or negative in nature s
Slide 22: Impact of Inflation
IMPACT OF INFLATION • Short-term leasing model (month-to-month) = more responsive to adjusting pricing • Proven resilient business model – performance during Global Financial Crisis and Covid-19 pandemic • High levels of demand, lower churn, elongated length of stay metrics Revenue • Revenue managem
Slide 23: Property Review
PROPERTY REVIEW STOR-AGE PROPERTY REIT LIMITED 23
Slide 24: South Africa – Acquisitions and Developments
SOUTH AFRICA – ACQUISITIONS AND DEVELOPMENTS • Acquired Think Secure Self Storage in Parklands, a suburb located on CT’s west coast in November 2022 › c. 4 000m² GLA¹, R65 million › Well-located on the corner of Sandown and Koeberg Roads and highly complementary to Sunningdale and Table View propert
Slide 25: Nedbank Development JV
NEDBANK DEVELOPMENT JV Overview • Entered JV with Nedbank Corporate and Investment Bank, acting through Nedbank Property Partners – FY22 • Two high profile properties under development at a total cost of approximately R200 million › Morningside – 7 400m² GLA, under construction › Bryanston – 4 700m²
Slide 26: Storage King
STORAGE KING Overview • 6th largest UK self storage brand – operating 37¹ properties throughout England • Post UK market entry in 2017 – acquired six operators, comprising 16 properties, portfolio of owned properties grown from 14 to 30² Portfolio expansion • Crewe – acquired adjoining building in A
Slide 27: Case Study – McCarthy's Acquisition
CASE STUDY – MCCARTHY’S ACQUISITION Salient terms at acquisition Harrogate • High quality, regionally dominant four-property freehold portfolio York acquired in January 2022 • Purchase consideration – £37.5 million Wakefield • CLA – 132 200 sqf / 12 400m², with the potential to increase to an estima
Slide 28: Case Study – McCarthy's Acquisition (continued)
CASE STUDY – MCCARTHY’S ACQUISITION (continued) Performance post acquisition Acquisition Change 30 September 2022 January 2022 CLA¹ (sqf) 132 147 - 132 147 Occupied space (sqf) 101 794 14.4% 118 161 Occupancy (%) 77.0% 12.4% 89.4% Rate (£) per sqf pa 21.00 14.6% 24.06 Average enquiries per store pm²
Slide 29: Moorfield JV
MOORFIELD JV Portfolio overview The table below sets out an overview of the JV’s investment activities: • JV entered with Moorfield in FY21 to assemble a portfolio of high-quality self storage assets across the UK, by developing and acquiring properties with a focus on London (its commuter towns), t
Slide 30: Moorfield JV (continued)
MOORFIELD JV (continued) Acquired portfolio • Storagebase, £59.0 million, March 2022 • Portfolio of four properties¹ located in › Salisbury (a new purpose-built property which commenced trading in April 2022) Wednesbury › Banbury Banbury › Wednesbury › Frome • The properties are branded and managed
Slide 31: Moorfield JV (continued)
MOORFIELD JV (continued) Developments The JV has four developments at various stages of progress: Heathrow Bath Canterbury West Bromwich Property transferred in Ownership and cost £4.1million £6.5 million £1.5 million October 2022 – £5.9 million Status Under construction Under construction Under con
Slide 32: Environmental, Social and Governance
ENVIRONMENTAL, SOCIAL AND GOVERNANCE STOR-AGE PROPERTY REIT LIMITED 32
Slide 33: ESG
ESG Strategy and framework • Aligns our Vision and Core Values with relevant UN Sustainable Development Goals (SDGs) and takes guidance from the Task Force on Climate-related Financial Disclosures (TCFD) • ESG framework – enables monitoring of our impact on the economy, the workplace, the social env
Slide 34: Annual Impact of Renewable Energy
ANNUAL IMPACT OF RENEWABLE ENERGY • C02 emissions¹ avoided – 1 677 tonnes, through the consumption of on-site solar PV renewable electricity • While total power demand across the portfolio is increasing, emissions generated through municipal electricity consumption are following a downward trend, as
Slide 35: Social
SOCIAL Overview • Stor-Age remains committed to our Social and Economic Development initiatives › Utilising our resources – operational, marketing and our core self storage product › To initiate and contribute to socio-economic development projects › Benefiting previously disadvantaged groups, chari
Slide 36: Social (continued)
SOCIAL (continued) Stor-Age Business Hub • Actively supports the continued sustainability of our commercial customers’ businesses • Majority of whom are SMMEs and on which the SA economy is dependent on for sustainable job creation and economic development • In SA › 50% + of commercial customers cla
Slide 37: Operations Review
OPERATIONS REVIEW STOR-AGE PROPERTY REIT LIMITED 37
Slide 38: Platform Overview
PLATFORM OVERVIEW STOR-AGE PROPERTY REIT LIMITED 38
Slide 39: Platform Driven by Data
PLATFORM DRIVEN BY DATA Optimise: • Supply/demand dynamics • Rental escalations • Unit configurations • Rental rates • Discounting Contact Centre Data Tenant Data • Quality control – ongoing call reviews Revenue • Leasing characteristics • Respond to needs • Length of stay • Improve sales with train
Slide 40: 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 41: Demand Creation Capability
DEMAND CREATION CAPABILITY Driving conversions through audience targeting enhanced by AI machine learning Social media Google My Business Beta Search YouTube Top funnel and Zero click Differential Machine learning Life changing re-targeting advantage vs best practice events • Understanding customers
Slide 42: Outlook
OUTLOOK • Strong performance in the first half of the year • Macro and political environment uncertainty – impact on inflation, interest rates and currency movements • Track record – performance in the Global Financial Crisis and the COVID-19 pandemic have proven, self storage is a resilient industr
Slide 43: Annexures
ANNEXURES A. Investment case B. Strategy G. The platform H. Our customers C. Portfolio overview I. Last mile delivery hubs – overview D. Portfolio analysis J. Digital First – overview E. SA developments K. UK and European self storage industry – overview F. UK developments STOR-AGE STOR-AGE PROPERTY
Slide 44: Investment Case
INVESTMENT CASE Annexure A • Niche growth sector globally, driven by societal trends › Consumerism, including the increase in e-commerce Resilient sector with › Densification and an increasingly mobile population growth opportunities globally • Primary drivers of demand are life-changing events and
Slide 45: Strategy
STRATEGY Annexure B 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 – now complemented by digital strategy • Multiple research p
Slide 46: Strategy (continued)
STRATEGY (continued) Annexure B 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
Slide 47: Portfolio Overview
PORTFOLIO OVERVIEW Annexure C 86 The portfolio comprises 56 properties in SA and 30 properties in the UK SA PORTFOLIO UK PORTFOLIO² 56¹ properties 30³ properties R5.25bn⁴ R5.07bn⁴ (£253 million) 390 600m² GLA⁴ 129 600m² GLA⁴ 28 700 tenants 14 700 tenants 56 30 1. Includes Think Secure Self Storage (
Slide 48: Portfolio Analysis
PORTFOLIO ANALYSIS Annexure D Total number of Total property value¹ Total number of tenants Total GLA properties² R10.32bn 43 400 520 200m2 86 Value of properties Number of tenants GLA Number of properties 34% 25% 35% 51% 49% 66% 75% 65% South Africa UK 1. Total net investment property value, includ
Slide 49: Morningside – Current Development
MORNINGSIDE – CURRENT DEVELOPMENT Annexure E Located prominently alongside the Wedge Shopping Centre on Rivonia Road in Kelvin Drive Morningside. The property enjoys high visibility to passing traffic. Summit Road The property will comprise an estimated 7 400m2 GLA on completion (on full fit-out) We
Slide 50: Bryanston – Current Development
BRYANSTON – CURRENT DEVELOPMENT Annexure E William Main Road With a prominent location alongside the Virgin Active at Grosvenor Crossing, the Nicol Drive property is positioned at the intersection of William Nicol Drive and Main Road in Bryanston. The property enjoys high visibility to passing traff
Slide 51: Pinelands – Current Development
PINELANDS – CURRENT DEVELOPMENT Annexure E Located in Pinelands, the property is situated on the corner of Howard Drive and Howard Centre Gardener Way, opposite Howard Centre. The property will comprise an estimated 7 300m² GLA on completion (on full fit out) and Forest Drive is being developed in t
Slide 52: Paarden Eiland – Current Development
PAARDEN EILAND – CURRENT DEVELOPMENT Annexure E Located prominently in the service road to Marine Drive, the property enjoys high exposure to the busy Marine Drive which carries significant traffic volume in both Milnerton directions. Marine Drive The property will comprise an estimated 4 700m² GLA
Slide 53: SA Pipeline Development – Kramerville
SA PIPELINE DEVELOPMENT – KRAMERVILLE Annexure E Sandton South Road Located in Kramerville (Sandown), the property is situated on the corner of Dartfield Road and Commerce Crescent. The property benefits from having access on grade to all four levels and will comprise Dartfield Bowling Road an estim
Slide 54: Heathrow – Current Development
HEATHROW – CURRENT DEVELOPMENT Annexure F To the M25 Storage King Heathrow is a greenfield development located to the west of London, inside the M25 Orbital Motorway (M25) and situated in close proximity to Heathrow Airport. Heathrow Airport To Central London The site is located on a prominent inter
Slide 55: Bath – Current Development
BATH – CURRENT DEVELOPMENT Annexure F Bath City Centre Storage King Bath is a brownfield development (building conversion) located within the Western Lock Retail Park, which lies approximately 3.9 kilometers west of Bath City Centre on the A36 Lower Bristol Road. The property is located adjacent to
Slide 56: Canterbury – Current Development
CANTERBURY – CURRENT DEVELOPMENT Annexure F Storage King Canterbury is a greenfield development located to the east of Canterbury Curry’s Town Centre in Kent, in close proximity to a large ‘big box’ retail corridor. M&S The site forms part of the ‘new to be created’ Canterbury Trade Park which sits
Slide 57: The Platform
THE PLATFORM Annexure G • 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 • Vastly experienced management teams – SA
Slide 58: Our Customers
OUR CUSTOMERS Annexure H GEOGRAPHIC REPRESENTATION1 RESIDENTIAL / COMMERCIAL TENANT MIX BY GLA2 Gauteng Residential 24 Western Cape 34 Commercial 38 Eastern Cape 1 KwaZulu-Natal 7 Free State 66 4 United Kingdom 26 GEOGRAPHIC FOCUS RESIDENTIAL vs COMMERCIAL Primary focus = high profile locations in J
Slide 59: Our Customers (continued)
OUR CUSTOMERS (continued) Annexure H AVERAGE LENGTH OF STAY – SA AVERAGE LENGTH OF STAY – UK < 6 Months < 6 Months 23 28 28 33 6 - 12 Months 6 - 12 Months 11 > 12 Months > 12 Months 10 2 - 3 Years 2 - 3 Years 18 13 20 16 > 3 Years > 3 Years DEMAND PROFILE – SA DEMAND PROFILE – UK Two significant use
Slide 60: Last Mile Delivery Hubs – Overview
LAST MILE DELIVERY HUBS – OVERVIEW Annexure I Partnership with Picup • Convergence of e-commerce, last mile delivery technology and prime located self storage properties • Three last mile hubs in operation – Cresta, Brooklyn and Kempton Park • Picup – provides logistics software solutions for e-comm
Slide 61: Digital First – Overview
DIGITAL FIRST – OVERVIEW Annexure J Benefits of the model • Opportunity for smaller independent operators to leverage a publicly traded self storage REIT’s digital platform – at a fraction of the cost Proven capability Deep industry to capitalise on specific audience • For Stor-Age it provides an av
Slide 62: Digital First – Digital Marketing Platform
DIGITAL FIRST – DIGITAL MARKETING PLATFORM Annexure J Key features ITALIAN CASE STUDY¹ • Full service digital marketing agency, focused on the self storage Immediate and sustained impact on enquiry sector – launched in July 2020 generation and reduction of advertising • Stor-Age = accredited Google
Slide 63: UK and European Self Storage Industry – Overview
Annexure K UK AND EUROPEAN SELF STORAGE INDUSTRY – OVERVIEW UK self storage industry¹ European self storage industry (excluding UK)³ 2 050 83.3% 3 375 Self storage properties, Occupancy on current Self storage properties includes 621 container lettable area operators 71.6 million sqf Population 86.2
Slide 64: UK Self Storage Industry – Rate and Occupancy
UK SELF STORAGE INDUSTRY – RATE AND OCCUPANCY Annexure K Source: The Self Storage Association UK annual industry report, May 2022 STOR-AGE PROPERTY REIT LIMITED 64
Slide 65: 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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