Stor-age Property Reit Ltd. · JSE:SSS
Stor-age Property Reit — FY2017 Earnings Presentation
50 slides from Stor-age Property Reit's earnings presentation, March 2017
Slide 1: Annual Results Presentation
STOR-AGE PROPERTY REIT ANNUAL RESULTS PRESENTATION YEAR ENDED 31 MARCH 2017
Slide 2: Presentation Outline
PRESENTATION OUTLINE • Introduction • Financial review • Strategy • Property review • Operations review • Sales, marketing and the brand • Investment case • Outlook STOR-AGE PROPERTY REIT LIMITED 2
Slide 3: Appendices
APPENDICES • Trading environment – South Africa • Share price performance • Income statement and earnings reconciliation • Schedule of properties • Pipeline of properties • Valuation methodology • Self storage 101 • The market • Self storage at a glance • Differentiators STOR-AGE PROPERTY REIT LIMIT
Slide 4: Introduction
INTRODUCTION STOR-AGE PROPERTY REIT LIMITED 4
Slide 5: Snapshot
SNAPSHOT Listing date November 2015 JSE sector Speciality REITs Profile Highly specialised, low risk, income paying self storage REIT Self storage universe 9 publicly traded self storage REITs (US: 5, UK: 2, Aus: 1, SA: 1) Market capitalisation R2.07 billion* Total property value R2.1 billion Manage
Slide 6: Highlights
HIGHLIGHTS Total distribution up 10% to 88.05 cps for full year Closing rental rate R86 per m² – 12.7% growth (9.4% like-for-like) Closing occupancy 193 400 m² (85% of GLA) Occupied space increased by 37 700 m² (4 000 m² like-for-like) Diversified customer base of 18 500 + tenants Investment propert
Slide 7: Key Metrics – Listed Portfolio
KEY METRICS – LISTED PORTFOLIO DISTRIBUTION RENTAL RATE OCCUPIED SPACE CPS PER M² M² 88.05 86.0 193 000 80* 76.3 156 000 ↑ ↑ ↑ 10% 12.7% 37 000 m² Including Including 9.4% 4 000 m² like-for-like like-for-like Mar 16 Mar 17 * Annualised distribution – 30.07 cps for 4.5 months from listing to date to
Slide 8: Key Metrics – Listed Portfolio (continued)
KEY METRICS – LISTED PORTFOLIO (CONTINUED) PORTFOLIO VALUE PROPERTIES TENANTS R2.1bn 31* 15 000 R1.4bn 24 12 000 ↑ ↑ ↑ 50% 25% 25% Mar 16 Mar 17 * Includes Unit Self Storage – May 2017 STOR-AGE PROPERTY REIT LIMITED 8
Slide 9: Financial Review
FINANCIAL REVIEW STOR-AGE PROPERTY REIT LIMITED 9
Slide 10: Earnings and Distribution
EARNINGS AND DISTRIBUTION 12 months 4.5 months 31 Mar 31 Mar 2017 2016 Earnings and distribution Rm Rm Rental income 158.8 54.9 Other income 7.9 2.0 • Rental income excl. Storage RSA Total portfolio income 166.7 56.9 in line with listing forecast Direct property costs (38.3) (13.0) • Growth in occup
Slide 11: Balance Sheet - Summarised
BALANCE SHEET - SUMMARISED 31 Mar 31 Mar Actual 2016 Actual 2016 Rm Rm Rm Rm ASSETS LIABILITIES Non-current assets Non-current liabilities Investment properties 2 050 1 371 Bank debt 106 129 Share purchase scheme loans 125 120 Finance lease 6 3 Intangible assets and goodwill 84 82 Derivative financi
Slide 12: Capital Structure
CAPITAL STRUCTURE • Conservative target gearing range 25% - 35% 100% R2.1bn property value Debt / property asset value • R400m equity capital raised in February 2017 to fund RSA acquisition • Dividend reinvestment plan announced in June 2017 • 12% gearing at YE • Effective interest rate 9.37% 30% R6
Slide 13: Strategy
STRATEGY STOR-AGE PROPERTY REIT LIMITED 13
Slide 14: Strategy
STRATEGY Outstanding Planning done in 5 year cycles – in year two of five locations Plan focused on both developing new properties and acquiring competitors High quality properties Plan details target cities, suburbs and ideal placement on key arterials Selling standards Plan assumes no further sign
Slide 15: Strategic Planning and Demographics
STRATEGIC PLANNING AND DEMOGRAPHICS HOUSEHOLD INCOME HIGH LOW POPULATION DENSITY HIGH LOW STOR-AGE PROPERTY REIT LIMITED 15
Slide 16: Property Review
PROPERTY REVIEW STOR-AGE PROPERTY REIT LIMITED 16
Slide 17: Portfolio Overview
PORTFOLIO OVERVIEW 49 Our portfolio comprises 49 properties (31 in the Listing Portfolio, 12 in the 43 R3bn Managed Portfolio and 6 in the pipeline) properties 11 Pretoria 5 10 Johannesburg 18 500 + 300 000 m² tenants Bloemfontein 1 31 3 Durban R2.1bn 1 properties 15 000 + 233 000 m² tenants 16 Cape
Slide 18: Listed Portfolio – Movements
LISTED PORTFOLIO – MOVEMENTS Properties GLA (m²) Value (R’m) 1 April 2016 24 181 300 1 371 Acquisitions 6 41 800^ 477 * Additions - 4 700 75 FV adjustments - - 127 31 March 2017 30 227 800 2 050 Unit Self Storage (May 2017) 1 5 300 42 31 233 100 2 092 ^ Excludes parking and office GLA * Includes lan
Slide 19: Listed Portfolio – Acquisitions
LISTED PORTFOLIO – ACQUISITIONS Storage RSA acquired – effective 28 February 2017 • Salient features: › Rare market opportunity in terms of scale and quality – R475m portfolio value › 6 properties – c. 41 800m² GLA › 1 development opportunity in Bryanston – town planning in place Unit Self Storage a
Slide 20: Listed Portfolio – Acquisitions (continued)
LISTED PORTFOLIO – ACQUISITIONS (CONTINUED) Acquisition of StorTown announced • Multi-property operator in Durban market • In line with geographic focus – economies of scale in sub-market • Salient features: › 4 properties – c. 22 000 m² GLA › 2 properties in Hillcrest, Durban North and Durban City
Slide 21: Listed Portfolio – Development Activity
LISTED PORTFOLIO – DEVELOPMENT ACTIVITY • Gardens and Durbanville expansions substantially complete › Both projects funded from existing debt facilities › Forecasted to be yield neutral within first 12 months of trading and yield enhancing thereafter › Forecasted to provide immediate uplift to portf
Slide 22: Pipeline
PIPELINE • Represents c. R1.32 billion (at cost) • Branded and managed by Stor-Age • Measured approach to new developments • 18 properties = c. 128 000 m² GLA (on full build-out): › 12 currently trading (‘Managed Portfolio’) › Managed Portfolio dominated by high profile ‘Big Box’ properties in outst
Slide 23: Operations Review
OPERATIONS REVIEW STOR-AGE PROPERTY REIT LIMITED 23
Slide 24: Operations Platform – Highly Sophisticated
OPERATIONS PLATFORM – HIGHLY SOPHISTICATED Outstanding Operating Web, mobile platforms locations standards and social media Contact Innovative Centre marketing Recruitment, High quality purpose Revenue training and L&D built properties management STOR-AGE PROPERTY REIT LIMITED 24
Slide 25: Operations Platform
OPERATIONS PLATFORM • Highly sophisticated and scalable – ‘power of the platform’ • Drives economies of scale and cost efficiencies • Clearly defined operating standards • Our people › Key strategic focus from inception › Significant emphasis on recruiting, training, developing and managing staff ›
Slide 26: Revenue Management
REVENUE MANAGEMENT • Aim to achieve optimal balance between occupancy and rate • Goal = right price, for the right customer, at the right time • Dynamic pricing model • Pricing per m² based on supply and demand – location specific, stage of lease-up and timing • Powerful operating software allows fo
Slide 27: Revenue Management - Integrated Strategy
REVENUE MANAGEMENT - INTEGRATED STRATEGY TESTING Occupancy OPTIMISATION Pricing Promotion Market leading sector IP ANALYSES STOR-AGE PROPERTY REIT LIMITED 27
Slide 28: Revenue Management - Optimising Demand
REVENUE MANAGEMENT - OPTIMISING DEMAND Optimised consumer cycle Internet Properties Life happens Contact Centre Desktop Tablet Laptop Phone Demand cycle STOR-AGE PROPERTY REIT LIMITED 28
Slide 29: Our Customers
OUR CUSTOMERS FY2017: 3 800 + surveys* completed Average score 95% • ‘My Experience Surveys’ portal drives customer standards • Results and feedback drives Learning, Development and Training Programme * Trading Portfolio, excludes Storage RSA STOR-AGE PROPERTY REIT LIMITED 29
Slide 30: Our Customers (continued)
OUR CUSTOMERS (CONTINUED) GEOGRAPHIC RESPRESENTATION* RESIDENTIAL / COMMERCIAL TENANT MIX BY GLA** 333 Gauteng 24 Western Cape Residential 49 Eastern Cape Commercial 42 KwaZulu Natal Free State 76 GEOGRAPHIC FOCUS RESIDENTIAL vs COMMERCIAL • Primary focus = high profile locations • Residential tenan
Slide 31: Our Customers (continued)
OUR CUSTOMERS (CONTINUED) AVERAGE LENGTH OF STAY* REASON FOR STORING** Business needs 12 17 20 < 6 months Excess stuff 30 4 6 - 12 months Lifestyle choice 12 > 12 months 19 Marriage / divorce 2 - 3 years Moving 17 43 3 21 > 3 years 2 Renovating Other DEMAND PROFILE ‘NEEDS’ DRIVEN PRODUCT Two signifi
Slide 32: Sales, Marketing and the Brand
SALES, MARKETING AND THE BRAND • Focus on location, visibility and quality of properties, coupled with excellent customer service and leading online platform • Positioned at quality end of market – well defined, distinctive and differentiated • Foundations of brand strategy › Big branding at propert
Slide 33: Digital Marketing and E-Commerce
DIGITAL MARKETING AND E-COMMERCE • Embracing digital age – enables cohesive brand experience • SEO results maintain most popular and searched terms • Social media used strategically › Facebook – to engage with customers and drive brand awareness – c. 65 000 active followers › Twitter – listening and
Slide 34: Enquiry and Web Stats
ENQUIRY AND WEB STATS ENQUIRIES BY SOURCE* 17 Smart phones Smart phones and tablets alone 55 account for 43% account for 36% 28 Website of web visits** of all visits Telephone Walk-ins • 55% of enquiries from online platforms • Significant portion of web visits from people searching for Stor-Age › T
Slide 35: Investment Case
INVESTMENT CASE • Leading self storage property fund in South Africa • Sector specialist, allowing for focused attention, delivering superior returns • Sophisticated operating platform and benefits of scale • Niche asset class uncorrelated to traditional property drivers – recession-resilient sector
Slide 36: Outlook
OUTLOOK • Focus on short and medium term strategic objectives › Driving occupancy, revenue and cash flow = earnings and dividends growth › Executing five year growth plan • Fully integrate recent acquisitions • Self storage sector fundamentals remain resilient, albeit in a challenging economic envir
Slide 37: Appendices
• Trading environment – South Africa • Valuation methodology • Share price performance • Self storage 101 APPENDICES • Income statement and earnings reconciliation • The market • Schedule of properties • Self storage at a glance • Pipeline of properties • Differentiators STOR-AGE PROPERTY REIT LIMIT
Slide 38: Trading Environment – South Africa
TRADING ENVIRONMENT – SOUTH AFRICA CPI INFLATION REAL GDP GROWTH RMB/BER BUSINESS CONFIDENCE INDEX REAL RETAIL SALES GROWTH STOR-AGE PROPERTY REIT LIMITED 38
Slide 39: Share Price Performance
SHARE PRICE PERFORMANCE Share price* performance relative to SA Listed Property Index 130 R400 million equity capital raised 37 million shares issued at R10.81 – 2.5% discount to 30 day VWAP price of R11.09 120 Unexpected change 116.04 to SA Finance Minister 16 November 2015 = 100 110 100 97.21 90 8
Slide 40: Income Statement and Earnings Reconciliation
INCOME STATEMENT AND EARNINGS RECONCILIATION 31 March 31 March 31 March 31 March 2017 2016 2017 2016 Income statement R’000 R’000* R’000 R’000* Property revenue 166 663 56 900 Profit for the period 240 725 56 507 Rental income 158 801 54 907 Basic earnings 240 725 56 507 Other income 7 862 1 993 Hea
Slide 41: Schedule of Properties – Listed Portfolio
SCHEDULE OF PROPERTIES – LISTED PORTFOLIO GLA Valuation Store name Address Province m² R’000 STOR-AGE BOKSBURG 37 View Point Road, Bartlett, Boksburg, Johannesburg Gauteng 7 229 65 000 STOR-AGE CONSTANTIA KLOOF Cnr of Hendrik Potgieter and 14th Avenue, Constantia Kloof, Johannesburg Gauteng 5 375 62
Slide 42: Schedule of Properties – Managed Portfolio
SCHEDULE OF PROPERTIES – MANAGED PORTFOLIO Mar 2017 Full capacity GLA GLA Store name Address Province m² m² STOR-AGE BROOKLYN Cnr of Jan Shoba & Justice Mohamed Street, Brooklyn, Pretoria Gauteng 7 022 7 582 STOR-AGE IRENE Cnr of 40th Avenue & 24th Street, Irene, Pretoria Gauteng 5 034 6 000 STOR-AG
Slide 43: Pipeline
PIPELINE Total committed pipeline subject to town planning consent c. 39 000 m² Anticipated GLA Site Location City Status (m²) Prominent location on Bram Fischer Drive Under construction RANDBURG JHB 7 300 near Peter Place Road - scheduled to open in July 2017 Prominent location on the corner of Mai
Slide 44: Valuation Methodology
VALUATION METHODOLOGY • 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 • Income capitalisation val
Slide 45: Self Storage 101
SELF STORAGE 101 About self storage • Storage space for personal and business use • ‘You lock – you keep the key’ • Various unit sizes ranging from 3 to 30 m² • Convenient, cost effective, secure and flexible lease period • Domestic and commercial user base › Domestic (70 - 80%) – event driven and l
Slide 46: The Market
THE MARKET International • ± 60 000 self storage properties – majority in N. America • US market – highest penetration levels • Australian market lags US market by c. 20 years – significantly more established than UK • UK market supply per capita 3X > than European average supply per capita • 9 publ
Slide 47: Self Storage at a Glance
SELF STORAGE AT A GLANCE Investment case • Premised on › Recession resilience and distribution growth outperformance vs traditional diversified REITs › Low correlation to traditional performance drivers behind retail, office and industrial sub-sectors Demand factors • Healthy in strong economy and r
Slide 48: Self Storage at a Glance (continued)
SELF STORAGE AT A GLANCE (CONTINUED) Other key factors • Location, visibility and convenience = differentiators • Low ongoing capex – relationship between capex / NOI growth very attractive • Simple business … but sophisticated operator required • Bigger is better – spreads fixed costs and supports
Slide 49: Differentiators
DIFFERENTIATORS Lease-up vs. mature self storage assets • Lifecycle of asset – two distinct phases – ‘Lease-up’ and ‘Mature’ (c. 80% level) • Lease-up period anywhere between 3 and 5 years Lease-term • Average length of stay for existing customers – 21 months • Two distinct renter profiles: short-te
Slide 50: Disclaimer and Confidentiality
DISCLAIMER AND CONFIDENTIALITY This document is strictly confidential and is not for publication or circulation. All information contained herein is strictly confidential and proprietary and may not be copied, reproduced, communicated, transmitted or distributed, in whole or in part, to any person o
Stor-Age Property REIT — FY2017 Earnings Presentation on 6ix