Stor-age Property Reit Ltd. · JSE:SSS
Stor-age Property Reit — FY2018 Earnings Presentation
60 slides from Stor-age Property Reit's earnings presentation, March 2018
Slide 1: Annual Results Presentation
STOR-AGE PROPERTY REIT ANNUAL RESULTS PRESENTATION YEAR ENDED 31 MARCH 2018 STOR-AGE PROPERTY REIT LIMITED 1
Slide 2: Presentation Outline
PRESENTATION OUTLINE Page Introduction 4 Financial review 8 Strategy 15 Property review 18 Operations review 30 Outlook 39 STOR-AGE PROPERTY REIT LIMITED 2
Slide 3: Annexures
ANNEXURES Page A: Trading environment – South Africa 41 B: Trading environment – UK 43 C: Income statement and earnings reconciliation 45 D: Net asset value and market capitalisation 46 E: Schedule of properties 47 F: Pipeline 50 G: Our customers 51 H: Valuation methodology 54 I: Self storage 101 55
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 9 publicly traded self storage REITs universe (US: 5, UK: 2, Aus: 1, SA: 1) Market capitalisation R3.9 billion1 Total South Africa United Kingdom Total p
Slide 6: Investment Case
INVESTMENT CASE Attractive sector Niche asset class uncorrelated to traditional drivers of property – recession-resilient Dynamic specialists, allowing for focused attention, delivering superior returns; recent Leading sector specialists strategic entry into UK – scalable platform opportunity and ma
Slide 7: Performance
PERFORMANCE Share performance and liquidity Total shareholder Share price performance relative to SA Listed Property Index (SAPI) return: 50% Since listing (November 2015) R1.276 billion equity raise, 2.5% discount to 30 day VWAP 140 a 14 000 000 R400 million equity raise, 2.5%adiscount to 130 Chang
Slide 8: Financial Review
FINANCIAL REVIEW STOR-AGE PROPERTY REIT LIMITED 8
Slide 9: Financial Highlights
FINANCIAL HIGHLIGHTS Total distribution up 11.1% to 97.83 cps Distributable earnings up 118% to R286 million Growth in rental income of 86%, including 10.6% like-for-like Growth in net property operating income of 82%, including 11.8% like-for-like Occupied space increased by 84 200 m² (SA 27 200 m²
Slide 10: Earnings – South Africa
EARNINGS – SOUTH AFRICA 31 March 2018 (Rm) 31 March 2017 (Rm) Like-for-like Acquisitions Total Like-for-like Acquisitions Total Property revenue LFL rental 176.8 63.6 240.4 159.9 3.7 163.7 income Rental income 171.5 62.2 233.7 155.1 3.7 158.8 10.6% Ancillary income 5.3 1.4 6.7 4.8 0.1 4.9 Direct pro
Slide 11: Earnings – United Kingdom
EARNINGS – UNITED KINGDOM 5 months to 31 March 20181 Actual Forecast Earnings (GBP’000) (GBP’000)2 Variance ahead of forecast Property revenue 3 996 4 301 6.5% Rental income 3 584 3 870 Ancillary income 412 431 Direct property costs (1 378) (1 498) Net property operating income 2 618 2 803 Administr
Slide 12: Balance Sheet – Summarised
BALANCE SHEET – SUMMARISED 31 Mar 31 Mar 31 Mar 31 Mar 2018 2017 2018 2017 Rm Rm Rm Rm ASSETS LIABILITIES Non-current assets Non-current liabilities Investment properties 3 853 2 050 Bank debt 642 253 SA 2 490 2 050 SA 236 253 UK freehold 1 190 – UK 406 – UK leasehold1 173 – Derivatives mark-to-mark
Slide 13: Distributions
DISTRIBUTIONS Distribution per share 97.83 cps 60 full year 88.05 cps full year 50.81 50 47.02 45.01 43.04 40 ↑ Cents per share 11.1% N1 30 30.07 ↑ 10% 20 10 0 2016 2017 2018 Interim dividend Final dividend N1 – listed November 2015, 4.5 month trading period to year end, distribution annualised STOR
Slide 14: Capital Structure
CAPITAL STRUCTURE SA UK Total R million R million R million 16% gearing Total debt facilities 995 406 1 401 3.33 year average expiry profile Undrawn debt facilities 642 - 642 Gross debt 353 406 759 Net debt 228 392 620 100% Subject to fixed rates effective - % hedged on gross debt 71% 91% 82% hedge
Slide 15: Strategy
STRATEGY STOR-AGE PROPERTY REIT LIMITED 15
Slide 16: Strategy
STRATEGY Sector specialists with deep product understanding and established global peer networks Outstanding locations Highly strategic in planning and execution at both macro and micro level High quality Growth – acquisition of quality assets, organic growth through improved operational properties
Slide 17: Strategic Entry into UK Market
STRATEGIC ENTRY INTO UK MARKET • Sector growth in UK is positive, with increasing demand Resilient sector • Supply constrained – undersupply in comparison to more established US and Australian markets with strong growth • Average net rentals and occupancies across UK sector increasing attractively o
Slide 18: Property Review
PROPERTY REVIEW STOR-AGE PROPERTY REIT LIMITED 18
Slide 19: Portfolio Overview
PORTFOLIO OVERVIEW 63 The listed portfolio comprises 50 properties: 36 in SA and 14 in the UK. Stor-Age has a further 13 properties in its Managed Portfolio (SA) – bringing the total properties to 63 SA LISTED PORTFOLIO UK LISTED PORTFOLIO 36 properties 14 properties c.R2.5bn c.R1.4bn c.264 000 m² c
Slide 20: Portfolio Breakdown
PORTFOLIO BREAKDOWN 31 March 2018 Trading Portfolio Properties¹ 63 GLA (m2) 407 000 Value (Rm) 4 956 Listed Portfolio Properties 50 GLA (m2) 321 000 Value (Rm) 3 906 Managed Portfolio Properties 13 GLA (m2) (on full fit-out) 86 000 Value (Rm) 1 050 Pipeline Properties 10 GLA (m2) circa 70 000 Value
Slide 21: Listed Portfolio Analysis
LISTED PORTFOLIO ANALYSIS Total property value (Rbn) 3 9061 Total number of tenants 23 500 + Total GLA² (m²) ³ 321 000 Total number of properties 50 Value of properties Number of tenants GLA 18% 35% 35% 65% 65% 82% South Africa UK 1. The value of the Storage King Core Portfolio was converted at an e
Slide 22: Transaction Activity Since Listing
TRANSACTION ACTIVITY SINCE LISTING Nov Feb Mar 2016 2015 2017 2017 Trading Portfolio: Managed Acquisition: Major extensions: Portfolio: Storage RSA – Gardens and 32 properties Sunninghill, 7 properties Durbanville May Berea and (6 trading, 1 development site) 2017 Gillooly’s opened CT and JHB Acquis
Slide 23: South Africa Acquisitions – Since Listing
SOUTH AFRICA Acquisitions – since listing • All-Store › CT, single property, R52m, April 2018 (post year end) • StorTown › DBN, 4 properties, R145m, November 2017 • Unit Self Storage › CT, single property, R42m, May 2017 • Storage RSA › JHB and CT, 6 properties and 1 development opportunity › R475m,
Slide 24: Managed Portfolio
MANAGED PORTFOLIO • Branded and managed by Stor-Age • Stor-Age has pre-emptive right to acquire all properties • 13 properties, c. 86 000 m² GLA (incl. bulk units), c. R1.05bn (cost), 6 000 + tenants • Dominated by high profile ‘Big Box’ properties in outstanding locations • Randburg opened in July
Slide 25: Case Study: Bryanston – Current Development
CASE STUDY: BRYANSTON – CURRENT DEVELOPMENT Project overview › Erf size 5 127 m² › Development cost R101m › Zoning Special › Opening July 2018 › GBA 8 128 m² › Project timeline 13 months › GLA 6 100 m² › Rezoning period 18 months STOR-AGE PROPERTY REIT LIMITED 25
Slide 26: Case Study: All-Store – Recent Acquisition
CASE STUDY: ALL-STORE – RECENT ACQUISITION On acquisition Renovation and redevelopment › Erf size 20 913 m² › Total additional 1 600 m² GLA › Zoning General Industrial › 28% of total facility – date of acquisition › GLA 5 500 m² › Renovation: office block to retail store, c. 400 m² GLA › Purchase pr
Slide 27: Overview of UK Self Storage Industry
OVERVIEW OF UK SELF STORAGE INDUSTRY THE UK MARKET PRESENTS A STRONG GROWTH OPPORTUNITY 1 505 76.1% 8.8% self storage properties, offering Occupancy on y-o-y increase in approximately 44.6 million sqf of space current lettable space total space occupied 29 600 sqf 44.6 m sqf 2.4 m sqf 30% Properties
Slide 28: Storage King (UK)
STORAGE KING (UK) Overview • 6th largest UK self storage brand • Operating 26 properties throughout England • Highly scalable, well invested infrastructure and experienced management • Long-established relationships with independent operators = opportunity Portfolio • Well-located, with a bias towar
Slide 29: UK Property Strategy
UK PROPERTY STRATEGY Aligned to current 5Y property strategy ending 2020 • Growth target – c. 3 to 5 properties pa • Highly strategic – 6 geographical target areas • Combination of acquisitions and new developments • Supply threshold – 1 sqf per capita outside M25, 3 sqf per capita inside M25 Acquis
Slide 30: Operations Review
OPERATIONS REVIEW STOR-AGE PROPERTY REIT LIMITED 30
Slide 31: Platform Overview
PLATFORM OVERVIEW Outstanding locations – Ops standards – Online multi-channel defensively positioned permanently in beta prospecting Stor-Age Contact Centre – “Understanding our Marketing – hyper online and phone customers’ needs drives targeted and segmented everything that we do” Our people – bes
Slide 32: Platform Advantage
PLATFORM ADVANTAGE Typical competitor Stor-Age Customer targeting Search Contact Pay Per Social engines Centre Click media Revenue Dynamic revenue management management Intelligent choices Data Analytics Optimisation STOR-AGE PROPERTY REIT LIMITED 32
Slide 33: Revenue Management – Case Study: Springfield
REVENUE MANAGEMENT – CASE STUDY: SPRINGFIELD Acquisition • Date December 2014 • Value R15 million • GLA 5 290 m² • Rental rate R40 per m² Asset management initiatives • Investment of R7.5 million • Included › Rebrand › New retail interface › Unit cut-up and reconfiguration › Mobile unit introduction
Slide 34: Revenue Management – Case Study: Gardens
REVENUE MANAGEMENT – CASE STUDY: GARDENS Project overview › Opened 2011 › Valuation R239m › Cost c. R127m › Rate R185 per m² › GLA 12 400 m² › Occupancy 80% (CLA) STOR-AGE PROPERTY REIT LIMITED 34
Slide 35: Customer Acquisition Strategy
CUSTOMER ACQUISITION STRATEGY Demand cycle Segmented hyper Outstanding targeting online properties high visibility prime multiple channels locations Life happens Desktop Laptop Tablet Phone Stor-Age Consumption led Contact Centre economies Multi-channel – People acquire stuff online and phone Optimi
Slide 36: Contact Centre
CONTACT CENTRE Key stats • Full time staff 6 • Calls/online enquiries 50 000 + • Move-ins 3 500 + • Net Promoter Score¹ (‘NPS’) 71 Centralisation benefits • real time data driven decision-making • standardisation • quality control • directing online marketing efforts • pricing optimisation • targete
Slide 37: Digital Marketing
DIGITAL MARKETING Highly skilled, specialised and scalable • Significant capability › strategic advantage › effectively an in-house agency › specialists – organic, paid, social media Key platforms • Google, Youtube, Facebook, Instagram • Google – SEO, PPC, Local Maps • Organic – web PR, product vs.
Slide 38: Data and Technology – Quick Facts
DATA AND TECHNOLOGY – QUICK FACTS 335 000 + 11 m + 118 000 + 100 + c. R2m Web page views Ad impressions Organic website Google Digital marketing enquiries campaigns spend c. 8 000 235 000 + 37 000 + GOOGLE 84 000 + Key word bids Unique website Conversions – Assigned Account Facebook followers, daily
Slide 39: Outlook
OUTLOOK • Focus on short and medium term strategic objectives – driving occupancy, revenue and cash flow = earnings and dividends growth • Growth profile of portfolio and earnings attractive • Conservative capital structure • Established, scalable operating platforms in SA and the UK • Challenging l
Slide 40: Annexures
A. Trading environment – South Africa H. Valuation methodology ANNEXURES B. C. Trading environment – UK Income statement and earnings reconciliation I. J. Self storage 101 The market D. Net asset value and market capitalisation K. Self storage at a glance E. Schedule of properties L. Differentiators
Slide 41: Trading Environment – South Africa
TRADING ENVIRONMENT – SOUTH AFRICA Annexure A Latest Comparative period period CPI % y-o-y (March 18 vs March 2017) 3.8 6.1 GDP (Q1 2018 q-o-q growth) (2.2) (0.5) FNB/BER Consumer Confidence Index (Q2 2018 vs Q2 2017) 26 (5) RMB/BER Business Confidence Index (Q3 2018 vs Q3 2017) 45 40 Source: Stats
Slide 42: Trading Environment – South Africa (Continued)
TRADING ENVIRONMENT – SOUTH AFRICA (CONTINUED) Annexure A CPI INFLATION REAL GDP GROWTH 8 12 6 10 y-o-y % change y-o-y % change 8 3% - 6% inflation target band 4 6 2 4 0 2 -2 0 -4 BUSINESS CONFIDENCE INDEX CONSUMER CONFIDENCE INDEX 30 60 50 20 40 net % 10 30 0 20 -10 10 0 -20 Source: Trading Economi
Slide 43: Trading Environment – UK
TRADING ENVIRONMENT – UK Annexure B Latest Comparative period period CPIH % change y-o-y (March 2018 vs March 2017) 2.5 2.3 GDP (Q3 2018 q-o-q growth) 1.8 1.9 GfK Consumer Sentiment Index (March 2018 vs March 2017) (7) (6) CBI Business Optimism index (Q3 2018 vs Q3 2017) (4) 1 Source: Office for Nat
Slide 44: Trading Environment – UK (Continued)
TRADING ENVIRONMENT – UK (CONTINUED) Annexure B INFLATION REAL GDP GROWTH 6 1.5 5 1 4 0.5 3 0 -0.5 2 -1 1 -1.5 0 -2 -1 -2.5 BUSINESS CONFIDENCE INDEX CONSUMER CONFIDENCE INDEX 40 10 20 0 0 -10 -20 -20 -40 -30 -60 -40 -80 -50 Source: Trading Economics STOR-AGE PROPERTY REIT LIMITED 44
Slide 45: Income Statement and Earnings Reconciliation
INCOME STATEMENT AND EARNINGS RECONCILIATION Annexure C 31 Mar 31 Mar 31 Mar 31 Mar 2018 2017 2018 2017 Income statement R’000 R’000 R’000 R’000 Property revenue 310 177 166 663 Profit for the period 576 726 240 725 Rental income 295 359 158 801 Basic earnings 576 726 240 725 Other income 14 817 7 8
Slide 46: Net Asset Value and Market Capitalisation
NET ASSET VALUE AND MARKET CAPITALISATION Annexure D 4.5 1 400 4 1 200 3.5 1 000 3 2.5 800 Cents R’bn 2 600 1.5 400 1 200 0.5 0 0 Nov 15 Mar 16 Sep 16 Mar 17 Sep 17 Mar 18 Total NAV Market capitalisation Share price NAV per share STOR-AGE PROPERTY REIT LIMITED 46
Slide 47: Schedule of Properties – Listed Portfolio
SCHEDULE OF PROPERTIES – LISTED PORTFOLIO Annexure E Store name Address Province STOR-AGE BOKSBURG 37 View Point Road, Bartlett, Boksburg, Johannesburg Gauteng STOR-AGE CONSTANTIA KLOOF Cnr of Hendrik Potgieter and 14th Avenue, Constantia Kloof, Johannesburg Gauteng STOR-AGE GARSFONTEIN Plot 13 Gars
Slide 48: Schedule of Properties – Listed Portfolio (Continued)
SCHEDULE OF PROPERTIES – LISTED PORTFOLIO Annexure E (CONTINUED) Store name Address Province STORAGE RSA CONSTANTIA KLOOF 17 JG Strydom Drive, Constantia Kloof, Johannesburg Gauteng STORAGE RSA STELLENBOSCH 7 George Blake Street and 6 Stoffel Smit Street, Stellenbosch Western Cape STORAGE RSA DURBAN
Slide 49: Schedule of Properties – Managed Portfolio
SCHEDULE OF PROPERTIES – MANAGED PORTFOLIO Annexure E Store name Address Province STOR-AGE BROOKLYN Cnr of Jan Shoba & Justice Mohamed Street, Brooklyn, Pretoria Gauteng STOR-AGE IRENE Cnr of 40th Avenue & 24th Street, Irene, Pretoria Gauteng STOR-AGE MOOIKLOOF 738 Blesbok Street Pretoria East Gaute
Slide 50: Pipeline
PIPELINE Annexure F Total committed pipeline subject to town planning consent c. 71 000 m² Anticipated Site Location City Status GLA (m²) Prominent location on the corner of Main Under construction – scheduled to open in BRYANSTON JHB 6 100 and Vlok Roads July 2018 Highly visible location on Jan Smu
Slide 51: Our Customers
OUR CUSTOMERS Annexure G GEOGRAPHIC REPRESENTATION1 RESIDENTIAL / COMMERCIAL TENANT MIX BY GLA2 Gauteng 29 25 32 Western Cape Residential Eastern Cape KwaZulu Natal Commercial 2 Free State 8 2 United Kingdom 75 27 GEOGRAPHIC FOCUS RESIDENTIAL vs COMMERCIAL Primary focus = high profile locations Resi
Slide 52: Our Customers – South Africa
OUR CUSTOMERS – SOUTH AFRICA Annexure G AVERAGE LENGTH OF STAY1 REASON FOR STORING1 Business needs 16 Excess stuff 22 < 6 months 24 29 6 - 12 months Lifestyle choice > 12 months 3 16 Moving 11 1 2 - 3 years Marriage / divorce 2 17 Renovating 21 > 3 years 38 Other DEMAND PROFILE ‘NEEDS’ DRIVEN PRODUC
Slide 53: Our Customers – UK
OUR CUSTOMERS – UK Annexure G AVERAGE LENGTH OF STAY REASON FOR STORING Business needs 6 24 < 6 months 8 20 Excess stuff 31 2 6 - 12 months Lifestyle choice > 12 months Moving 10 15 2 - 3 years Marriage / divorce 18 > 3 years 42 7 Renovating 17 Other DEMAND PROFILE ‘NEEDS’ DRIVEN PRODUCT Two signifi
Slide 54: Valuation Methodology
VALUATION METHODOLOGY Annexure H • 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 capital
Slide 55: Self Storage 101
SELF STORAGE 101 Annexure I 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 d
Slide 56: The Market
THE MARKET Annexure J 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 capi
Slide 57: Self Storage at a Glance
SELF STORAGE AT A GLANCE Annexure K 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 ec
Slide 58: Self Storage at a Glance (Continued)
SELF STORAGE AT A GLANCE (CONTINUED) Annexure K 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 an
Slide 59: Differentiators
DIFFERENTIATORS Annexure L 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 (all properties) • Average le
Slide 60: 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
Stor-Age Property REIT — FY2018 Earnings Presentation on 6ix