The new era of specialist real estate listings is no doubt in full swing, as more funds continue to list on the JSE.
The latest property counter intending to go public on the local bourse’s more than R500 billion real estate sector is self-storage property counter Stor-Age.
Investors will have access to the first storage real estate investment trust (Reit) on the main board through Stor-Age. The company believed to be the largest self-storage property fund in SA is eyeing a listing in November.
Stor-Age provides self-storage facilities – 80% to individuals and the balance to small businesses. It has more than 11 000 tenants who rent out storage units.
A successful listing of Stor-Age will bring JSE real estate listings to five so far this year. Arrowhead Properties’ pure residential-focused Indluplace Properties, UK-focused Capital & Regional, New Frontier Properties and Lodestone Properties have all listed this year.
Two other listings are pending: property developer Balwin Properties and UK-focused hotel fund International Hotel Group will list on October 14 and 15 respectively. In the past two years, the real estate sector has seen a listing boom, as 33 companies have listed.
Stor-Age will bring 23 properties worth R1.3 billion to market. Upon listing it expects a market capitalisation of R1.2 billion.
CEO Gavin Lucas says the listing is opportune given that Stor-Age has a first mover’s advantage in SA. “We believe the listing is creating a unique specialisation and we believe that this is a unique proposition,” says Lucas.
Storage Reits are firmly entrenched in the US, UK and Australia while SA is playing catch up. Global investors have raised concerns about storage Reits being vulnerable to economic headwinds and short-term leases of storage units. Says Lucas: “This asset class has traded very well in economic downturns over the last decade. It has a good track record.”
Stor-Age’s property portfolio has an 84% occupancy rate, an average rental rate of R73 per square metre on its average property size of 7 700 per square metre.
The listing of Stor-Age will be the tenth storage listing in the world, as the UK has five funds, the US three and Australia one.
It will embark on a private placement raising up to R715 million and later a capital raise for retail investors. Lucas says the proceeds from its private placement will be deployed in settling its existing debt to “create a bulletproof balance sheet”. This will enable it to conclude potential acquisitions and a property pipeline over the next two to three years. With a gearing level of 25% to 35%, this makes Stor-Age conservative given that the industry’s average is up to 40%.
It has a R1 billion pipeline of about 19 properties covering 145 000 square metres in Johannesburg, Pretoria, Cape Town and Durban. Stor-Age will have a 70% free float of its shares in which the original founders, the Lucas family, will hold about 30% of the fund post listing. JSE-listed Acucap Properties, which has been subsequently acquired by sector heavyweight Growthpoint Properties, helped Stor-Age assemble its property portfolio over the past five years.