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Stor-Age debuts on JSE

Real estate investors now have access to a self-storage fund.

After bedding down a listing as the JSE’s first self-storage fund, Stor-Age will now look to build scale through its pipeline of property acquisitions.

Investors now have access to Stor-Age which listed on Monday on the local bourse’s more than R680 billion real estate sector, ushering a new era of specialist listings.

The Real Estate Investment Trust (Reit) traded in a narrow range of R9.80 to R9.99, marginally below its IPO offer price of R10. The stock was 0.20% higher to R9.91 on the day.

Grindrod Asset Management chief investment officer Ian Anderson says Stor-Age was priced at the very top-end of even the most optimistic valuation ranges.

“As a result, there is significantly more value away from Stor-Age in the South African listed property sector at the moment and it comes as no surprise Stor-Age is trading below its IPO offer price on fairly large volumes,” says Anderson. The stock saw about 2.5 million share volumes.

While listed storage funds are firmly entrenched in the US, UK and Australia, Stor-Age is SA’s foray into the sector.

Besides Stor-Age, there have been six more real estate listings so far this year. Arrowhead Properties’ pure residential-focused Indluplace Properties, UK-focused Capital & Regional, New Frontier Properties, Lodestone Properties, Balwin Properties and International Hotel Group have all listed this year.

Other soon-to-be-listed property counters include Schroder European Real Estate Investment Trust and Mara Diversified Property Holdings, assembled by Pivotal Property Fund.

Stor-Age provides self-storage facilities – 80% to individuals and the balance to small businesses. The company brings 23 properties worth R1.3 billion to the market. It has more than 11 000 tenants who rent out storage units, with a property portfolio that has an 84% occupancy rate and an average rental rate of R73 per square metre on its average property size of 7 700 square metres.

Its growth ambition is to conclude a R1 billion acquisition property pipeline of 19 properties covering 145 000 square metres in Johannesburg, Pretoria, Cape Town and Durban. The first tranche of assets are expected to be transferred by early next year.

CEO Gavin Lucas says eight of the 19 properties are already built and trading. The timeline for the balance of assets to be transferred is fluid, as this depends on the broader macroeconomic environment and shareholder appetite for more assets, says Lucas. A combination of debt and equity will be used to fund its pipeline, given its gearing of 10%, compared with the sector’s average of 40%. 

“This [gearing] gives us headroom to raise debt,” he says.

Before listing, Stor-Age embarked on a capital raise of approximately R1.02 billion from selected institutional investors – above its targeted R715 million. Its proceeds were largely used to pay its debt of R800 million, reducing its gearing which was 25%.

The remaining proceeds were used to settle the sales proceeds owing to partners Growthpoint Properties and Fairstore Trust, as each sold its respective 100% and 68% interest in Stor-Age to accommodate the pre-listing capital raise.  

The listed property manager for Old Mutual Investment Group’s MacroSolutions boutique Evan Robins says self-storage is an interesting specialised sector where listed funds have no exposure. He adds on the management team: “A young entrepreneurial management built this company up to where it is today [to be] one of SA’s major self-storage players.”

Expected to trade at a forward yield of around 8%, Stor-Age will still be an affordable play in listed property compared with the sector’s 7%. It is eyeing growth of 10% in dividend payouts to income-hungry investors in the next three to five years.

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Stor-age purchase may turn into a stor-aged investment since it is trading well fairly below IPO and hence low liquidity and investment case merit.

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