South Africa’s largest self-storage property fund Stor-Age announced on Wednesday that it is part of a new R1.1 billion joint venture (JV) with UK real estate fund manager Moorfield Group.
The JSE-listed group, which already has an extensive portfolio of these property assets in SA and the UK, says it has finalised the terms of the JV with Moorfield to develop a portfolio of self-storage assets in the UK.
While the initial value of the new JV is £50 million (approximately R1.1 billion), the group noted that there is potential to increase this to over R2.1 billion.
“The UK-focused development JV, which provides Stor-Age with a significant platform to execute its strategic growth plans in the UK over the medium-term, will enable the company to develop a portfolio of self-storage assets, focused on London and the South East of England,” Stor-Age said in a statement.
The group also pointed out that Moorfield has a 25-year track record of investing across most UK real estate sectors.
Branding and management
“All properties [in the JV] will be branded and managed by Storage King as part of Management 1st, a comprehensive third-party management solution which the group launched in September 2019 for independent operators, developers and private equity owners in the UK,” Stor-Age added.
“Stor-Age’s UK property growth strategy includes acquiring existing trading self-storage properties from third-parties, new developments and the introduction of Management 1st.
“In addition to having a pre-emptive right to acquire all newly developed properties once certain predefined operating criteria have been met, Storage King will also earn management fees for acquiring, developing and managing properties in the JV,” in said.
Stor-Age CEO Gavin Lucas that the group is delighted to have agreed final terms with Moorfield.
“We look forward to developing and assembling a portfolio of high profile self-storage properties in prime locations in the UK.
“The UK market represents an exciting growth opportunity and by partnering with Moorfield, we are now both well placed to achieve our multi-year strategic growth objectives together,” he added.
Commenting on the deal, Moorfield CEO Marc Gilbard said: “As a specialist alternative real estate investor with a track record of generating strong returns from the timely recognition and discerning exposure to sectors benefitting from changing demographic and societal change, the UK self-storage sector is a natural fit for our investment portfolio.”
He described Stor-Age as “a best-in-class partner” whose operational and origination expertise would enable Moorfield to both access the self-storage sector and then scale up its portfolio.
According to Stor-Age, Moorfield is “well known as a vanguard investor in emerging sectors” having pioneered investment in student accommodation, the build-to-rent market and developments focused on senior living.
“Moorfield also has an extensive track record in successfully identifying evolving investment themes in the office and industrial/logistics sectors,” it noted.
“The JV is in advanced discussions on a number of acquisitions, leveraging Storage King’s established relationships and industry experience to secure opportunities. The pipeline comprises a mix of subject-to-planning development sites, turnkey developments and existing investment asset,” Stor-Age added.
Update ahead of interims
Stor-Age has also provided a business update ahead of the announcement of its interim results to the end of September.
“Despite high levels of uncertainty around Covid-19 and the impact of the pandemic, the company expects interim distributable earnings to be approximately R220 million, growing by an estimated 3% from the prior year comparable period,” it said.
The company expects its interim dividend per share to be approximately 52 cents, compared to 54.89 cents in the prior year interim period.
Stor-Age noted that it has continued to deliver a robust operating performance over the last six months in both the South African and UK markets.
“Since March 2020, group occupancy has increased by 10 000m², while enquiries achieved in SA and the UK were up by 14% and 19% respectively over the same period,” it said.
“The high levels of demand experienced, together with the growth in occupied space, continue to support the self-storage investment theme of resilience and the ability of the sector to outperform during an economic downturn relative to the broader property market,” the group added.
In the six-month period ending September, Stor-Age said that it had collected 96% and 98% of rental due in SA and the UK respectively.