JSE Reit Stor-Age in joint venture with UK's Moorfield
CAPE TOWN – JSE Reit Stor-Age, South Africa’s largest self-storage property fund, has entered into a joint venture (JV) with UK real estate fund manager Moorfield to develop self-storage assets worth R1.1 billion (£50 million), with the potential to increase to more than R2.1bn (£100m).
Stor-Age also provided a business update on Wednesday, saying it expected interim distributable earnings to grow by about 3 percent to about R220m in the six months to end-September. The interim dividend per share was expected to be about 52 cents compared with 54.89c in the prior year period.
Moorfield Group (Moorfield), has a 25-year track record of investing across most UK real estate sectors.
The UK-focused JV provided Stor-Age with a platform for its growth plans in the UK over the medium-term and would enable it to develop a portfolio of self-storage assets that were focused on London and the South East of England.
All properties would be branded and managed by Storage King as part of Management 1st, a comprehensive third-party management solution which Stor-Age launched in September 2019 for independent operators, developers and private equity owners in the UK.
Stor-Age’s UK strategy includes acquiring existing self-storage properties, new developments and the introduction of Management 1st.
In addition to having a pre-emptive right to acquire all newly developed properties, Storage King would also earn management fees for acquiring, developing and managing properties in the JV.
Stor-Age chief executive Gavin Lucas said the UK self-storage market was an exciting growth opportunity and by partnering with Moorfield, they were now both well placed to achieve their multi-year strategic growth objectives together.
Moorfield has pioneered investment in student accommodation, Build-to-Rent and senior living, building on its track record of identifying evolving investment themes in the office and industrial/logistics sectors.
Moorfield chief executive Marc Gilbard said in a statement that the UK self-storage sector was a natural fit for their investment portfolio.
“Replicating the strategy of our recent nursing and dementia care-home partnership, we have selected a best-in-class partner whose operational and origination expertise will enable us to both access the sector and then scale a portfolio in a meaningful way,” he said.
The JV was in advanced discussions on a number of acquisitions comprising a mix of subject-to-planning development sites, turnkey developments and existing investment assets.
Lucas said Stor-Age had continued to deliver a robust operating performance over the past six months in both markets, despite the devastating economic consequences of the Covid-19 pandemic and the challenges from lockdowns in South Africa and the UK.
Operational focus and discipline at a property level, supported by the specialised digital marketing platform, enabled Stor-Age to extract occupancy and revenue growth in South Africa and the UK, he said.
Since March 2020, group occupancy had increased by 10 000m2, while inquiries achieved in SA and the UK were up by 14 percent and 19 percent respectively.
In South Africa, year-on-year occupancy grew by 11 500m2, while in the UK occupancy grew by 14 500m2 year-on-year. Excluding the Flexi Store portfolio acquisition in December 2019, occupancy increased in the UK by 1 500m2.
In the six-month period ending September, the company collected 96 and 98 percent of rental due in South Africa and the UK, respectively. Collection of rent and recovery of debt remained a key focus area.
Stor-Age was well capitalised with a strong balance sheet.
Loan to value of about 30 percent remained within the 25 to 35 percent target range and provided
headroom to navigate the period of uncertainty.
Lucas said the dislocation caused by the pandemic had manifested itself in many “life-changing events”, a primary driver of demand for self-storage.
As at September 30, Stor-Age had a development pipeline of eight properties, which would add an estimated 53 000m2 of gross lettable area at a cost of about R740m.
Stor-Age shares closed 0.83 percent higher at R12.09 on the JSE on Wednesday.