CAPE TOWN- JSE REIT Stor-Age, the storage property fund in South Africa, will shortly enter the UK self storage market with an estimated R1.3 billion acquisition of the region’s sixth largest self storage operator, Storage King.
The acquisition is in line with Stor-Age’s stated strategy of targeting international self storage markets with attractive growth potential to complement its ongoing success in the South African market. The Storage King transaction is expected to conclude in October 2017.
Stor-Age CEO Gavin Lucas says Storage King represents an excellent entry point into the UK market and springboard for future off-shore expansion. “Storage King offers established critical mass through a high quality portfolio, proven local expertise and a track record in self storage with consistent earnings growth, especially over the last three years. This provides us with a strong and scalable platform, with in-place management, for future growth and expansion.”
The REIT will settle the c. £77.13 million purchase price (R1.3 billion) through an optimal mix of equity and debt at Stor-Age’s election. Stor-Age has negotiated for a refinanced £25 million debt facility in Storage King, which will effectively see Stor-Age pay a purchase price of c. £53 million (c. R887 million) for 97.3% of the issued shares in Storage King (with the balance of the shares being acquired by management of Storage King on the same terms). The specialist and experienced Storage King management team will remain in place and co-invested with 2.7% alongside Stor-Age going forward.
Explaining the UK as the REIT’s first port of international departure, Lucas says: “Self storage is a growth sector globally, not only in emerging markets but also in the first world. The UK self storage market is a significant growth opportunity - it offers a more robust macro environment but with a relative undersupply of self storage compared to the US and Australia, and a language, culture and regulatory system familiar to us in South Africa. Even approaching Brexit, self storage remains an attractive investment in the UK due to the proven resilience of the sector.”
Since listing the REIT has consistently exceeded the distribution forecasts in its listing prospectus.The share closed yesterday at R11.60.