introducing stor-age

Chairman’s letter

Since listing in November 2015, Stor-Age has continued to deliver an excellent financial performance, exceeding expectations and consistently meeting all our financial and strategic milestones.

Maintaining the growth trajectory and track record of delivery

Stor-Age continued to deliver real gains in rental rates and occupancies, both key drivers of sustainable growth in returns. This result was achieved in a difficult operating environment, clearly seen in the weaker performance of many of our sector peers. The group’s acquisition of StorTown and strategic entry into the UK with the acquisition of Storage King are both evidence of our ability, as sector specialists, to grow the business in challenging market conditions by identifying and executing opportunities that add long-term value to Stor-Age.

Investor interest was affirmed by the significantly oversubscribed bookbuild to fund the UK acquisition. Initially looking to raise R900 million, strong demand increased the amount of equity raised to the maximum allowable value of R1.27 billion.

This reflects investor confidence in the group’s performance and our successful track record of acquisitions to date, and pleasing support for our growth strategy, which has been well articulated by the management team.

The group’s entry into the UK presents an excellent growth opportunity relative to more established markets, such as Australia and the United States. To this end, our balance sheet capacity, flexibility, and still low level of gearing post-acquisition of Storage King will enable us to pursue further selected development and acquisition opportunities that meet our investment criteria.

With more than a decade of experience successfully acquiring, developing, leasing and operating self storage assets, Stor-Age has established itself as a leading and dynamic sector specialist. The group is well positioned to maintain its strong growth trajectory – with an ambition to outperform the sector and its own benchmarks.


1 Includes All-Store – acquired 6 April 2018

Stor-Age is the market leader in South Africa and one of only nine publicly-traded self storage REITs globally. Our business model is based on global best practice and strong networks with leading first-world market peers. Since listing, our shareholders have enjoyed increasing earnings and dividend flows, supported by consistent growth in net asset value.

The value of our portfolio has increased from R1.33 billion to R3.85 billion, and market capitalisation has almost trebled to R3.9 billion as at 31 March 2018. At the same time, the number of properties in the REIT has increased from 24 at listing to 501, all of which provides compelling evidence of business scalability

1 Includes All-Store – acquired 6 April 2018

Creating value and meeting demand

Underpinned by a high-quality property portfolio, the recession-resilient nature of self storage sustains the business through the different economic cycles. The product remains flexible and needs-based, meeting the demands of customers from different market segments, whether they are scaling up or down in response to changing economic or personal circumstances.

The core demand drivers for self storage are set to continue – accelerated by consumption-led economies. Urban crowding, an emerging middle class, and the trend toward security living create demand for space in a space-limited economy. The digital age has also seen a rise in the number of online start-ups requiring adaptable storage options when growing or downsizing their businesses.

The same social and built-environment trends propelling self storage in South Africa are evident in the United States, UK, Europe and Australia. Over the past twelve years, the group has established a purpose-built, high-quality portfolio to meet these demands. This is supported by a sophisticated operational platform, a strong administrative capability and a highly skilled digital marketing team, ensuring that we deliver unrivalled value and service to our customers, locally and in the UK.

The resilience of self storage is evidenced by more than 24 500 new tenants moving into our South African and UK properties during the year.

1 Listed Portfolio South Africa

Self storage industry trends

South Africa’s self storage industry

The South African self storage industry is well established and fast developing. However, it remains relatively young in comparison to first-world market peers, with a number of market cycles still to evolve.

Over the past 18 months, the group has seen the early stages of development of good-quality self storage properties in sought-after locations across the country (excluding Stor-Age). We anticipate we will see a reinvestment of self storage industry capital into the market by previous vendors.

We are positive about both trends. We envisage the development of new self storage properties will supplement our pipeline of local acquisition opportunities over the medium term as we continually look to consolidate.

While self storage is an attractive sector in terms of economic return, barriers to entry in key target locations remain significant. To this end, we are confident in the skills of our management team who have demonstrated their ability to identify and execute on strategic opportunities when they present themselves. Combined with our position as dynamic sector specialists, our development, acquisition and integration capabilities provide a distinct competitive advantage, supported by a strong balance sheet.

Operating in a global self storage market

Self storage remains a growth sector globally. In the UK, occupancy growth and increasing profits indicate demand is growing faster than supply. This is despite supply levels increasing by approximately 2.4 million square foot (sqf) or 70 new properties in 20171.

With more than 1 500 self storage properties1, it is our view that the UK market is more than 10 years ahead of the South African market in its life cycle and stage of development. However, it is a growing and undersupplied market relative to many of its peers. With approximately 30% of UK self storage properties owned or managed by large operators (10 or more properties)1, we believe the UK displays attractive consolidation opportunities over the medium term. For more information on the UK self storage industry, refer to Introducing Storage King.

While Brexit has created uncertainty in the UK, the strength of the self storage sector has ensured the industry continues to perform attractively. This is evidenced by 2% and 8% growth in average rental rates and the total amount of space used by customers in 20171.

Oxford Economics has provided a reasonably confident outlook for the UK economy, forecasting growth of 1.8% in 2018 and 1.6% in 2019. Despite this, we remain vigilant in monitoring the UK operating environment and are prepared for any shifts that could negatively impact growth.

Post-acquisition of Storage King, approximately 35% of our business is exposed to UK property assets. We envisage that over the short to medium term, our UK asset exposure will remain in the target range of approximately 30% to 40%. Stor-Age remains a South Africa-focused business, with the added benefit of a significant portion of our underlying earnings serving as a hard currency Rand-hedge from an attractive growing first world market.

Performance backed by solid governance

At Stor-Age, our decision-making is guided by our four Core Values of Excellence, Sustainability, Relevance and Integrity.

We are aware that our actions taken today will have an impact on the risks and opportunities that present in the short and medium term. This is particularly relevant to the sustainability of Stor-Age – a relatively young business that is continuing to grow and evolve.

Understanding the impact of this growth on our organisation and employees therefore remains top of mind at board and executive level.

We work tirelessly to ensure our organisational structures and employees are equipped to grow in tandem with our business. This includes, for example, our ongoing investment in employee learning and development, and our strategic focus on technology.

As discussed in more detail in our growth strategy, our growth strategy is on track to 2020 – and the group is already in the process of formulating our thinking towards 2025. This will ensure that, when the time comes, we are appropriately positioned to deal with the task at hand.

With regard to governing a multinational business, we have established a clear framework of authority to guide our decision-making within the context of a well-defined medium-term strategy for our UK business.

In South Africa, the board made significant progress on our transformation journey. We launched a detailed three-year transformation plan, effective April 2018. This plan will assist us in our quest to achieve compliance with the recently amended Property Sector Code, which supports transformation within the property sector. Read more about this plan in our corporate governance report.

We also welcome two new members to our board – Phakama Mbikwana and Kelly de Kock. In addition to adding diversity, we look forward to their contributions to the skill set, expertise and independence of the board.

In line with our Core Values, the board and executive team promote and support ethical standards of business conduct and corporate governance. We endorse the principles of King IV™, and more information about our application of King IV™ can be found in our corporate governance report.

The board further undertook a detailed self-evaluation during the year, a process that was managed and co-ordinated by our independent auditors. Each board member was given an opportunity to comment on eight key performance areas, expanded into 40 specific questions around the functioning of the board. Members were also given the opportunity to comment on the performances of their peers across a number of relevant categories. Some very helpful insights emerged from this process, and these will undoubtedly help to strengthen the board’s performance and competence.

Outlook and thanks

With an excellent portfolio, a robust and sophisticated operational platform, and a pipeline of exciting acquisition opportunities, Stor-Age is well positioned across the South African and UK markets to continue to deliver attractive, risk-adjusted growth in distributions and underlying portfolio value.

I would like to thank my fellow non-executive directors, and congratulate the management team and all employees on another successful year. Thank you for the energy, commitment, skill and competence you bring to the operation of this business.

Guided by a well-articulated vision and mission, the disciplined execution of Stor-Age’s strategy continues to cement our position of market leadership, and we remain excited about the group’s growth prospects, to the benefit of all stakeholders.

Paul Theodosiou


11 June 2018

1 The Self Storage Association UK Annual Industry Report, 2018.