OUR PERFORMANCE
CEO’s Report
31 March 2017 marks the first full year for Stor-Age trading publicly as a JSE-listed REIT following the previous decade of trading privately. Stor-Age’s listing brought a low-risk, income paying specialist REIT to market.
We are pleased to report another set of attractive results reflecting our disciplined execution of the strategy and the ongoing management of our portfolio.
We added to our track record of developing new properties and acquiring and integrating trading stores seamlessly into our portfolio this year by expanding our Gardens and Durbanville properties; acquiring Storage RSA; and opening three new high-profile Big Box properties in our Managed Portfolio.
Since opening our first property in 2006, our entrepreneurial management team with its in-depth understanding of the property and self storage markets has proven an ability to manage and grow the business in different markets and varying economic cycles.
OUR PERFORMANCE
Our total shareholder distribution of R131.1 million translated into a distribution per share of 88.05 cents, representing 10% annualised growth compared to the prior period’s 30.07 cents (four-and-a-half-month trading period to March 2016). The distribution growth was supported by the12.7% closing rental rate growth to R86 per m², and an increase in occupied space of 37 700 m².
The business remains highly resilient, driven by self storage sector fundamentals. Need will motivate demand whether in a healthy economic environment or the current constrained one. People continue going through life-changing events and businesses still require space on a flexible basis, whether for upscaling or downscaling.
We remain at the forefront of the sector in South Africa as the top self storage operator by lettable area, number of properties, number of tenants, value, and an exceptional geographic footprint.
Growing our property portfolio
Self storage is the built environment’s response to society’s needs, and is an exciting growth sector, not just in South Africa and similar emerging markets, but across first-world markets such as the US, Australia and the UK.
South Africa
Stor-Age seeks investment opportunities where we can achieve strong market penetration, leverage and further benefit from our economies of scale, enjoy limited competition and produce high operating margins. Our property growth strategy, while aggressive in its targets, is tempered with a commitment to high-quality self storage assets. We believe that, in focusing on assembling a portfolio at the quality end of the spectrum, we will not compromise the sustainability of our business by chasing short-term growth targets.
Our plan sees us growing through a combination of acquisitions of existing self storage properties from third parties (directly into Stor-Age) and developing new self storage properties.
Driven by the acquisition of Storage RSA, our investment property increased by R680 million to R2.050 billion this year. The location and quality of the Storage RSA properties, coupled with a strong employee complement and attractive brand, presented an opportunity to both grow and strengthen the Stor-Age business immeasurably and represented a rare acquisition opportunity in the South African self storage market.
The R475 million portfolio comprised six trading stores with excellent property fundamentals, including prime locations and with high-quality buildings, and one development site in Bryanston with town planning approvals. The Storage RSA acquisition has enlarged our high-quality and defensive portfolio of prime self storage assets and will contribute significantly to our strategy of creating attractive and sustainable long-term returns for our shareholders.
While our growth in the medium to long term will continue to come through both acquisitions and developments; in the short term, we envisage continuing to grow the portfolio with high-quality complementary asset acquisitions.
Given the limited supply of prime self storage properties in our primary urban and suburban target nodes, we will continue to focus our efforts on developing new self storage properties in the medium to long term.
INTERNATIONAL
Since 2007, we have spent time in the more developed self storage markets in the US, Australia and the UK. These markets help inform our South African business plan. Our insight is strengthened by our extensive peer networks of medium to large scale self storage operators in these markets.
As self storage is a young market, even in these first world countries, we are confident that an opportunity to enter one or more of these markets may arise in the short to medium term.
OUR PEOPLE
Our strong performance for the year was in large part attributable to the efforts of our loyal, dedicated and high-calibre employees. Our people are critical to our strategic objectives. Our distinct non-hierarchical structure, with fully accessible management, endeavours to reward everyone for their contribution to our success.
Our people and our sophisticated, decentralised platform are two key drivers of our long-term success. During the year, we rolled out a new e-Learning program which will streamline communication between our head office and store-based employees to continue knowledge transfer and business and service development.
We are fortunate to have an exceptional team of highly committed and passionate individuals who work to build on the legacy of the family business that lies at the heart of our company.
Outlook
Our current five-year growth plan, now in its second year, sets broad targets to 2020 but, more importantly, details the strategic plan of ’how’ and ’where’ we intend on executing high-quality acquisitions and new developments in order to continue to strengthen and grow our asset base.
With the benefit of a core product that continues displaying its recession-resilience, and a healthy, conservatively geared and hedged balance sheet, Stor-Age is well positioned to continue withstanding the tough economic trading conditions prevailing in South Africa.
Delivering our second set of attractive results in a sector which continues to grow, Stor-Age is well positioned to move forward in a sustainable manner. We remain excited about the future of Stor-Age and believe in the sustainable growth potential of our business.
Gavin Lucas
CEO
13 June 2017