Our business
Growth strategy
We conduct our strategic growth planning in five-year cycles. We are in the second year of our cycle ending 2020. We intend to grow the portfolio and enhance performance and investor returns by:
extracting organic growth through active revenue management, developing additional GLA and optimising the unit mix at the properties
leveraging our tenant management software platform to unlock value, drive cost efficiencies and entrench our competitive advantage
pursuing acquisitions in a fragmented industry, and consolidating our position as the leading and largest self storage brand in the South African market
actively managing and growing licensing, asset management and operator fee income from the development and ongoing management of the Managed Portfolio and pipeline
managing financial risk through prudent capital management policies
The strategy seeks to entrench Stor-Age as the market leader and largest self storage property fund and brand in South Africa:
- Largest store footprint
- Quality stores – high-profile locations, urban, urban-edge, and suburban
- Visible, convenient and accessible
- The benchmark for modern urban self storage development
To inform and optimise our strategy, we undertook four major research projects in 2015 focused on: supply levels; anticipated demand; customer profiling; and consumer demographics – the latter specifically to understand the emergence of the black middle class and its positive impact on the consumer profile.
Based on our research, we believe there is sufficient demand to develop a 60+ property portfolio across South Africa’s major cities, subject to there being no further significant deterioration in the economic outlook over the medium term.
DEVELOPING AND ACQUIRING PROPERTIES
developments
Stor-Age develops investment-grade self storage properties in visible, convenient and accessible locations where there are favourable demographics and where suitable acquisitions are not available. The decision is based on the cost of development versus the cost of acquisition, the demographic market analysis and the existence of barriers to entry. Our model for rolling out new properties and expanding existing ones is well developed with clearly defined key success criteria.
The expansion of our existing Gardens and Durbanville properties in the year will add approximately 5 500 m² GLA on full fit‑out.
During the year, we opened three new high-profile Big Box self storage properties in the Managed Portfolio. The new properties, in Sunninghill and Essexwold (Gillooly’s Interchange) in Johannesburg and Berea (Durban) offer a combined 24 500 m² GLA on full fit-out.
Acquisitions of existing self storage properties
As reflected by our successful acquisitions since listing, Stor-Age is well positioned to take advantage of value-add acquisition opportunities. Our ability to close transactions and integrate trading stores seamlessly onto the Stor-Age operating platform was demonstrated during the year by our acquisition of Storage RSA, the third largest self storage operator in the country, followed just after year-end by the acquisition of single-property operator, Unit Self Storage, in Cape Town.
The R475 million Storage RSA acquisition in February 2017 brought six trading stores on board, offering over 41 800 m² GLA across the Western Cape and Johannesburg. The portfolio also included a development opportunity of 4 800 m² GLA in Bryanston for which we have town planning approvals.
Unit Self Storage was added in May 2017 with its single property offering 5 300 m² GLA over two levels.
In June 2017, the group announced that it had entered into a memorandum of understanding to acquire the Durban-based multi-store operator, StorTown. StorTown trades from four locations and offers c. 22 000 m² GLA.
Barriers to entry and defensive nature
The barriers to new supply in key target nodes are significant. Because the industry historically centred in industrial or urban-edge areas, there is limited premium grade self storage assets in prime urban and suburban nodes, where population density and average household income are key.
Town planning presents a major challenge with long lead times required to gain planning consents. This in addition to the long lease-up period required to reach stabilised occupancy at new stores is a significant barrier to entry and contributes to the defensive nature of the portfolio.
