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Growth Strategy

Our growth strategy*

Since listing in November 2015, the Group has consistently delivered on all strategic initiatives and grown the portfolio from 24 to 85 properties, representing approximately R9.8 billion in value. The South African portfolio comprises 55 properties and represents a value of c. R4.85 billion, while the UK portfolio under the brand Storage King, comprises 30 properties and represents a value of c. R5 billion.

We conduct our strategic growth planning in five-year cycles. We are currently in the second year of the cycle ending 2025, and have undertaken strategic and meticulous planning for the five-year period. A key focus remains our digital transformation strategy which significantly influences our business strategy.

We intend to continue growing the portfolio and enhancing performance and investor returns by:

Our growth strategy 2021

Our growth strategy for the South African market

The strategy seeks to maintain Stor-Age’s position as the leading and largest self storage property fund and brand in South Africa:

  • Largest store footprint
  • Quality stores in high-profile and convenient locations
  • Prominent and easily accessible
  • The benchmark for modern, urban self storage development

To inform our strategic cycle to 2025, in 2020 we revisited the four major research projects completed in 2015 with a specific focus on supply levels, anticipated demand, customer profiling and consumer demographics. These projects give us key insights which inform and optimise our growth strategy, allowing us to better understand our residential and business customers, and anticipate future demand.

While we see an opportunity to acquire existing properties, our new development strategy is detailed, with a focus on high barrier to entry areas in our core markets. Our plan to 2025 includes growing the South African portfolio to 70+ properties.

Our growth strategy for the UK market

Our business plan for Storage King is guided by our strategic and long-term focus on growing and optimally positioning our UK property portfolio and continuing to leverage our high quality in-place self storage management platform.

During the year, we continued to focus on key high-impact foundational areas to position Storage King optimally for future growth. We continued to make significant progress in integrating key South African-based head office support services into the Storage King platform. In addition to the property strategy outlined below, we continued to see the positive impact on enquiry generation during the year as a result of successfully leveraging our digital marketing capability into the UK.

Our five-year strategy for the UK market to 2025 seeks to grow the portfolio through a combination of acquiring existing self storage properties, developing new properties in key target areas and adding trading properties to our third-party management platform – Management 1st. We have identified a growth target of an average of two to four properties per annum.

Key features of the medium-term growth plan include:

Acquiring existing self storage properties that meet Storage King’s acquisition criteria:

Developing investment grade self storage properties in prominent, visible, convenient and accessible locations:

  • Good locations in strategic and regional cities
  • Within/close to attractive urban or suburban nodes
  • Ideally within/close to a retail corridor
  • Ideally located with main road frontage to passing traffic
  • 35+ operators identified
  • Minimum requirements targeted
    • 30 000+ sqf maximum lettable area (MLA)
    • 75 000+ population, 20 minute drive time
  • Key locations in strategic and regional cities
  • Big Box (greenfield) – high density retail or commercial type nodes, within attractive urban/suburban areas and with main road frontage to passing traffic (typically multi-storey, three+ floors)
  • Conversions (brownfield) – conversion of existing buildings in retail or commercial type nodes in close proximity to dense urban areas
  • Minimum requirements targeted
    • 45 000+ sqf MLA
    • 100 000+ population, 20 minute drive time

Development JV

In October 2020, Storage King entered into a joint venture with Moorfield, a leading UK real estate fund manager, to develop a portfolio of self storage assets with an initial value of approximately R1.1 billion (£50 million) and with the potential to increase to over R2.2 billion (£100 million). The UK-focused development JV, which provides Stor-Age with a significant platform to execute its strategic growth plans in the UK over the medium term, will enable the Group to develop a portfolio of self storage assets, focused on London and the South East of England.

The key terms of the JV are set out below:

  • Initial equity contribution of £25m
  • Target to achieve approximately 50% loan to cost for new developments
  • Equity capital contributions will be in the ratio 75.1:24.9 (Moorfield:Stor-Age)
  • Separate SPVs will be set up for each new development
  • All newly developed properties will be managed by Storage King under Management 1st
  • Storage King will earn management fees for acquiring, developing and managing the assets
  • Storage King will have a pre-emptive right to acquire all newly developed assets once certain predefined operating criteria have been met

Leasehold ownership

Storage King maintains a flexible approach to leasehold and freehold property ownership, which enables it to grow the business, secure prime locations and position the portfolio optimally.

While Storage King’s approach to leasehold property valuation is based conservatively on future cash flows until the next contractual lease renewal date, it has a demonstrable track record of successfully regearing leases several years before renewal. Storage King benefits from the Landlord and Tenant Act, which protects its right of renewal except in the case of redevelopment. In addition, the vast majority of Storage King’s leasehold properties are located in retail parks and/or have building characteristics that make their current usage either the optimal or best use of the property.

Furthermore, as property investors, Storage King’s landlords value the quality of Storage King as a tenant and often extend the length of the leases in their portfolios. This enables Storage King to maintain favourable terms.

Ultimately, maintaining a flexible approach to leasehold ownership as part of a broader portfolio assembly strategy has allowed Storage King to operate from properties that would otherwise have been unavailable.

Our future growth strategy

Stor-Age is a sector specialist with deep product understanding and significant emerging and first world market experience, boasting a successful track record of developing, acquiring and managing self storage assets. Driven by societal trends including consumerism, densification and an increasingly mobile population, self storage remains a resilient niche sector with excellent growth opportunities globally.

We continue to see attractive opportunities to grow our portfolios in South Africa and the UK. The strategy will see us continuing to target value enhancing independent operators for acquisition, while new developments will principally be targeted at prominent high-barrier-to-entry big-box properties in outstanding locations.

* As at 31 March 2022