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Investment Positives

The Top Operator (By m², Number Of Properties, Number Of Tenants, And Value) With Superb Geographic Representation

Stor-Age is the largest owner operator of self storage properties in South Africa, with an attractively diversified portfolio positioned in prime urban and suburban locations throughout South Africa’s six main metropolitan cities – Johannesburg, Pretoria, Cape Town, Durban, Port Elizabeth and Bloemfontein.

Self storage is a niche sub-sector of the broader commercial property market. Stor-Age is well ahead of any other competitors in the South African market in terms of scale.

Stor-Age’s unique best of breed portfolio and market leading positioning both combine to form an attractive long term growth outlook. As the largest operator, Stor-Age will continue to capitalise on the benefits of scale through acquisitions. With its outstanding locations, excellent quality buildings (functional and purpose-built), big branding, top quality customer service, sophisticated on-line reservation platform, centralised contact centre, scale, good NOI growth and very low capex – Stor-Age is exceptionally well positioned.

Potential Consolidation/Acquisition Opportunities, With Balance Sheet Capacity To Deliver

In a fragmented industry with many single asset (or small portfolio) operators, Stor-Age has the opportunity to grow through acquisitions. Stor-Age has significant balance sheet strength to deliver on any potential acquisition opportunities and it is well positioned to integrate any new acquisitions seamlessly into the operational management and trading platform.

Management Has Built The Portfolio From Scratch

The Executive Management team has demonstrated an ability to manage and grow the business over the last 10 years in a variety of different markets and economic cycles. Highly entrepreneurial, the executive team is relatively young by industry standards, however well respected by their peers for displaying an in-depth understanding of the dynamics of both the property and self storage markets. The team has an outstanding track record of developing new properties, acquiring trading stores and integrating them seamlessly into the platform, whilst managing the portfolio within a set strategy. The strong brand and high quality portfolio are backed by talented management who have significant interests in the business.

With the track record to back it up, management have successfully made a highly specialised strategic play in the self storage sector. Strategically they have the additional benefit of having developed deep international self storage industry networks.

Founded by executive management in 2005, Stor-Age is the ‘blue-chip’ for quality in the South African self storage industry. All properties in the portfolio are freehold (except for three long leases - all 40 + years and notarially registered), purpose-built facilities in prominent locations concentrated in SA’s four main cities – Johannesburg, Pretoria, Cape Town and Durban.

Sophisticated Operating And Management Platform

The business is highly scalable with a sophisticated and scalable centralised operating and management platform that provides operational, marketing, human resource, facilities management and financial support to the portfolio.

A state-of-the-art web-based tenant management software platform enables the management team to analyse, set and adjust rental rates in real time across the portfolio in order to respond to changing market conditions. The centralised platform will provide economies of scale and cost efficiencies as the portfolio grows.

Market Leading Brand

Stor-Age’s focus on the location and visibility of its properties, together with excellent customer service and a leading online platform, has created the largest and most recognisable brand in the South African self storage industry.

More than half of all enquiries are generated off the internet, and Stor-Age has the second largest social media following of all peers across the world.

The strength of the brand is underpinned by a marketing strategy which aims to drive customer response through multiple platforms by focussing on customer service and selling standards at a property level.

Brand awareness has been achieved in the target customer groups throughout South Africa’s major cities, supported by the strategy to target high profile locations, with the high profile Big-box flagship self storage properties particularly aiding in this regard. Customer service standards are measured through a programme of mystery shopper and customer satisfaction surveys. The introduction of customer satisfaction surveys at point of move-in and move-out has led to improved insight into the customer experience which has been used to improve the product offering.

Digital Platform And Online Presence

Stor-Age has embraced digital initiatives and online search engine optimisation (SEO) to put it at the forefront of the industry. Fulltime SEO consultants and/or agencies are employed to ensure that Stor-Age maintains its leading ranking for the most popular and searched terms by using both paid for and organic listings. Social media is used as a complimentary measure to existing marketing channels to further strengthen the Stor-Age brand. The website aims to educate browsers and communicate that Stor- Age has high quality properties and offers the most favourable value proposition in the self storage market. The internet continues to be an increasing source of prospects and is currently the number one generator of new enquiries.

Dedicated National Contact Centre And Bespoke Online Reservation System

Stor-Age has a dedicated contact centre and an industry leading online reservation system. The contact centre currently manages all overflow calls and web enquiries from the individual properties. It is staffed by a team of trained operators enabling increased productivity and effective scalability as more properties are acquired or developed in the future.

The online reservation system includes a real time pricing model and allows customers to obtain a quote, reserve a self storage unit and pay the reservation fee. Online enquiries are integrated with the tenant management operating system to ensure that all enquiry details are recorded in real time.

Self Storage Is A Well-Established Reit Asset Class In Offshore Markets With Precedent Of Valuation Premiums

Global REIT investors are familiar with self storage metrics and through-cycle performance. The US self storage REIT sector has an established track record of tighter implied cap rates, higher FFO multiples and overall outperformance versus the broader US REIT sector.

Markets such as the US and UK have well established market leaders in self storage - the US example shows self storage has had a strong historical performance versus the broader REIT sub-sector. Operators such as Public Storage (US) and Big Yellow (UK) have traded at P/E premiums to their respective markets, and the broader self storage REIT sub-sector in the US has shown it has consistently traded at tighter implied cap rates, price-to-FFO premiums, price-to-NAV premiums and performed stronger overall in recent years. More recently the Australian market had its first listing in the self storage sector on the ASX, with National Storage coming to the market successfully in December 2013.

Operating fundamentals - solid net operating income (‘NOI’) growth and low ongoing capex (relative to traditional commercial real estate) have made self storage a great business in the US in recent years - the public market now understands self storage’s capex/NOI growth profile which has driven sizeable premiums to asset values (i.e. share price vs. NAV).

Barriers To New Supply In Key Target Nodes Are Significant

The barriers to new supply in key target nodes are significant. It is difficult to develop new self storage properties in high end locations.

Town planning presents a major challenge - unique and specialised skill sets are required in order to obtain town planning consents for new self storage properties in high end locations. Together with this, the town planning process requires lengthy periods of time. Developing small footprint (< 4,000 m² erf size) multi-storey (four levels +) self storage properties is foreign territory for current operators in the South African self storage sector outside of Stor-Age (note that this style of development is significantly different to the traditional model of ground or ground plus one level self storage properties being developed in industrial and/or rural areas).

A further significant challenge to new supply in key nodes is that there are few operators (or individuals) currently in the SA market who have the skills, expertise, as well as track record to take up the operational challenge of taking a new R80 to R100m + property (at cost) through its lease-up phase of its life-cycle (three to five years). Bear in mind that there is no pre-letting of space when it comes to developing new self storage properties, thus all new self storage developments are 100% speculative in nature.

Actual development of investment grade self storage properties in key nodes has been almost non-existent/minimal over the last five years outside of Stor-Age. As of 2017, outside of its own operations, management is starting to see the first ‘green shoots’ of good quality new self storage developments in good quality locations in certain sub-markets.