Consolidation on the way for the self-storage industry

“It’s a dynamic story and it’s hard to believe that these [previously] the interested parties are no longer interested.

“So yeah, you’d have to believe it’s at stake, but it’s a complicated story now that Abacus has [close to] 10 percent.”

The main drivers of demand in the sector include the acceleration of e-commerce creating a need for storage space for entrepreneurs, people moving from cities to regions and vice versa, decluttering to create home offices and a growing number of hobbyists or enthusiasts who simply need more space.

Australian assets “undervalued”

The bullish purchase of ezStorage by Public Storage, one of three bidders for National Storage, in the United States, in mid-April, adds spice to large investors.

JP Morgan said the deal made Australian self-storage REITs appear undervalued.

“ABP and NSR remain industry consolidators and we believe Australia’s self-storage assets are undervalued,” JP Morgan said in a note to investors.

“The operating occupancy rate experienced a very strong recovery in 2H 2020 and the two groups are positioned to push the rate in 2021.

StoreLocal founders Rob Mactaggart, left, and Hans Pearson.

“Self-storage is also a fragmented asset class and we do not rule out the possibility that NSR may once again attract offers from players looking to scale up in Australia, as it did in early 2020. “

Andrew Catsoulis, Managing Director of National Storage, said of Abacus: “We welcome their presence on the registry. I think they see us as a credible and serious trader and my opinion is that they saw an opportunity to buy our stocks when they were well rated.

Mr Catsoulis said he did not think it was the first step in an attempted takeover.

” I do not think so. I understand it’s not an M&A play is a strategic investment and if you look at the returns that investment has achieved, it has turned out to be a very wise decision.

When asked if National Storage had received takeover approaches, Mr. Catsoulis replied “this is not something I could or would comment on even if we had done it” and turned the conversation towards half-year results well received.

In the six months leading up to December 31, the occupancy rate increased 7.7 percent to 85.4 percent, while the same center’s revenue per available meter was up 11, 4 percent.

He said expansion was a priority for the company, which has 210 locations and spent about $ 300 million on “mommy and daddy-going acquisitions” this fiscal year with the ability to spend up to $ 400 million. more dollars.

A long way to go

Meanwhile, Abacus, who declined to comment for this article, also increased his portfolio, buying the 75% of Storage King he did not own at the end of last year, as well as a number of other storage companies. At the last count, he controlled 170 sites, 92 of which belong to him.

Sam Kennard, managing director of Kennards Self Storage, the third major player with 95 storage facilities and at least seven underway, said consolidation still has a long way to go, although his business strategy is to grow through the development of new sites.

“There is a lot of money around and there are people who want returns, and very skinny ones,” Kennard said. “Both REITs and the other funds that are looking to invest people’s money in things are trying to find whatever they can buy.

“And I think it’s going to continue. Prices seem to be going up for homeowners so people who didn’t sell in the early waves are doing better lately.

He said quality metro locations are changing hands on a cap rate of around 6 percent, which compares to an implied cap rate of 3.6 percent for the ezStorage portfolio in the United States.

Mr Kennard said the early days of COVID-19 were tough with occupancy losses and price drops, but business quickly returned as people’s lives changed.

This has resulted in the Kennards occupancy rate increasing from 84% before the pandemic to 88% now.

“We are very motivated by household formation, mobility and change. So, no one would ever imagine the coming of COVID and what would happen next. ”

Hans Pearson, co-founder and managing director of The StoreLocal Group, which has just started development of its 26th store in Hendra, Brisbane, said COVID-19 has been good for the self-storage business.

Revenue growth has been “well over 20%,” he said, while the occupancy rate is 90% compared to 80% before COVID-19.

Mr Pearson said the main business drivers for self-storage will remain strong and he expects double-digit growth this year.

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