Stor-Age Property Reit, the listed personal storage landlord that has consistently outperformed its peers, has not been spared by the pandemic, with its dividend falling 5% in the six months to end-September.
This was the first time Stor-Age saw its dividend fall in any financial period since it listed in November 2015. The company, however, has been a far better performer than many similar companies, some of which have seen their dividends plummet by double digits.
Year-to-date, its share price is down 17.55% while the All Property Index is down nearly 50%, including dividends. Stor-Age’s share price closed 6% higher at R13 on Tuesday.
CEO Gavin Lucas said Stor-Age had delivered a robust operating performance despite the hard lockdowns in SA and the UK.
Stor-Age declared an interim dividend of 52c for the period, compared with 54.89c for the comparable 2019 period.
“The challenges over the past six months required swift business decisions with effective execution. Our high-quality property portfolio across two markets, specialist sector skills and experience enabled Stor-Age to quickly recover from the initial setback of the lockdowns and deliver a very strong operational performance,” he said.
He said that pent up demand is starting to improve the company’s fortunes. “Many customers rent storage space from us when they face difficult changes in their lives. This includes downscaling homes. While that process happens, they choose to store goods with us,” he said.
Inquiries returned to pre-coronavirus levels by the end of May. For the full period, SA and UK inquiries were 14% and 19%, respectively, ahead of the prior year period on a like-for-like basis.
Lucas said the strong demand underpinned “impressive growth” in occupancy of 26,100m², making its portfolio 86% occupied.
Despite the subdued economic environments in both markets prior to the imposition of the lockdowns, like-for-like rental income grew by 6.1% and 2.8% in SA and the UK, respectively, while at a group level rental income and net property operating income increased 21.3% and 13.3%, respectively.
The value of Stor-Age’s 71 properties increased during the period by R529m to R7.6bn. Despite the disruption and negative economic impact of the pandemic, Stor-Age’s growth strategy in SA and the UK remains unchanged as it continues to expand its footprint, Lucas said.
The group is building storage facilities at Tyger Valley in Cape Town and Cresta in Johannesburg, as well as the first phase of a development in Sunningdale, Cape Town.
At September 30, Stor-Age’s secured development pipeline in SA was worth R740m.
In October 2020, the company announced that it had finalised terms and entered into a joint venture with Moorfield, a UK real estate fund manager with a 25-year track record of investing across most real estate sectors. The venture would develop a portfolio of self-storage assets with an initial value of approximately £50m (R1.02bn) and with the potential to increase to more than £100m.
Stor-Age has a loan-to-value (LTV) ratio of 26.7% and total undrawn borrowing facilities amounting to R496m, giving it one of the healthiest balance sheets in SA’s listed property sector. The average LTV in the sector is 41%.
LTVs measure a company’s debt relative to assets. Fund managers tend to want property landlords to have LTVs that range from a maximum 35% to 40%.
“Together with the strong operating performance, the group’s intense focus on cash collections, strict working capital management and cost containment measures allowed it to finish the period with R414m cash on hand,” Lucas said.
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