Our opinion on the current state of STOR-AGE(SSS)

Stor-Age (SSS) stands out as the only real estate investment trust (REIT) on the Johannesburg Stock Exchange (JSE) that specializes in the acquisition and operation of domestic storage facilities across major South African cities and the United Kingdom. Currently, the company's operations are distributed with approximately 60% in South Africa and 40% in the UK. Stor-Age anticipates that its UK business will eventually surpass its South African operations in scale.

The company owns a total of 74 properties valued at R4.7 billion in South Africa and R2.9 billion in the UK. The self-storage sector has the unique characteristic of performing well during both economic recessions and booms. The average customer retention is about 2 years, indicating a stable and recurring revenue stream. The customer base is both diverse and statistically stable, which enhances the business's resilience.

Stor-Age's expansion into the UK not only demonstrates its capability in identifying and integrating valuable properties into its portfolio but also adds a rand-hedge element to the investment, providing protection against currency volatility for investors.

In the results for the six months ending on 30th September 2023, Stor-Age reported a 16.9% increase in property revenue, though headline earnings per share (HEPS) saw a decrease of 30.6%. The occupancy rate stood at 89.1%, and the company's net asset value (NAV) saw a rise of 7.2% to 1558c per share. The loan-to-value (LTV) ratio was reported at 31.9%. During this period, Stor-Age completed significant developments, including the acquisition of the four-property Easistore portfolio in the UK for £82.0 million through a joint venture (JV) with Nuveen Real Estate, where Stor-Age holds a 10% equity interest.

Further developments include the completion of six new properties (four in South Africa and two in the UK) within their JV structures, which have commenced trading. The company also reported a robust development pipeline of over 66,000 m² gross leasable area (GLA), with 17 active projects at various stages of completion.

A trading update up to 31st January 2024 indicated an improvement in occupancy rates in South Africa to 92.1%, with a significant increase in the owned portfolio by 9700 square meters and an average rental rate increase of 9.4% year-on-year.

Stor-Age's performance and strategic initiatives make it a compelling investment option on the JSE. The company's ability to thrive in varying economic conditions, combined with its expansion and management strategies, present minimal risk with steady growth potential. Despite a downward trend in the share price beginning in April 2022 and ending in October 2023, the stock has since shown signs of recovery, marking a potential buying opportunity, especially with the recent announcement on 13th May 2024 about entering into a third-party agreement with Hines to manage their self-storage business in the UK. This move could further bolster Stor-Age's position in the market and enhance its growth trajectory.