Cape Town-based self-storage specialist Stor-Age seems intent on wrapping up some serious market share after pitching to acquire rival business Storage RSA Investments Proprietary Limited.
Storage RSA was established in 1997 when it opened its first store in Somerset West, and now ranks as the third largest self-storage operator in South Africa. Its portfolio comprises seven high-quality properties, four of which are located in Cape Town and the remaining three in Gauteng.
Stor-Age CEO Gavin Lucas reckoned Storage RSA fitted the company’s strategy of pursuing value-added acquisitions in a fragmented, local self-storage industry. He said the acquisition would help Stor-Age consolidate its position as a dynamic brand in the South African market. He added that Storage RSA would provide Stor-Age with considerable scale from both a balance sheet and trading perspective with the introduction of additional high quality properties to the portfolio.
“From a sector perspective, concluding the deal would solidify and significantly contribute to Stor-Age’s position as a significant self-storage operator and property fund in the South African market.”
Lucas cautioned, though, that while there was some room for immediate value enhancement of the portfolio through Stor-Age’s sophisticated operations platform, the majority of value enhancement would occur over time through key initiatives – like digital marketing, revenue management and scale in key markets.
In May this year Stor-Age expanded existing self-storage properties as a result of sustained high levels of ccupancy and strong customer demand at Stor-Age Gardens and Stor-Age Durbanville. Both properties are undergoing further development with the addition of 5,500m2 and 2,500m2 of gross building area at each property respectively. The projected development cost is R32m and R12m respectively, and the projects are due for completion in December and January.
In the trading period to end March this year Stor-Age showed an 11% annualised escalations and growth in portfolio occupancy to 86%, rental income of R54,9m (which was 3% higher than initially forecast.) At the release of the results on June, Lucas said constant demand for self-storage was the key driver of the company’s strong results.
“Self-storage is a ‘needs based’ product and the need prevails in any economic cycle.”
He argued that in both good and tough times people went through life changing events and required flexibility – whether performing renovations at home or moving.
“Likewise businesses always require flexible space options – whether they are upscaling or downscaling.”
He added that current lifestyle trends were further boosting demand such as security-conscious living in smaller spaces in apartment blocks, complexes or retirement villages. Lucas added that in South Africa, specifically, the emerging black middle class was another key driver of demand. Stor-Age reported that in the period to end March occupancies across the portfolio increased by 3,900m2 in the 4.5 months from the company’s listing with the facilities boasting over 14,300 tenants.