JSE-listed real estate investment trust Stor-Age has entered into agreements to acquire Roeland Street Investments 2 (RSI2) and Roeland Street Investments 3 (RSI3), for R58-million.
RSI2 is being sold by Acucap Investments – a subsidiary of Growthpoint Properties, Stor-Age Property Holdings (SPH) and The Fairstore Trust, for R43.5-million.
RSI3 is being sold by Acucap and SPH for R14.5-million.
RSI2 and RSI3 collectively own 12 purpose-built self storage properties located in Cape Town, Johannesburg, Durban, Port Elizabeth and Pretoria, which are currently operated and managed by Stor-Age.
The collective portfolio comprises a gross leasable area (GLA) of about 86 300 m2, increasing to 88 000 m2 on a fully fitted-out basis, with a current occupancy of 73% on a fully fitted-out basis and an average rental rate of R103/m2.
Post conclusion of the acquisition, which should be around October 1, the value of Stor-Age’s investment property portfolio will be about R5-billion with a 70:30 geographical percentage split, by value, between South Africa and the UK.
The GLA in the South African portfolio will increase to 353 000 m2, with an overall occupancy level of 83% and an average rental rate of R95/m2.
ACQUISITION RATIONALE
Stor-Age listed on the JSE in November 2015. The objective of the founders and promoters at the time of the listing was to bring to market a highly specialised, low-risk, income paying self-storage Reit.
The development of new self-storage properties is subject to both development risk and lease-up risk. The lease-up risk in the self-storage sector is the result of no pre-letting of space prior to completion of a development.
Once a new self-storage property is developed and ready to start trading, the period of time to reach a stabilised mature occupancy is significant with lead time ranging from three to five years.
In the short to medium term, properties in the lease-up phase would have a dilutionary impact on distributions.
In preparation for the listing, eight properties which were still in the lease-up phase with an average portfolio occupancy of about 40%, were transferred to RSI2. On listing, these properties had not yet achieved occupancy levels which would have met Stor-Age’s objective of delivering an attractive, stable income return to shareholders.
A further three properties were developed in RSI2 in 2016 and another property was developed in RSI3 in 2017. The properties in RSI2 and RSI3 were both branded and managed as Stor-Age properties.
Stor-Age also had a pre-emptive right to acquire the properties from both RSI2 and RSI3.