JSE-listed real estate investment trust Stor-Age has managed to collect 93% of its rental due in South Africa in April and May, despite the impacts of Covid-19-related lockdown measures and ensuing risk mitigation initiatives.

Additionally, the company collected 98% of its rental due in the UK over the same two-month period.

Meanwhile, Stor-Age delivered a 5.03% year-on-year increase in its annual dividend a share, for the year ended March 31, to 112c apiece. This compares with a dividend of 106c apiece declared for the year ended March 31, 2019.

The company posted distributable earnings of R452-million in the year under review, compared with distributable earnings of R387-million posted in the prior year.

Stor-Age reported a 2.9% year-on-year decrease in headline earnings a share to 53.09c apiece in the reporting year, compared with 54.66c in the prior year.

The company’s rental income and net property operating income increased by 29.7% and 34.1% year-on-year, respectively. Rental income for the reporting year was R615-million, compared with R474-million in the prior year.

Stor-Age reported like-for-like rental income increases of 6.5% in South Africa and 5% in the UK in the year under review.

The company had a closing total occupancy of 83.8% at year-end, while its loan-to-value ratio was 30.1% at year-end.

Stor-Age’s portfolio comprises 71 self-storage properties across South Africa and the UK, with 21 properties in the UK and the balance in South Africa.

The South African portfolio is valued at R4.1-billion and the UK portfolio, under the Storage Kind brand – at R2.9-billion. Additionally, a further seven properties trade under the licence of Storage Kind, in the UK, generating licence and management fees for Stor-Age.

The company states that its strong results for the year under review reflect a resilient trading performance against the backdrop of challenging macro conditions in South Africa and political and economic uncertainty for most of the year in the UK.

Stor-Age comments that the Covid-19 pandemic and risk management measures to contain the spread of the virus – including national lockdowns, social distancing and travel restrictions – have created an economic crisis with both supply- and demand-side shocks.

“As economies and businesses adapt to the changing environment and ensuing challenges, we will see a restructuring of the economic and social order in which business and society have traditionally operated.

“Against a backdrop of constrained economic environments, the self storage business model has a track record of resilience. The primary drivers of demand for our product are life-changing events and dislocation, be they positive or negative in nature.”

The company adds that its customers typically require its product either temporarily or permanently for various reasons throughout the economic cycle. This creates a market depth that is a significant contributing factor towards the resilience of the product.

“We anticipate that the greater use of technology as an enabler within business, and greater adoption by society at large, will result in an increasingly mobile population.

“The impact on where and how people live and work, coupled with business models evolving to require less operational space, will likely result in further demand for storage units both in South Africa and the UK,” Stor-Age states. 

During the year under review, Stor-Age completed the acquisitions of Craighall, in South Africa and a five-property Flexi Store portfolio, in the UK.

The company continues to undertake development activity in a phased manner as restrictions permit at its Tygervalley and De Waterkant properties, in Cape Town, as well as in Cresta and Sunningdale, Johannesburg, all valued at  about R260-million.

The board has elected to not provide any distribution guidance for the year ahead.

LOCKDOWN OCCUPANCY

During the higher levels of lockdown, the company’s objective had been to keep their properties accessible for customers in both South Africa and the UK to support the provision of essential services.

“We immediately offered complimentary storage space to a number of relief and government-based entities including the Western Cape Government and Community Chest in SA and the National Health Service in the UK. We continue to support these authorities, charities and nonprofit organisations by offering the use of properties to support relief efforts,” Stor-Age explains.

Soon after the respective lockdowns started, the company successfully activated an online e-sign capability for the completion of new leases, allowing for the facilitation of a “contactless” digital sign-up and move-in process.

The increased level of costs attributable to sanitising, personal protective equipment and updated on-site signage has been more than offset by the reduction in marketing spend throughout the lockdowns, principally driven by a notable reduction in “pay-per-click” advertising costs.

In line with expectations, Stor-Age saw a significant reduction in both move-in and move-out activity in South Africa and the UK as soon as the lockdowns started in March.

“In South Africa, we saw enquiry levels drop significantly, as expected, from end of March continuing into April. With the move to Level 4 restrictions at the beginning of May, we experienced a noticeable increase in demand as new regulations were passed regarding increased personal mobility and the reopening of certain sectors of the economy,” Stor-Age explains.

The company adds that, with the easing of restrictions, it experienced a higher level of move-outs relative to move-ins during the first weekend in May.

After the regulations allowing for the movement of households from May 7 were amended, enquiries returned to normal levels in South Africa in line with expectations.

The lockdown in the UK was initially less restrictive, says Stor-Age. While overall activity (move-ins and move-outs) was severely curtailed relative to the norm, it still gave rise to a larger negative impact on move-ins compared with move-outs in March.

There was a drop off in enquiries from the start of the lockdown, although it was not as significant as in South Africa. In April, occupancy decreased by 1 200 m².

In May 2020, enquiry levels in the UK returned to pre-Covid-19 levels and were in line with expectations.