A record high occupancy and strong cash flows has given National Storage the room to raise capital, announcing a $325m cap raise for future growth.
The Group enjoyed record high portfolio occupancy of 86.7% as at 30 April 2021, an increase of 9.1% since 30 June 2020 (85.4% Dec 2020). This translates to 111,000sqm of additional storage space leased since 30 June 2020. The increased demand has seen Revenue per Available Metre increase 21.5% from $188/m2 as at 30 June 2020 to $229/m2 as at 30 April 2021.
National Storage Managing Director Andrew Catsoulis said, “All states and territories in which NSR operates continue to perform strongly and all these areas are now trading over 80% occupancy, with over 35% of all centres now operating at over 90% occupancy, and approximately 70% operating at over 85%.”
“We attribute this strong operational result to a positive macroeconomic environment as well as a number of internal operational improvements over the past 12 to 18 months. These enhancements include an updated and fully rebuilt website, the integration of our “contact-free move-in“ process, refinements made to our revenue management system, as well as the internalisation of a number of key functions in the business that were previously outsourced.”
NSR has continued to execute on its strategic growth objectives with 27 acquisitions totalling $373 million transacted in FY21 to date4, taking advantage of attractive acquisition opportunities for high quality and strategically located assets. These acquisitions consist of 24 storage centres and 3 development sites, adding 134,400m2 of net lettable area (“NLA”) to NSR’s portfolio. NSR’s forward looking acquisition pipeline continues to remain strong.
“We are pleased to see the continued execution of our acquisitions-based growth strategy which will provide opportunities for ongoing accretion of underlying earnings from these new assets,” said Mr. Catsoulis.
NSR is also pleased to announce plans for an increasing focus on development and expansion projects that provide additional built capacity in key markets. NSR’s development pipeline consists of a combination of greenfield/brownfield developments, expansions of existing centres and the “Revive” refurbishment program, and allows NSR to leverage its in-house development expertise. NSR has 16 active projects, with 6 projects under construction as at 30 April 2021. The development pipeline is forecast to add aggregate NLA of approximately 110,000m2.
“Given the ongoing compression in yields across the self-storage sector, and our strong growth in rate, REVPAM and occupancy, NSR believes it is an opportune time to expedite the pace of its development, expansion and centre revitalisation programs. With 70% of our centres now operating at or nearing stabilised occupancy, it is important that we continue to grow our built capacity in a sustainable fashion so as to generate ongoing opportunities to grow underlying earnings per security and NTA”, said Mr. Catsoulis.
In order to replenish the investment capacity and provide additional funding flexibility for the acquisition and development pipeline going forward, NSR announces it is undertaking a fully underwritten Equity Raising to raise approximately A$325 million.
The Entitlement Offer is fully underwritten. The offer price of the Entitlement Offer has been set at $2.00 per stapled security (“Issue Price”), which represents a:
• 3.8% discount to the last closing price of $2.08 per stapled security on 7 June 2021;
• 3.3% discount to the theoretical ex-rights price of $2.07
Offer proceeds will be used initially to repay debt to strengthen NSR’s balance sheet, reducing pro forma December 2020 gearing levels from approximately 35% to 24%, representing the low end of NSR’s target gearing range of 25% – 40%, providing NSR additional funding flexibility to continue its consolidation strategy and pursue further growth through the development program.
“This will enable us to further strengthen our balance sheet in order to facilitate ongoing growth of the business from a development, expansion and centre revitalisation basis, as well as enabling us to undertake continued acquisitions on a selected basis,” said Mr. Catsoulis.
Taking into account the impact of the Equity Raising and NSR’s strong operating performance, NSR provides upgraded FY21 underlying EPS guidance of 8.5 – 8.6 cents per stapled security (previous guidance range of 8.1 – 8.5 cents per stapled security). NSR also provided preliminary guidance for FY22 underlying EPS growth of no less than 8% on FY21.
NSR expects to announce its FY21 full year results on 25 August 2021.
Further Information
National Storage REIT are on our Top Picks List and the announcement today demonstrates why. Strong cash flows and earnings growth are working to enable the REIT to take on board additional capital and show earnings growth into the next financial year.
Disclaimer: The information contained on this web site is general in nature and does not take into account your personal situation. You should consider whether the information is appropriate to your needs, and where appropriate, seek professional advice from a financial adviser.