Abacus to Raise $402m for Business Growth

8 December 2020

Abacus has embarked on a $402m capital raising to bolster its balance sheet to fund its ambitious Self Storage investment pipeline.

Since FY19 Abacus has deployed $413 million of capital into Self Storage. To date in FY21, $155 million has been deployed including acquisition of the remaining 75% interest in our operating platform, Storage King, and the exchange of contracts or settlement on $97.5 million of Self Storage properties.

Abacus has a further pipeline under active consideration comprising $160 million of Self Storage assets, of which approximately $130 million is a high quality portfolio of metropolitan assets located in significant urban areas. If successfully completed, Abacus’ Self Storage portfolio will increase to $1,521 million of assets.

In addition, a robust development pipeline with 55,250 sqm identified to be delivered over the medium term is expected to enhance portfolio quality and increase income growth, with the expected development spend of approximately $80 million targeting a return on invested capital of 8.0%.

Trading conditions in the Self Storage portfolio have proved resilient. Abacus’ multi-pronged growth strategy including acquisition, development, expansion and optimisation has delivered strong Q1 FY21 results, with
occupancy of 89.7% and revenue per available square metre3 (“RevPAM”) of $251, while rent collection remains high at 99%.

Abacus originate opportunities through the Storage King platform, with 100% ownership of Storage King expected to increase the velocity of acquisitions and provide a significant competitive advantage in acquiring scale. Since the acquisition of the initial 25% interest in Storage King in FY18, Abacus has sourced 70% of new acquisitions via the Storage King relationship/platform with 20% on market and 80% off market.

Initially, the group will use the capital raising to repay debt and provide the acquisition capacity for the pipeline assets.

The capital raising is being offered as a fully underwritten 1-for-4.8 accelerated non-renounceable pro rata entitlement. All securities offered under the entitlement offer will be issued at a fixed price of $2.90 per new security, which represents a:
– 6.5% discount to the last close price of $3.10 on Monday, 7 December 2020;
– 7.7% discount to the 5-day VWAP10 of $3.14 on Monday, 7 December 2020;
– 5.4% discount to the TERP11 of $3.07

Post completion of the entitlement offer, pro forma gearing is expected to be 17.5%, which provides Abacus with $911 million of acquisition capacity. If the Pipeline acquisitions are successfully completed and following completion of the Entitlement Offer, pro forma gearing will increase to 21.5%. On completion of the Entitlement Offer, the pro forma NTA per security is expected to be $3.15.

Abacus’ Managing Director, Steven Sewell, said, “It has been immensely pleasing for Abacus to successfully deliver on its stated strategy. Since FY19, $926 million of capital has been deployed into acquisitions in the key areas of Office and Self Storage. This Entitlement Offer is expected to allow Abacus to extend its strong track record of long term value enhancing investments by providing an additional $911million of acquisition capacity, ensuring Abacus will be in a strong position to continue to take advantage of the significant number of opportunities in these key sectors.”

Post completion of the Entitlement Offer, Abacus expects FFO for HY21 to be 8.9 – 9.1 cents per security ($59 – $61 million) and expects the interim distribution to be 8.5 cents per security.

Second half FY21 FFO is expected to be higher than the first half, benefitting from recent acquisitions, anticipated continued improvement in underlying trading conditions across the portfolio, ongoing tailwinds in the Self Storage sector and continued deployment of capital for acquisition opportunities. FY21 full year distribution is expected to reflect a payout ratio broadly in line with the target range of 85 – 95% of FFO.