National Storage REIT Releases Update as Storage King REIT hits the road for Capital

National Storage REIT has issued an update on its business a day after the proposed Abacus Storage King REIT hit the road with its listing and capital raising prospectus.

National Storage REIT “NSR”, expects FY23 underlying earnings to be 11.5cps, which reflects an 8.5% increase on FY22, demonstrating the strength of the business through various economic cycles.

The reaffirmed guidance reflects the strong performance of NSR’s portfolio over the year and is in part driven by a 3.5% increase in Group REVPAM to $269 as at 31 May 2023 (June 2022: $260).

Capital Management                                                                                                              

NSR has finalised a Syndicated Term Loan which was launched as a $250 million five and seven-year facility on 14 April 2023. Following a highly successful bookbuild, NSR received firm commitments from 18 lenders totalling $539 million, being 2.9 times over-subscribed (excluding cornerstone commitments from the Joint Lead Managers).

Given the strong market response, the facility was upsized to $400 million, split evenly across the five and seven-year tranches, with competitive pricing.

Credit approvals have also been obtained from new and existing relationship banks for an additional $200 million of facilities, with durations of up to five years. Finalisation of these facilities is expected to take place in the coming weeks. Upon completion of these debt facilities, NSR will have total undrawn funding capacity of over $900 million. Gearing at 31 May 2023 remained low at 19.7%.

Managing Director Mr. Andrew Catsoulis said, “As a result of our intensive capital management initiatives undertaken following the equity raising in March 2023, the weighted average debt tenor of NSR has increased to 3.6 years, and further progress has been made on interest rate hedging. These prudent initiatives further fortify NSR’s financial position at a time of potential macro-economic headwinds.”

Acquisitions & Developments                                                                                                   

The acquisition pipeline at NSR remains strong, with NSR continuing to assess many new and existing opportunities. Transaction volumes for FY23 have trended to the lower end of NSR’s expectations, as the opportunities are assessed against the current economic conditions and conservative acquisition criteria.

Mr. Catsoulis said, “NSR is maintaining its disciplined approach of targeting acquisitions that are day one accretive and have passing yields at or above NSR’s weighted average cap rate.

These acquisitions are aimed at being able to deliver future yield upside through occupancy and/or rate growth, and efficiencies that can be gained by integration into NSR’s fully internal, integrated management and operational platforms.”

NSR’s development pipeline contains over 40 projects where NSR either owns or has contracted the subject development site, has undertaken preliminary planning and design, and the initial feasibility of the projects has met NSR requirements. This pipeline has the capacity to deliver over 350,000m2 of additional NLA in key markets, and the potential to deliver a further $100 million in gross revenue in coming years once stabilised occupancy is achieved.

As at 31 May 2023 there are 10 projects under construction, which will deliver approximately 85,000m2 of additional NLA across the next 12 months. This new built capacity has the potential to deliver approximately $25 million in gross revenue once stabilised occupancy is achieved.

Valuations

NSR is currently revaluing the portfolio through a combination of external and Director valuations. Whilst it is preliminary to provide any outcomes from this process, NSR expects capitalisation rates to remain relatively unchanged from the 31 December 2022 level of 5.87%. Improved operational performance of the portfolio between the date of this valuation and the one prior indicates that some improvement in asset values can be expected, which would flow through to an improvement in NTA.

Operational Performance                                                                                                       

NSR’s investment in larger than average storage centres has seen NSR’s average centre size increase to approximately 5,400m2 as at 31 December 2022. The previously outlined FY23 Reportable Group of 195 centres have, on average, over 4,500m2 of occupied space per centre. Total occupied space across the total portfolio of over 230 centres is now in excess of 1,000,000m2, with significant further upside available within the existing built portfolio for future growth.