Update 10/26/17 – Stor-Age has closed its funding round, raising R1.275 billion of equity to use in its acquisition of Storage King. Shares sold at R11.50 each, with the capitalization reaching the maximum allowed, according to a press release. The deal is expected to close on Oct. 31.
“The strong demand for our stock resulted in us increasing the size of the capital raise from the initially indicated R900 million, up to the maximum allowable value of R1.275 billion,” Lucas said. “At these levels, there was significant excess demand for our stock, indicating a strong vote of confidence in our performance since listing and our current growth strategy.”
9/7/17 – Stor-Age Property REIT, which operates the Stor-Age Self Storage brand in South Africa, has agreed to acquire U.K.-based Storage King for approximately £77.13 million. The deal, expected to close next month, is part of the real estate investment trust’s initiative to pursue international expansion opportunities. The Storage King portfolio includes 13 owned facilities and 12 properties under licensing and management agreements, primarily in Southeast England. It comprises about 577,000 gross leasable square feet, according to a Store-Age press release.
As part of the transaction, Stor-Age is expected to refinance £25 million in Storage King debt, which will effectively lower the purchase price to £53 million for 97.3 percent of issued shares, with the remainder allocated for purchase by Storage King management, the release stated. “Specialist and experienced” members of the Storage King management team will remain in place with a 2.7 percent co-investment stake.
"Storage King offers established critical mass through a high-quality portfolio, proven local expertise and a track record in self-storage with consistent earnings growth, especially over the past three years,” said Stor-Age CEO Gavin Lucas. “This provides us with a strong and scalable platform, with in-place management, for future growth and expansion."
Stor-Age began to position itself for the acquisition as far back as 2014 and used the intended exit last month of Storage King’s private-equity shareholder, Cabot Square Capital Advisors Ltd., as its opportunity to move forward, Lucas said.
The Storage King properties mark the REIT’s first assets outside of South Africa. “Self-storage is a growth sector globally, not only in emerging markets, but also in the first world. The U.K. self-storage market is a significant growth opportunity. It offers a more robust macro environment but with a relative undersupply of self-storage compared to the [United States] and Australia, and a language, culture and regulatory system familiar to us in South Africa,” Gavin said. “Even approaching Brexit, self-storage remains an attractive investment in the U.K. due to the proven resilience of the sector.”
In addition to its U.K. operation, Storage King owns its brand-name rights throughout Europe and has a pipeline in place for “third-party acquisition opportunities,” the release stated. Its 13 owned locations had an average occupancy of 78 percent at the time of the purchase agreement.
Lucas emphasized Stor-Age remains committed to the South Africa market and will continue to focus primarily on local business opportunities. In terms of value, two-thirds of the company’s portfolio will remain South African, “but with added growth potential for group earnings and a rand hedge for a significant portion thereof,” he said.
Because Stor-Age is publicly traded on the Johannesburg Stock Exchange, adding a sizable portion of business trading in British pounds could potentially be viewed favorably by investors as a move toward stabilization and protection against depreciation of the South African rand.
Headquartered in Cape Town and established in 2006 by the Lucas family, Stor-Age operates a 44-property portfolio, primarily in four South African metropolitan areas, that comprises approximately 300,000 square meters. It’s the operator appointed by Stor-Age Property Fund Managers Pty. Ltd. to manage and market the property portfolio owned by Stor-Age Property Holdings Pty. Ltd., and was listed on the Johannesburg Stock Exchange in November 2015.