[+] Smart Money Pivots to Self-Storage Amid Office Gloom

In a market where traditional sectors such as commercial office space are grappling with big writedown-driven losses, the self-storage space is proving itself a resilient and ambitious alternative asset class. National Storage REIT, for example, has just posted a $230-million profit after tax, despite increased finance costs, underscoring the sector ’ s attractiveness. The trust ’ s strategic moves, including a partnership with Singapore's GIC and a robust acquisition spree, have bolstered its portfolio and asset value, now worth $5.2 billion. Meanwhile, Abacus Storage King, freshly restructured, also reported a strong result with a $138.2-million profit, fuelled by acquisitions and developments. As self-storage continues to grow in Australia, with an expected industry growth rate of 4.4 per cent over the next five years, it’s clear this sector is one to watch. As mentioned, National Storage has reported a $230-million profit after tax, while total revenue reached $349 million, representing a 7 per cent year-on-year growth. Unlike more traditional sectors that are struggling, with Australia’s biggest office landlord, Dexus, posting a $1.58 billion loss driven by devaluation of its overall portfolio, the self-storage sector faces more positive prospects. Although National Storage REIT profit after tax was much lower compared with the previous year, the trust said in its presentation to the ASX that there were “increased finance costs attributable to higher debt costs and drawn debt balances used to fund long-term accretive acquisitions and developments”. Additionally, its total expenses rose 8 per cent year-on-year to $199 million. Managing director Andrew Catsoulis said that the FY24 earnings result was strong and showed “both the resilience and embedded capacity for growth” of the business. “NSR’s [National Storage REIT] total assets increased by 13 per cent to $5.2 billion as the total asset value of NSR’s property portfolio rose by 14 per cent to $4.9 billion, with valuation uplift again driven predominantly by improved operational performance,” he said. During the period, the trust settled 29 acquisitions totalling $250 million, which included 10 additional sites for future developments in key areas. Its pipeline includes 46 active development projects with an aggregate NLA (net lettable area) of about 382,000 square metres. In June, as part of its strategy to capitalise on opportunities across the self-storage sector, National Storage REIT entered into an agreement with Singaporean sovereign fund GIC to set up the National Storage Ventures Fund (Ventures JV), aimed at developing and operating self-storage centres across the country. The trust and GIC hold about 25 per cent and 75 per cent equity interests in new entity, respectively. Additionally, the new fund was to deploy $270 million in total capital over the initial period of 12 to 18 months to develop an initial portfolio of 10 foundation assets sourced from National Storage REIT’s existing development portfolio. National Storage REIT (NSR) ▲ The five-year performance of National Storage REIT on the ASX. Source: Google Finance Separately, National Storage REIT acquired the self-storage portfolio of the MAAS Group, adding more than 34,000sq m of additional NLA. The portfolio included nine assets, a mix of established and under development centres, with eight in NSW and one in the ACT. Abacus Storage King At the same time, Abacus Storage King, a $3-billion listed property trust formed as a result of Abacus’s decision to de-staple its self-storage assets and operations in 2023, reported a statutory net profit of $138.2 million this month. Its full-year result was helped by acquisitions, which included $137 million invested across eight operating stores and three development sites, and developments that included delivery of three new operating stores valued at $81 million. Abacus Group chief financial officer Evan Goodridge said it was a strong first financial year for Abacus Storage King as a standalone entity. “We remained disciplined on directing capital towards assets that provide potential for enhanced income growth and the creation of medium to long term value,” he said. Group managing director Steven Sewell said that despite the inflationary headwinds, the portfolio benefited from “a range of tailwinds over the short to medium term, including organic growth as the self-storage category continues to mature in Australia and New Zealand, acquisition opportunities in a heavily fragmented sector and the longer term platform initiatives”. The self-storage sector, which is typically seen as part of the alternative asset class, alongside data centres, multi-family residential assets as well as student accommodation, and senior housing, has been growing since the pandemic as investors shift from more traditional asset classes. According to IBISWorld forecasting, the outlook for the Australian self-storage industry remained positive and was expected to grow at 4.4 per cent over the five years. You are currently experiencing The Urban Developer Plus (TUD+), our premium membership for property professionals. Click here to learn more.

[+] Smart Money Pivots to Self-Storage Amid Office Gloom

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