Safestore’s EPRA NAV rose by 18.8% over the six months ended 30 April 2016 and the interim dividend was raised by 20% to 3.6p. Underlying, like-for-like EBITDA rose by 12.7% to £29.3m as occupancy rose by 2% to 70.9% and average storage rates rose by 4.7% to £26.02.
Safestore has delivered a strong financial performance in the first half of the year. Group revenue increased 10.4% on a like-for-like basis with the UK growing by 11.7% and the Parisian business by 6.8% on a constant currency basis. Occupancy in the UK was up 1.8ppts to 68.6%. At the same time the UK rate grew by 5.6%. In Paris, there were increases in occupancy, rate and like-for-like revenue. Occupancy ended the period at 79.4%, a 2.2ppts increase compared to the prior year and rate grew by 1.9%.
On occupancy, 70.9% equates to 1.44m sq ft of unoccupied space, of which 1.23m sq ft is in UK stores and 0.21m sq ft in Paris. This is the equivalent of around 30 empty stores located across the estate. The available space is fully invested and the related operating costs are largely fixed and already included in the Group cost base. Safestore say their ongoing focus will be on ensuring that they drive occupancy to utilise this capacity at carefully managed rates as well as continuing to drive revenue growth through the yield management of the existing customer base.
Safestore say their current Loan to Value ratio (“LTV”) of 30% and Interest Cover Ratio of 5.1x provides them with significant headroom against banking covenants. The August 2015 refinancing extended their UK banking facilities to June 2020, reduced the margin on their UK and Euro debt to 1.5%, removed the requirement for mandatory debt repayments of GBP30m over the next three years and provided them with an additional uncommitted GBP60m credit facility (of which GBP45m has subsequently been committed). Including the uncommitted facility, they now have undrawn facilities of GBP140.5m. The Group aims to maintain LTV of between 30% and 40% for the foreseeable future.
Looking at the portfolio, over the coming months the Group plans to open, on time and on budget, five new sites in Chiswick, Wandsworth, Birmingham, Altrincham and Paris Emerainville. All stores have planning permission and work is progressing on four of the sites. Construction work will commence at the new Altrincham site as soon as the site acquisition has been completed which is anticipated in the coming weeks. Overall, the five new sites will provide gross new MLA of 226,000 sq ft (190,000 sq ft net of existing space in Wandsworth and the conditional disposal of their Birmingham Central site).
The Chiswick site is located on the A4 in West London and will provide a new flagship freehold store of 42,500 sq ft which is planned to open in the fourth calendar quarter of 2016. The estimated cost to completion of this freehold store is GBP3.8m.
In Wandsworth, they have an existing 10,000 sq ft store on Garratt Lane in South West London as well as an additional adjoining 0.25 acre parcel of land. They closed their existing store at the end of 2015 and are in the process of redeveloping the site to include a new purpose-built 33,200 sq ft freehold store which is scheduled to open in the third calendar quarter of 2016 and is estimated to cost GBP3.3m.
In Birmingham, they are currently constructing a new flagship store on the A34 North of the centre of Birmingham which is due to open in the fourth calendar quarter of 2016. The long leasehold store will provide 51,000 sq ft of space and estimated costs of this build are GBP3.8m.
They recently exchanged contracts in May 2016 on the sale of our Birmingham Central store for GBP3.6m to Unite, subject to the purchaser receiving planning permission. Birmingham Central is a 26,000 sq ft store with occupancy at 72.8% at April 2016. They anticipate transferring the Birmingham Central customers to our new Birmingham store on completion of the build.
They also recently exchanged contracts on the freehold purchase of a building located on an easily accessible site opposite Altrincham Retail Park. Altrincham and Sale is an affluent area with a population of 206,000 and significant inward investment. The total cost of this project is estimated to be c.GBP3.2m with a planned opening before the end of the calendar year. They are confident that the new 39,000 square foot store will be a valuable addition to the portfolio.
In Paris, where regulatory barriers are likely to continue to restrict new development inside the city, they will continue our policy of segmenting their demand and encouraging the customers who wish to reduce their storage costs to utilise the second belt stores., They will also manage occupancy and rates upwards in the more central stores and ensure that pricing recognises the value customers place on the convenience of physical proximity. The strong selling organisation and store network established by Une Pièce en Plus in Paris uniquely enables it to implement this commercial policy.
As announced in February 2016, they have acquired a freehold site in eastern Paris adjacent to the A4 motorway at Marnes-la-Vallée in the town of Emerainville for EUR4.2m. The site contains an existing warehouse which will be converted into a c.60,000 sq ft self-storage facility and c.8,000 sq ft of serviced offices. The planned costs of conversion are c.EUR2.4m. They anticipate that the new store will open in late Summer 2016.
Finally, they are extending stores at Acton and Longpont to add, in aggregate, a further 27,500 sq ft of space. Prior to commencing works on these sites, the Acton store was 89% occupied and the Longpont store was at 83%.
In March 2016 they announced that they had entered into a put and call option agreement to acquire Space Maker Stores Ltd (“SMS”) from Allodial Capital Ltd and James Elton (the “Vendors”). An initial consideration of GBP43.0m less certain downward adjustments to the enterprise value (“initial consideration”) will be payable in cash on completion of the acquisition. Up to GBP1.4m of deferred consideration (“deferred consideration”) may become payable in cash between six months and three years from the date of completion, subject to the SMS business achieving certain performance targets during that period.
SMS is the ninth largest self-storage portfolio in the UK with 12 stores located in Bournemouth (two stores), Colchester, Redhill, Romford, Brentford, Chelmsford, Exeter, Leeds, Plymouth, Portsmouth and Poole, and has a fully invested built out lettable area of c.496,000 sq ft. Six of the SMS stores are freehold or long leasehold and six are leasehold stores with an average remaining lease length of 16.4 years at 30 April 2016.
SAFE : Considerable NAV growth in first half for Safestore