Owing to frequent supply chain bottlenecks and a surge in online retail, the importance of self-storage units spread across a region has come to the forefront. This is true for both companies as well as consumers who have accumulated goods or are planning a big house move. At such a time, self-storage operation platforms like Abacus Storage King (ASX: ASK) have come into the spotlight.
Abacus Storage King launched as a sector specialist Self Storage REIT on August 3, 2023, after de-stapling from Abacus Group (ASX: ABG). Since its launch as a standalone entity, ASK has solidified its position in the market. Bolstered by a diverse portfolio of metropolitan properties and a resilient operating platform, the Company reported a 4.8% growth in Revenue per available square meter (RevPAM) compared to the same period last year.
One of the highlights of ASK’s performance in H1 FY24 includes acquisitions totalling $161 million, along with the addition of 11,000 square meters of Net Lettable Area (NLA) to its portfolio through new store development and expansions.
Financially, ASK has maintained a conservative capital structure, gearing well within the 25%-35% target range. With a $250 million increase in banking facilities negotiated in December 2023, ASK is well-positioned to fuel future growth initiatives through acquisitions and development projects.
Abacus Group’s Chief Financial Officer, Evan Goodridge, noted, “HY24 was a strong first reporting period for ASK as a standalone entity. In a more challenged economic environment where the cost of capital is rising, we remain disciplined on directing capital towards assets that provide [the] potential for enhanced income growth and the creation of medium to long term value.”
The revaluation process in HY24 resulted in a marginal decrease in the value of ASK’s Self Storage investment property portfolio by $27 million. While market income growth contributed to a $21 million increase, a slight expansion in capitalisation rates offset the gains, resulting in a minor decline overall.
Looking ahead, ASK is well-positioned to leverage its strategic advantages and deliver sustained income and value creation.
In a fragmented Australian and New Zealand Self Storage sector, ASK sees ample opportunities for further expansion. With about 50% of the market owned by independent operators, ASK has identified a pipeline of nine acquisition opportunities worth $161 million to fuel its growth trajectory. This includes $84 million acquired as part of the de-staple from ABG, $67 million for three operating stores and $10 million for two development sites. External acquisitions added 16,600 sqm of NLA to the portfolio. A further $24 million has been exchanged across three assets expected to settle in H2 FY24.
Abacus Group’s Managing Director, Steven Sewell, commented, “It was pleasing to be able to introduce ASK to the market as a specialist Self Storage REIT with an integrated property portfolio and operating platform, externally managed by Abacus Group. As part of the de-staple, ASK’s balance sheet has been set with sufficient capacity to fund medium-term growth initiatives and ultimately support our vision to be the undisputed leader in the Self Storage industry by being the most respected, responsive, and recognised owner, operator and manager.”
ASK reaffirmed its FY24 distribution guidance of 6.0 cents per security, targeting a full-year distribution payout of 90%-100% of FFO. ASK has found a growing opportunity in the self-storage industry, and it is pulling out all stops to establish dominance.
Alinda is a Business Reporter for The Sentiment
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