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Voluntary UK Acquisition announcement, Development Pipeline update and Small Related Party Transactions
Stor-Age Property REIT Limited
Incorporated in the Republic of South Africa
Registration number 2015/168454/06
Share code: SSS ISIN ZAE000208963
(Approved as a REIT by the JSE)
(“Stor-Age” or the “Company” or “group”)
VOLUNTARY UK ACQUISITION ANNOUNCEMENT, DEVELOPMENT PIPELINE
UPDATE AND SMALL RELATED PARTY TRANSACTIONS
A. ACQUISITION OF A PORTFOLIO OF FIVE SELF STORAGE PROPERTIES IN THE UNITED
KINGDOM
1. Introduction
The board of directors of Stor-Age (the “Board”) is pleased to announce that Stor-Age, through its
subsidiary, Betterstore Self Storage Properties 1 Limited (“Betterstore”), has agreed terms on which
Betterstore will acquire 100% of the issued share capital of Flexi Store Self Storage Limited (the
“Acquisition” or “Flexi Store”), for an initial purchase consideration of £13.4 million (“Purchase
Price”), which will be adjusted up or down (as the case may be) by the net working capital balance as
at the effective date (which is limited to a maximum of £500 000) (“Working Capital Adjustment”).
The transaction is subject only to formal exchange and completion of transaction documentation and
the satisfaction of prescribed banking conditions under the groups existing facilities.
2. Rationale
The Acquisition is in line with the stated growth and investment strategy of the Storage King business
of pursuing value-added acquisitions in the United Kingdom (“UK”) self storage market. The Board
believes that the Acquisition represents an excellent opportunity to acquire a portfolio of five self
storage properties in locations which complement the existing portfolio, providing additional scale from
both a balance sheet and trading perspective. The portfolio, which has been trading under licence of
the Storage King brand, will now also be managed under the existing operating infrastructure of the
group.
The acquisition increases the total number of owner operated Storage King properties to 21, adding
an additional 157 062 square feet (“sqf”) of gross lettable area (“GLA”) with a maximum lettable area
(“MLA”) of 190 520 sqf.
Details of the properties acquired are set out below:
Storage King Dudley
Located prominently on Birmingham New Road (A4123) in the large town of Dudley in the West
Midlands, 17 kilometres north-west of Birmingham, the property consists of 31 333 sqf GLA and 36
658 sqf MLA. The property, which has dedicated new customer parking bays to the front and a
dedicated loading area behind a secure fence line, is in close proximity to the local Tesco Extra
supermarket and trades into a dense residential area.
Storage King Nottingham
Located in Nottingham in the Midlands, the property consists of 36 850 sqf GLA and 58 306 sqf MLA.
The property is positioned in a commercial corridor and trades into a dense residential area, benefiting
from good visibility on Radford Road, which sits just off the Western Boulevard (A6514).
Storage King Shrewsbury
Located in Shrewsbury, the county town of Shropshire in the West Midlands, the property consists of
35 175 sqf GLA. The property is situated in a large trade park alongside several retail stores and car
dealerships, offering good visibility to Harlescott Lane and trades into the local residential areas within
the town.
Storage King Warrington
Located in the large town of Warrington in Cheshire in the north west of England, midway between
Liverpool and Manchester, the property consists of 32 896 sqf GLA. Sitting on Winwick Road (A49)
within a trading estate adjacent to several big box retailers including IKEA and an Aldi supermarket,
the property trades into a dense residential area.
Storage King West Bromwich
Located in the town of West Bromwich in the West Midlands, north west of Birmingham, the property
consists of 27 485 sqf GLA. The property enjoys prominent exposure onto Birmingham Road (A41),
just off the M5 highway and trades into the local residential areas.
3. Property specific information
Details of the properties are set out in the table below:
Property Geographic location MLA Weighted Total
name (sqf) average consideration
rental rate payable
per sqf
Dudley Unit 8 Iconic Park, Birmingham New 36 658 £16.24 £4.35 million
Road, Dudley, DY1 4SR
Nottingham Unit 1 Lewis Industrial Estate ,Radford 58 306 £18.48 £2.18 million
Road, Nottingham, NG7 7NQ
Shrewsbury Archers Way Battlefield Enterprise Park 35 175 £19.35 £4.76 million
Shrewsbury, SY1 3AF
Warrington 1 Colville Court Winwick Quay 32 896 £17.23 £1.13 million
Warrington, Cheshire WA2 8QT
West AGL House, Birmingham Road, West 27 485 £15.90 £0.98 million
Bromwich Bromwich, West Midlands B71 4JY
Total 190 520 £13.4 million
adjusted by the
Working Capital
Adjustment
Notes
1. The acquisition yield for the portfolio is 7.29%. This yield is based on the forecast GBP net
operating income (pre UK corporations tax) for the next 12 months (the “Forecast”) and the total
consideration payable of £13.4 million. The Forecast, including the assumptions upon which it is
based and the financial information from which it has been prepared, is the responsibility of the
Board. The Forecast has not been reviewed or reported on by independent reporting accountants,
2. Warrington is held on a long leasehold basis with a lease expiry of 20 years, Nottingham with a
lease expiry of 13 years and West Bromwich with a lease expiry of 18 years (subject to the
conclusion of a reversionary lease with the landlord).
3. Shrewsbury and Dudley are each held under 999-year peppercorn leases and are considered for
valuation purposes as virtual freehold properties.
4. The total consideration payable is considered to be in line with fair market value of the property,
subject to the special assumptions of zero purchaser’s costs, as determined by an external
valuation performed by Oliver Close, a Professional Valuer and Registered Valuer of The Royal
Institution of Chartered Surveyors, of Cushman & Wakefield Debenham Tie Leung Limited as at
31 August 2019. The valuation methodology adopted for the properties is consistent with the
methodology used for the valuation of the Company’s properties as at 31 March 2019.
5. Weighted average rental rate per sqf is quoted on an annual basis
4. Categorisation
The Acquisition is not a categorised transaction in terms of the JSE Listings Requirements (“Listings
Requirements”). This announcement is voluntary and for information purposes only.
B. DEVELOPMENT PIPELINE UPDATE
The Board is pleased to announce an update on the Company’s development pipeline.
Tygervalley
Located on Durban Road (R302) in a busy commercial corridor in close proximity to the well-established
mixed use Tygervalley precinct the property will service the residential areas of Bellville, Oakdale, Boston,
Welgemoed and Loevenstein.
Comprising 7 100m² of GLA over six levels with the design catering for a separate receipting and despatch
area to accommodate a growing demand from our commercial user segment, the total project costs are
approximately R88 million, with construction having recently commenced.
Cresta
Located at the entrance to the Cresta Mall, the property will primarily service the residential areas of
Cresta, Blackheath, Northcliff, Linden, Greenside and Fairland in addition to the broader commercial
corridor along Beyers Naude Drive.
Comprising 7 400m² of GLA over six levels with the design also catering for separate receipting and
despatch areas for commercial customers, the total project costs are approximately R102 million, with the
anticipated commencement of construction in November 2020.
De Waterkant
In December 2018 Stor-Age acquired the property situated at 2 Rose Street in the Cape Town CBD for a
purchase consideration of R45 million.
A rezoning application had been submitted to the local authorities in November 2018 to amend the zoning
to allow for self storage. The City of Cape Town’s Municipal Planning Tribunal has approved the rezoning
of the property to Mixed Use which allows for self storage as a land use, subject to a final appeal process
which is scheduled to conclude before the end of November 2019.
Located prominently on the corner of Rose and Waterkant Streets in the Cape Town CBD and in close
proximity to the V&A Waterfront, the property is well located to service the residents and businesses of
the Cape Town CBD, the V&A Waterfront, De Waterkant, Bo Kaap, Tamboerskloof and the Atlantic
Seaboard suburbs of Green Point, Sea Point, Fresnaye, Bantry Bay, Clifton and Camps Bay.
Anticipated to become one of the portfolio’s most high profile and valued assets, the property will comprise
up to 6 600m² GLA over 14 levels, with excellent visibility to commuters travelling both into and out of the
Cape Town CBD on Buitengracht Street, with the anticipated commencement of construction in the last
quarter of 2020.
The development will complement our existing Gardens property in Roeland Street at the top of the Cape
Town CBD, and our Sea Point property in Regent Street, providing Stor-Age with a presence in three
excellent locations in the heart of some of SA’s most densely populated and sought-after areas.
Sunningdale
On 30 September 2019 Stor-Age entered into a joint venture agreement with Garden Cities to develop a
new self storage property in Sunningdale. Located on the Western Seaboard approximately 30 kilometres
from the city of Cape Town, Sunningdale is a successful and sought-after Garden Cities suburban
development.
Located prominently on the corner of Berkshire Boulevard and Whitehall Way and close to the new Table
Bay Mall, it will comprise 6 350m² GLA with excellent visibility to commuters accessing the retail and
residential nodes of Parklands and Sunningdale. The property will also trade into the nearby suburbs of
Bloubergstrand, Blouberg Rise, Big Bay and West Beach, with the anticipated commencement of
construction in February 2020.
The development will complement our existing Table View property providing Stor-Age with a presence
in two excellent locations in the fast developing west coast region.
Stor-Age will have a 50% equity interest in the estimated R67 million development and will also earn
development fees prior to opening, and ongoing property management fees once the property
commences trading.
C. SMALL RELATED PARTY TRANSACTIONS – CONSTRUCTION AND REFURBISHMENT SERVICES
PROVIDED BY MADISON SQUARE HOLDINGS CC (“MSH”)
1. Introduction
Since listing in November 2015 Stor-Age has from time-to-time entered into agreements with MSH in
relation to the provision by MSH of construction and refurbishment services (“the MSH Services“). The
financial extent of the MSH Services has been disclosed in all integrated annual reports published by
Stor-Age, and in SENS announcements of interim and final results. MSH is an associate of the executive
directors of the Company and is therefore deemed to be a related party to Stor-Age.
Shortly after its listing in November 2015, the Company’s Sponsor requested the JSE to confirm that the
MSH Services would be considered to be in the ordinary course of business and, to the extent that the
MSH Services fall below the 10% threshold of market capitalisation in any rolling 12-month period, such
services would not be classified as a “transaction”.
The JSE responded in February 2016 that the arrangement between Stor-Age and MSH is not a
management agreement as contemplated in paragraph 13.40 of the Listings Requirements; that such
agreement does not give rise to a transaction, as contemplated in section 9 of the Listings Requirements;
and therefore section 10 of the Listings Requirements is not applicable to the agreements entered into
between MSH and Stor-Age in respect of the MSH Services (“Original Response”).
As a result of changes to the Listings Requirements to incorporate not only transactions, but also
“agreements” in the definition of a “related party transaction”, the Company’s Sponsor requested the JSE
to confirm whether the finding in the Original Response was still applicable, given that it was a practice
which had been the subject of disclosure since listing in all integrated annual reports and related investor
communications. In its response, the JSE advised that the value of the MSH Services (other than
maintenance services which are considered to be in the ordinary course of business) must be
categorised when entered into, amended or renewed, and announced on SENS.
The MSH Services do not involve the acquisition or disposal of an asset by the Company. Accordingly,
no assets can be valued using recognised valuation techniques. The JSE has accepted the Company’s
proposal that the non-executive directors provide confirmation to the JSE that the terms and conditions
of all agreements entered into between Stor-Age and MSH for the provision of the MSH Services are
market-related, and that the procedures followed by the non-executive directors in reaching their
conclusion are acceptable.
In order to ensure that the agreements concluded with MSH are market related, the Company employs
the services of an independent third party quantity surveyor to provide the necessary guidance and
assurance to the non-executive directors that the terms and conditions of the agreements for the
provision of the MSH Services are in line with market-related terms and conditions for such services.
The non-executive directors rely on this independently procured assurance in order to assess the terms
and conditions of the agreements, and to approve them.
2. Rationale for the agreements
The MSH Services assist the Company with the construction, refurbishment and expansion of its property
portfolio in line with its strategy. The construction techniques, skills set and processes, which are
specialist in nature and specific to the self storage industry, have been developed and refined by MSH
over the last 10 years. This ensures that a high quality and cost-effective service is provided to the
Company for the benefit of shareholders.
Added benefits for the Company from using MSH’s services are as follows:
• in the planning stage of all new projects, the Company obtains the benefit of MSH’s expertise in
“value-engineering” the proposed design and related construction inputs required, in order to arrive
at an optimally priced project within pre-defined development budgets;
• the Company makes design changes throughout the construction period without incurring penalty
financial claims;
• the Company does not incur penalty financial claims for standing time or late information, allowing
for improved cost control, contract management and budgeting;
• all savings achieved during the project are passed back to the Company as the nature of the building
contract is “cost plus the predefined and agreed margin” as opined on upfront as fair and market-
related by third party quantity surveyors.
In the opinion of the Company’s directors, it is neither feasible nor appropriate for construction related
activities to be carried out by the Company itself given the risk profile of construction in general; the
associated large fixed overhead costs; the negative impact on cash available for distribution to
shareholders; and the potential detriment to the Company’s REIT status.
3. Details of the agreements
In order to ensure compliance with the Listings Requirements, details of the following agreements (“the
Agreements”) are required to be announced given that, on an aggregated basis together with other
agreements of a similar nature entered into with MSH, the Agreements exceed a categorisation
percentage of 0.25% of market capitalisation in a rolling 12-month period:
Property Total value Key terms Effective date of
of projects payment
StorTown R10 279 070 Redevelopment of a property purchased Paid monthly in various
Durban from Dancor Properties Proprietary Limited instalments from
City as announced on SENS on 10 October 22 January 2018 to
2017
17 May 2019
Craighall R13 555 824 Construction of Phase II of the Craighall Paid monthly in various
Certificate of Practical Completion instalments from 16 March
development as announced on SENS on 2018 to 21 August 2019
7 December 2017
Stikland R10 060 155 Alterations and expansion of GLA relating Paid monthly in various
to the acquisition of All-Store as instalments from
announced on SENS on 6 March 2018 18 September 2018 to 21
August 2019
Gardens R2 212 254 Internal fit-out of additional GLA and Paid monthly in various
associated construction work on the sixth instalments from
floor of the expanded Gardens property as 17 September 2018 to 17
announced on SENS on 25 May 2016 May 2019
All payments made to MSH in respect of the MSH Services have been fully disclosed in the Company’s
integrated annual reports and SENS announcements of interim and final results.
In addition to the above Agreements, the Company also entered into an agreement with MSH on
6 November 2019 for the provision of MSH Services in respect of the new Tygervalley self storage
property to be developed (“the Tygervalley Agreement”). Located in the northern suburbs of Cape
Town, the property will comprise 7 100m² of GLA and is expected to be completed by December 2020.
The total consideration payable by the Company to MSH is R67.1 million.
4. Categorisation and confirmation of market related terms and conditions
The Agreements, when considered on an aggregated basis, and the Tygervalley Agreement constitute
small Related Party transactions in terms of the Listings Requirements.
The sole member of MSH is the Stor-Age Property Holdings Trust (“SPH Trust”). Gavin Lucas, Stephen
Lucas and Steven Horton, who are the executive directors of Stor-Age, are ultimate beneficiaries of the
SPH Trust.
The non-executive directors have confirmed to the JSE that the terms and conditions of the Agreements
and the Tygervalley Agreement are considered to be market-related, after having received, inter alia, a
report from an independent third party quantity surveyor in respect of each property (“the QS Reports”).
A copy of the non-executive directors’ resolution and the QS Reports will be open for inspection for 28
days from the date hereof at the registered office of the Company and the Johannesburg office of its
Sponsor, Questco Corporate Advisory Proprietary Limited.
Cape Town
18 November 2019
Sponsor to the Company and Transaction Sponsor
in respect of the small related party transactions
Questco Corporate Advisory Proprietary Limited
Financial Advisor in respect of the Acquisition
Investec Bank Limited
Date: 18/11/2019 03:50:00
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