Safestore Sees Growing Demand for Storage

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Safestore Sees Growing Demand for Storage

Demand for self storage in the UK and France will continue to grow despite a slowdown in the housing market, Steve Williams, chief executive of Safestore Holdings, said. ‘For self storage, all the fundamentals (for growth) are in place,’ he told Thomson Financial News in an telephone interview, after the company reported a 21.7 pct rise in EBITDA before exceptional items for the year to end-Oct 2007.’We would prefer a very buoyant housing market, but self-storage will continue to grow,’ he said.

A slower housing market results in a lower level of enquiries and fewer customers taking space, he said, but this is countered by longer occupation periods as property chains lengthen and customers sell and then wait longer to buy. The market is also becoming more diversified, with a mixture of commercial and individual customers, and short-term and long-term lets, he said.

‘One third stay up to 12 weeks, one third between 13 and 26 weeks and one third are nice, sticky customers who stay longer,’ Williams said. The average length of stay was 80 weeks at Oct 2007, up from 73 weeks a year earlier. The rates charged for letting storage space also increased — to an average of 21.56 stg per square foot, up 8.3 pct, for the whole portfolio, while the like-for-like rate was up 9.6 pct to 21.88 stg. ’50 pct of this was due to prices going up and 50 pct was due to space management — changing the size of units,’ said Richard Hodsden, chief financial officer. Stores tend to gravitate towards higher yielding smaller units as they become more established and less reliant on commercial customers, he said.

The self storage retailer increased its occupancy by more than 200,000 sq ft, or 7.4 pct, to 2.91 mln sq ft during the year, Williams said. Safestore had a 103-strong portfolio of store spread across the UK and Paris at end-Oct, valued at 583.7 mln stg, an increase of 24.0 pct since Oct 31, 2006, he said. One store, in Glasgow, has opened since year-end, and a further 10 are due to open in 2008, with seven planned for 2009/10.

The group is flexible whether its sites are freehold or leasehold, Williams said, and instead places a priority on site visibility and size. Our UK footprint gives us competitive advantages,’ he said. ‘We are taking a fairly prudent approach to expansion, with 7-10 store openings a year.’ Williams said the self-storage sector is still fairly new for investors, who view the business both as a property and as a retail play. ‘We are a new asset class, a unique hybrid,’ he said.

The sector has good defensive qualities against property yields moving out, he said, and a downturn in commercial prices would provide an opportunity to expand. Conversion to Real Estate Investment Trust Status remained on the cards, he said, but Safestore’s tax position, whereby it can utilise current tax losses, meant it is unlikely to convert in this year.

First-quarter trading, which is generally the weakest in terms of occupancy, is consistent with historic seasonal trading patterns, Williams said, and revenues remain in line with expectations. Safestore reported a 21.7 pct rise in EBITDA before exceptional items for the full-year ended Oct 31 to 40.7 mln stg from 33.5 mln, while like-for-like revenues rose 14.1 pct to 72.6 mln stg. Its adjusted Net Asset Value per share increased 43.6 pct to 198.8 pence.

The company declared a final dividend of 3 pence, resulting in a total dividend of 4.5 pence for the full year. In reaction, Citigroup kept ‘buy’ on Safestore and its 270 pence price target, noting that the group makes no reference to the difficult October experienced by rival Big Yellow. It said Safestore’s NAV was well ahead of its forecast, while the group’s balance sheet also looks to remain strong, as it sees attractive upside to the stock. The company’s shares were down 5-1/4 pence, or 3.44 pct, to 147-1/2 pence at 11.25 am, while the FTSE Small Cap index had lost 37.5 points to 3,040.50.Safestore had a 103-strong portfolio of store spread across the UK and Paris at end-Oct, valued at 583.7 mln stg, an increase of 24.0 pct since Oct 31, 2006, he said.One store, in Glasgow, has opened since year-end, and a further 10 are due to open in 2008, with seven planned for 2009/10.

The group is flexible whether its sites are freehold or leasehold, Williams said, and instead places a priority on site visibility and size. ‘Our UK footprint gives us competitive advantages,’ he said. ‘We are taking a fairly prudent approach to expansion, with 7-10 store openings a year.’ Williams said the self-storage sector is still fairly new for investors, who view the business both as a property and as a retail play. ‘We are a new asset class, a unique hybrid,’ he said.

The sector has good defensive qualities against property yields moving out, he said, and a downturn in commercial prices would provide an opportunity to expand. Conversion to Real Estate Investment Trust Status remained on the cards, he said, but Safestore’s tax position, whereby it can utilise current tax losses, meant it is unlikely to convert in this year. First-quarter trading, which is generally the weakest in terms of occupancy, is consistent with historic seasonal trading patterns, Williams said, and revenues remain in line with expectations.

Safestore reported a 21.7 pct rise in EBITDA before exceptional items for the full-year ended Oct 31 to 40.7 mln stg from 33.5 mln, while like-for-like revenues rose 14.1 pct to 72.6 mln stg. Its adjusted Net Asset Value per share increased 43.6 pct to 198.8 pence. The company declared a final dividend of 3 pence, resulting in a total dividend of 4.5 pence for the full year. In reaction, Citigroup kept ‘buy’ on Safestore and its 270 pence price target, noting that the group makes no reference to the difficult October experienced by rival Big Yellow. It said Safestore’s NAV was well ahead of its forecast, while the group’s balance sheet also looks to remain strong, as it sees attractive upside to the stock. The company’s shares were down 5-1/4 pence, or 3.44 pct, to 147-1/2 pence at 11.25 am, while the FTSE Small Cap index had lost 37.5 points to 3,040.50.

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