Tap into Safestore's quality income

In the wake of lockdown being imposed at the end of March, Safestore’s core UK and Paris stores experienced an increase in customers moving out, but occupancy has since rebounded. Closing occupancy fell to 71.6 per cent at the end of April, down slightly on 71.9 per cent in 2019. However, by 15 June, closing group occupancy was up 1.3 per cent compared with April on a like-for-like basis, and revenue during that period was also up 0.4 per cent year on year. Rent collection has also remained close to historical norms, with the group receiving 96.9 per cent of April and May rents in the UK and 83.8 per cent of rent due in Paris, both down slightly the same time last year. 

The UK self-storage market is relatively immature compared with other countries – the average supply of self-storage space per capita stand at 0.73 square feet (sq ft), against 9.4 sq ft in the US and 1.9 sq ft in Australia. But a lack of supply in space-constrained locations – 72 per cent of revenue is generated by stores in London, the south east of England and Paris – has helped drive up the average rate charged per sq ft. During the six months to April, the average rate rose 2.1 per cent and held firm in the UK and Paris as lockdown measures have begun to ease, rising 4.1 per cent and 2.63 per cent, respectively, in the six weeks to mid-June.     

The group has benefited from the rising scale of its store portfolio – which outstrips listed peers Big Yellow (BYG) and Lok'nStore (LOK) – to boost the first-half underlying cash profit margin from 57 per cent to 58 per cent. It is also more geographically diverse, entering the Spanish market last year after acquiring OhMyBox – which brought with it four stores in Barcelona – as well as the Belgian and Dutch markets via its joint venture with private equity group Carlyle. As well as providing a less capital-intensive method for Safestore to enter new markets, it also earns fees for managing the investments on behalf of Carlyle. 

Despite expansion, free cash flow rose 17 per cent during the first half of the year and has grown over the past nine consecutive years. Meanwhile, the loan-to-value ratio stood at 30 per cent, against a covenant limit of 60 per cent, and underlying cash profits cover underlying finance costs 8.6 times. It also has ample liquidity, with   bank facilities of £158m and no borrowings to refinance before June 2023. The cost of debt stood at just 2.2 per cent during the first half.