3 October 2003
$125 million property fund to acquire self storage assets
$125 million property fund to acquire self storage assets
In what is believed to be the first public offer of self-storage property assets, specialist property funds manager APN Funds Management Limited (APN FM) has contracted to purchase $125 million of self storage properties for a new unlisted property vehicle.
The portfolio, which comprises 20 properties, has exposure to Queensland, Victoria and South Australia. The vendor is National Storage, currently the third largest operator of storage centres in Australia. National Storage has committed to 15 year, triple net leases forall properties in the portfolio.
APN FM director, Howard Brenchley said "we are excited about the prospects for this portfolio. As a group we have been watching the development of the self storage industry and were attracted to the quality of the properties in the portfolio and the business model of National Storage."
The properties will be acquired by the APN National Storage Property Trust, an unlisted fund which will be mandated to purchase additional storage properties operated by National Storage. APN FM will be raising $62 million in equity to purchase the portfolio. An open-ended trust, unitholders will be asked to determine the future of the Trust before June 2008.
Director of Acquisitions and Development for National Storage, Andrew Catsoulis, said that following the completion of the current deal, which was arranged by Craig Wright and Tamara Williams of Capital Solutions Group, National Storage would operate 25 storage businesses across four states, encompassing approximately 14,000 units.
"This represents a total area of more than 100,000 square metres of storage space and more than 11,000 individual storage agreements.
"The funds from the sale of the properties will provide National Storage with the capital to continue its path of storage business acquisitions around Australia," Mr Catsoulis said.
"Storage for domestic and business users continues to grow at an unprecedented rate, driven by sharp increases in apartment and inner-city living Australia-wide and the trend towards off-site storage for business as a means of reducing office space and consequently, leasing costs," MrCatsoulis said.
He said this trend mirrored the remarkable growth of the industry in the United States and United Kingdom.
Mr Catsoulis said the company planned to double its number of outlets over the next two years.
"Now we have a strategic presence as a leading market player in Queensland, Victoria and South Australia, and our next move is to focus on the Sydney market where we currently have one storage business, acquired in February this year."
"What appealed to us was the National Storage business model, as well as the location, exposure and high quality of the properties", said Brenchley.
"We are forecasting an initial yield of 9% rising to 9.4% in 2006 for the Trust in our product disclosure statement" said Brenchley. Income is secured by the lease to National Storage as well as through the rent paid to National Storage from individual storers.
The industry still remains fragmented with the three largest operations comprising less than 10% of the market. "We believe that with an increase in the number of corporate players with strong covenants, there are opportunities for a re-rating of this sector by the market" said Brenchley.
APN FM has been at the forefront of the development of investment products in emerging property sectors. Its APN Retirement Properties Fund invests in five retirement villages in the Melbourne metropolitan area and last year APN Property Plus Portfolio purchased 19 Woolworths fuel outlets. Both trusts are currently performing ahead of forecasts.
APN FM also manages the $670 million APN Property for Income Fund for which it received InvestorWeb Research's award as the Property Securities Fund Manager of Year in both of the past two years; and more recently received the Monitor Money Skilled Manager of the Year award for property securities.
The offer opened on September 24, 2003 and will close on November 10, 2003. Minimum subscription is $10,000.
