Abacus Group plans to spin off Storage King assets to create a $3b self-storage giant

Abacus Group (ASX:ABP) is planning to create a new $3 billion self-storage property giant, anchored by the Storage King brand, with plans to spin off its assets in the sector into a new ASX-listed entity.

 The new self-storage REIT, to be known as Abacus Storage King REIT (ASK), will allow Abacus to focus on growing its $2.6 billion commercial property portfolio on Australia’s eastern seaboard.

Abacus will manage the new REIT and plans to retain a 19.9 per cent interest in ASK which will become a pure-play self-storage investment that the group says has strong growth potential.

ASK will own a portfolio of 127 properties including 108 trading stores with more than 568,000sqm of net lettable area and 19 development projects.

The assets currently represent more than half of total assets owned by Abacus.

The property group says ASK has material growth potential through a pipeline of future acquisitions and a further 115,300sqm in development and expansion opportunities.

“Abacus is proud of the growth it has achieved in its self-storage portfolio and has been successful in managing and enhancing the Storage King platform to become Australia’s most recognised self-storage brand,” says Abacus managing director Steven Sewell.

“Abacus has deployed over $1.2 billion into self-storage assets over the last five years and has determined that the portfolio has reached a scale where it makes most sense to be separately listed with its own capital structure.

“The self-storage market has attractive market fundamentals supported by macroeconomic tailwinds including an imbalance in supply and demand for self-storage space, densification of residential property, and the growth of e-commerce.”

The planned spin-off has been announced in tandem with the property group’s FY23 interim earnings, a modest 0.4 per cent increase in funds from operations (FFO) to $81.4 million.

Statutory net profit fell 73.2 per cent to $84.5 million, with the previous corresponding period benefitting by a significant uplift in property valuations.

The self-storage business contributed EBIT of $59.3 million in the latest half year, up 12 per cent from a year earlier. Self-storage outperformed the group’s commercial property assets, which posted a 7 per cent lift in EBIT to $50.3 million.

Four self-storage developments were completed during the period, while Abacus invested $87 million to acquire eight new self-storage sites and a further $58 million for six other sites which are due to settle in the second half of FY23.

Sewell says that following the sale of the Storage King assets, Abacus will ramp up investment in its commercial property portfolio.

“Following a successful period of strategic portfolio evolution, Abacus is excited to deliver the next phase of growth in its commercial portfolio," he says.

"Abacus' commercial portfolio will provide securityholders with stable income growth supported by high occupancy and a diversified lease expiry profile."

The proposed spin-off of the self-storage assets will go to a vote of securityholders at an extraordinary general meeting to be held by the third quarter of this calendar year.