National Storage ramps up expansion plans with $325m capital raising

Buoyed by higher returns from its storage centres over the past six months, National Storage REIT (ASX: NSR) is raising $325 million to seize on new opportunities for growth.

National Storage, which operates 230 self-storage centres in Australia and New Zealand, plans to use the funds to ramp up site development and acquisitions amid a surge in corporate activity within the self-storage space recently.

The capital raising comes on the heels of Abacus (ASX: ABP), owner of the Storage King brand, completing a $200 million institutional placement to expand in the sector.

Abacus is also planning to create a new $3 billion self-storage property giant to further its growth plans.

National Storage, Australia’s largest storage group, says it has $100 million of potential acquisitions in its sights after wrapping up 28 acquisitions worth $194 million in FY23 to date. This is on top of $81 million in committed acquisitions currently in train.

National Storage currently has 46 development and expansion projects under way which will release 350,000sqm of net lettable area in ‘coming years’.

The expansion follows solid business growth over the past seven months, with annual REVPAM (revenue per available metre) rising 5.1 per cent to $274 per square metre from the end of June last year to February this year.

The growth delivers on managing director Andrew Catsoulis’ forecast at last year’s AGM of a minimum 5 per cent growth in earnings.

“National Storage continues to deliver strong operational performance,” Catsoulis says. “We have focused on maximising REVPAM by carefully balancing rate and occupancy.”

Catsoulis says growth has also been achieved through the expansion of new assets.

The $325 million fully underwritten placement will comprise a $300 million institutional offer and a $25 million securities purchase plan for existing investors.

The issue price will be determined by a bookbuild with the price ranging from $2.33 to $2.41 per stapled security. The price range represents discount of between 4 and 7.2 per cent to the most recent closing price of National Storage securities of $2.51 yesterday.

National Storage will also use the proceeds of the capital raising to pay down debt including drawn facilities that are due to expire in the first half of FY24. The group says pro forma gearing will be cut from 27 per cent at the end of December to 24 per cent after the placement is completed.

Catsoulis says storage centre developments and expansions are a ‘key pillar of our growth strategy’.

“These projects deliver tangible upside for National Storage, from both the perspective of long-term enhanced revenue as well as net tangible asset uplift.

“Our in-house development and acquisition teams reflect our focus on acquisitions, in place developments, expansions and redevelopment projects, which are being implemented along with multiple other projects under active consideration.”

National Storage’s portfolio was worth more than $4 billion at the end of FY22, with net tangible asset backing of $2.34 per security – up from $1.89 a year earlier.