After raising rates per square metre by 5 per cent in just nine months and achieving record occupancy across its facilities in Australia and New Zealand, National Storage (ASX: NSR) is raising $325 million to seize growth and refurbishment opportunities while demand is high.
The move comes just 13 months after the Brisbane-based group raised a very similar amount, which was duly spent with $373 million worth of acquisitions completed in FY21 to date adding 134,400 square metres of net lettable area (NLA) to the portfolio.
The board's confidence is shown in the tiny 3.8 per cent discount for the fully underwritten raise that was announced today after NSR entered a trading halt.
This is about half the discount that was offered in 2020 when new shares were issued at $1.57 each, compared to the $2 per share arrangement put forward today.
The aggressive push in 2020 appears to have paid off for the company founded by its managing director Andrew Catsoulis, which has seen its portfolio occupancy hit 86.7 per cent and has today lifted earnings guidance by 5 per cent to 8.5-8.6 cents per share.
"All states and territories in which NSR operates continue to perform strongly and all these areas are now trading over 80 per cent occupancy, with over 35 per cent of all centres now operating at over 90 per cent occupancy, and approximately 70 per cent operating at over 85 per cent," Catsoulis says.
"We attribute this strong operational result to a positive macroeconomic environment as well as a number of internal operational improvements over the past 12 to 18 months.
"These enhancements include an updated and fully rebuilt website, the integration of our "contact-free move-in" process, refinements made to our revenue management system, as well as the internalisation of a number of key functions in the business that were previously outsourced."
Following 27 acquisitions in the financial year to date including 24 storage centres and three development sites, National Storage has today announced plans for an increasing focus on development and expansion projects, with a 110,000sqm pipeline that consists of greenfield/brownfield developments, expansions of existing centres and the "Revive" refurbishment program.
In total the company had 16 active projects with six under construction as at the end of April.
"Given the ongoing compression in yields across the self-storage sector, and our strong growth in rate, REVPAM (revenue per available square metre) and occupancy, NSR believes it is an opportune time to expedite the pace of its development, expansion and centre revitalisation programs," Catsoulis says.
"With 70 per cent of our centres now operating at or nearing stabilised occupancy, it is important that we continue to grow our built capacity in a sustainable fashion so as to generate ongoing opportunities to grow underlying earnings per security and NTA (net tangible assets)."
Proceeds will initially be used to pay down debt in order to strengthen National Storage's balance sheet, reducing pro forma December 2020 gearing levels by 11 percentage points to 24 per cent.
"This will enable us to further strengthen our balance sheet in order to facilitate ongoing growth of the business from a development, expansion and centre revitalisation basis, as well as enabling us to undertake continued acquisitions on a selected basis," Catoulis concludes.
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