Safestore upbeat as occupancy recovers
September 2009 - Demand for domestic and commercial self storage has continued to creep ahead over the summer months, according to Safestore, the UKs largest retailer in the sector.
The group on Tuesday pointed to recovering occupancy and rental rates as households and businesses looked for short-term solutions to stashing their goods.
The self-storage provider saw occupancy increase by 110,000 sq ft over the nine months to July 31, compared with a loss of 29,000 sq ft for the same period the previous year.
Average rents increased 5.3 per cent to £25 year-on-year as the company let out 2.8m sq ft of space.
Steve Williams, chief executive, said demand had been hit by the recession although economic uncertainty had also helped underpin demand among some customers.
“We are starting to see some signs of recovery in the housing market, but there are still people who can’t or won’t move and require extra space,” Mr Williams said.
Domestic customers were being more decisive about decluttering junk rooms to rent out or use as home offices in the face of recession, he said.
Commercial customers, who represent just 32 per cent of all users but account for 57 per cent of space taken, continued to look for flexible storage alternatives to avoid long-term lease commitments to accommodate stock.
Sentiment towards both Safestore and Big Yellow, its listed rival, has been hit hard since last autumn as fears over the declining values of their commercial property portfolios and debt levels weighed on share prices.
About two-thirds of Safestore’s properties are owned freehold with the remainder on lease, Mr Williams said.
But Safestore, which ended its half year with debts of £273m, should not be considered a property play, he said, even though Big Yellow operated as a real estate investment trust.
“Our value is very much based on cash flows, discounted over long periods,” he said. “Our business is based on cash – we are not a typical ‘property’ company.”
Shares in Safestore, which hit a low of 38p last November, closed down 2¾p at 128¼p. The company maintained its guidance that it expected to meet consensus forecasts of underlying earnings before interest, tax, depreciation and amortisation of £44m for the full year.
Collins Stewart maintained its “buy” recommendation on the stock, noting encouraging trading at the company’s pipeline of new stores across its expanding network of 94 outlets in the UK and 22 in its Une Pièce en Plus chain in Paris.
KBC Peel Hunt also left its “buy” recommendation unchanged on expectations of an unchanged full-year dividend of 4.9p, arguing that the share’s “26 per cent discount to forward NAV per share looks overdone” in the light of a recent rally in the real estate sector.
By Michael Kavanagh - Financial Times
