Abacus opens the door to $3b self-storage REIT
Real estate investors will get a fresh chance to invest into the booming self-storage market, through a plan by property fund manager Abacus Property Group to spin out its Storage King facilities into a $3 billion listed property trust.
The de-stapling move, as it is known, could also help release inherent value in the $2.5 billion Abacus’ own stock, which with other listed property trusts has been trading at a heavy discount to its asset values, as it battles the impact of surging interest rates.
Abacus stock surged on news of the plan on Thursday, jumping 23¢, or 8.1 per cent, to $3.08. Even at that price, Abacus shares are still 20 per cent below its net tangible asset value of $3.86.
Abacus’ managing director, Steven Sewell, said the platform had invested $1.2 billioninto self-storage assets over the past five years, giving it sufficient scale “where it makes most sense to be separately listed with its own capital structure”.
To be known as Abacus Storage King REIT and trading under the ticker of ASK, the new property trust will have a 127-asset portfolio, including 108 trading stores with more than 568,000sq m of space and 19 developments.
“The creation of ASK as a dedicated self-storage REIT will provide security holders with pure-play exposure to the Storage King portfolio and operating platform,” Mr Sewell said.
“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.
“ASK has an outstanding growth runway with a pipeline of future acquisitions and a 115,300sq m development and expansion pipeline.”
If Abacus shareholders support the split, a freshly minted property trust could be trading on the boards by the third quarter of this calendar year. It would become a direct rival to the $2.8 billion National Storage REIT, in which Abacus itself holds a 9.36 per stake after establishing a position three years ago.
Abacus would retain a 19.9 per cent stake in ASK, managing the new self-storage trust and its separate $2.6 billion portfolio of diversified commercial property.
“The market should receive the proposed de-stapling structure favourably as a potential unlock of the underlying discount to NTA,” Citi analysts wrote in a client note on Thursday.
The announcement of the new trust came as Mr Sewell delivered Abacus’ 2023 interim result, clocking up a 0.4 per cent lift in earnings to $81.4 million. Statutory profit fell 73.2 per cent to $84.5 million, after booking in a much smaller revaluation gain than in the previous corresponding period.
The platform’s self-storage portfolio delivered a buoyant 25 per cent growth in net property rental income to $72.2 million over the 2023 first half. By comparison, net property rental income grew 6 per cent to $50.8 million from its commercial portfolio.
The self-storage portfolio increased in value by $83 million or 3.5 per cent. Abacus’ office portfolio fell 2.7 per cent, or $49 million, while its retail portfolio value declined by 4.8 per cent, or $28 million.
Abacus is paying an interim distribution 9¢, up 2.9 per cent, and it has reaffirmed its distribution guidance of at least 18.4¢ for the full year.