eKourier Jan 2014

Australias First Self Storage IPO FEATURES

investors take business risk in the property. Something more like a going concern hotel investment. The APN fund initially antici- pated a 5 year exit. The trust grew after 2003 to raise additional funds to fuel further investment. In 2008, APN were unable to engineer an exit for investors in the National Storage Property Trust and arranged Gresham Partners, and later also imposed a brief distri- bution freeze on their retail investors. The re-unification of the business and property in the National Storage IPO sees the arrangement come full a refinance, including a mezzanine loan from

adopt a Op Co / Prop Co stapled structure separating the manager from the property, and setting up synthetic leases between the internal entities. The prospectus will no doubt reveal this. In Australia, the other major brand operators and investors include Storage King as Franchisor and Asset Manager, and Kennards Self Storage. At Kennards, we own and operate our assets as going concern in the classical fashion of global leaders. We own / operate 79 storage centres in Australia and New Zealand. Kennards is the largest owner of self storage assets in the region and remains a private family owned and operated business. In addition, Abacus Property Group ranks as a major investor in self storage with 44 assets spanning Australia and New Zealand operated by Storage King. In late November, rumour emerged that Abacus were also looking to list their $300 million storage portfolio in a stand-alone company. The emergence of a Self Storage REIT in Australia was inevitable and slightly overdue. The small Australian market has lead to concentration of ownership and slow scale build-up, and interrupted by the GFC which has slowed the journey. The quantity of high quality institutional grade self storage assets in the market is modest further slowing growth and leading to over enthusiastic bidding for second tier assets. The big question, how will the self storage REIT perform? Like any property investment, the performance will depend heavily on the underlying asset quality and in addition for self storage, manage- ment capability will have a significant influence. Understanding the detail in this regard will provide some insights. The National Storage Prospectus released in late November unfortunately provided scant detail on the Assets and Valuations. The arrival of the first self storage IPO will provide some benefits to the industry, illuminating a wider audience about the self storage asset class, it’s positive attributes and it’s risks. We will watch this space with interest. Sam Kennard Managing Director

D ecades after self storage listed on Wall Street in the USA and more than 10 years after the UK’s first self storage listing, Australia looks set to see its first self storage IPO. National Storage look ready to do a deal with their property owner fund manager (APN Property Group) and combine the business and property assets in a listing of a going concern self storage – as reported in the Australian Financial Review Nov 15th, 2013: “National Storage Unlocks the Door to $280M Float”. APN and National Storage began their relationship in 2003 when APN created a retail fund known as the APN National Storage Property Trust. The trust owned the properties while National Storage entered a 15 year triple net lease to operate from them. This sale-and-leaseback structure contrasts starkly with the more classical storage ownership structures of the major operators around the world including KSS, who all operate and own the assets in a single entity. This reflects the unique property class that self storage operates as, where

circle and embrace the globally accepted investment structure of REIT’s and major operators. The IPO will now give the retail investors the ability to exit and crystallise their holding some 10 years after inception. Self storage rentals to storers are an active type of business, requiring daily hands on involvement. To navigate the ASX passive income tests for a REIT, the National Storage IPO will likely need to Kennards Self Storage. At Kennards, we own and operate our assets as going concern in the classical fashion of global leaders.” “In Australia, the other major brand operators and investors include Storage King as Franchisor and Asset Manager, and

Kennards Kourier January 2014

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