National Storage announces $190 million equity raising to fuel its growth


The National Storage REIT (ASX: NSR) share price won’t be going anywhere this morning after the self-storage operator requested a trading halt.

Why are National Storage shares in a trading halt?

National Storage requested the trading halt whilst it undertakes a fully underwritten $170 million institutional placement of new stapled securities and a non-underwritten security purchase plan to raise up to a further $20 million from eligible investors.

According to the release, the placement is fully underwritten by both J.P. Morgan Australia and Morgan Stanley Australia and will be issued at a fixed price of $1.71 per security. This represents a 4.4% discount to the distribution adjusted last close of $1.79 on June 24 2019.

The securities issued under the security purchase plan will also be offered at $1.51 per security.

Why is National Storage raising funds?

Over the last six months the company has transacted a large number of high-quality acquisition opportunities across Australia and New Zealand totalling $235 million.

In addition to this, the company also has approximately $100 million of additional acquisitions in various stages of negotiation and due diligence which are expected to transact by the end of the first quarter of FY 2020.

Management believes these acquisitions demonstrate that it is continuing to successfully execute its long-term strategy of industry consolidation in the highly fragmented self-storage sector in Australia and New Zealand. It also expects the acquisitions to underpin growth over FY 2020 and beyond.

In order to fund this acquisition program and maintain funding flexibility, National Storage is undertaking its equity raising.

Managing director, Andrew Catsoulis, said: “FY19 marks NSR’s most successful year of acquisitions with over 30 acquisitions across Australia and New Zealand either settled to date, or contracted to settle in the near future. We are thrilled with the high quality of these acquisitions and remain confident in NSR’s demonstrated ability to extract enhanced value from these centres as we continue to integrate the assets into, and operate the centres as a part of, the NSR portfolio.”

Portfolio valuations.

The company also revealed that it has undertaken an independent valuation process on over 50 centres across its Australian portfolio.

Whilst it warned that this process is yet to be finalised, so far it indicates that the likely weighted average capitalisation rate across the portfolio will be in the vicinity of 6.9%, which will provide a significant uplift of over ~$100 million in total portfolio valuation.

Mr Catsoulis said: “This strong valuation and corresponding NTA uplift indicates the ongoing value that NSR’s platform continues to add to the unique portfolio of storage centres that NSR now holds across Australia and New Zealand.”

I think this update demonstrates why National Storage is one of the better dividend options on the local market right now along with Rural Funds Group (ASX: RFF), Westpac Banking Corp (ASX: WBC), and these dividend shares.

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More reading

Motley Fool contributor James Mickleboro owns Westpac shares. The Motley Fool Australia owns shares of and has recommended RURALFUNDS STAPLED. The Motley Fool Australia has recommended National Storage REIT. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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