National Storage REIT (ASX: NSR) has given a business update and is carrying out a capital raising, is it a buy?

National Storage is the largest self storage provider in Australia and New Zealand with over 125 properties located across the two countries that gives access to more than 68,000 storage units with a total lettable area of approximately 650,000 square metres. It has grown quickly having listed on the ASX in December 2013 as the first listed internally managed and integrated operator of self-storage centres in Australia.

National Storage’s FY19 Update

The self storage business is looking to raise $170 million from institutional investors and a further $20 million from eligible retail/regular investors.

The capital raising price is $1.71 for institutional investors, which is a 4.4% discount to the distribution adjusted close of $1.79 yesterday.

National Storage also provided an update about its acquisitions and the financial impact of the capital raising.

National Storage Acquisitions

In the second half of FY19 National Storage has completed the acquisition of 11 existing centres in Australia for $127 million.

National Storage also said it sold its Biggera Waters (Gold Coast) development to the Bryan Family Group Joint Venture, which National Storage owns 25% of, for $26 million.

The real estate investment trust (REIT) is also in talks to buy another $100 million of additional storage centres in the first quarter of FY20.

In New Zealand the REIT has, in the second half of FY19, acquired eight existing centres, two development sites and one expansion opportunity for NZ$114 million.

National Storage Financials

National Storage has expanded its debt facilities to add a further $147 million and extend its current facilities, whilst also adding Australia and New Zealand Banking Group (ASX: ANZ) to its group of lenders.

The capital raising money will be used to repay debt to reduce pro forma gearing levels from 40% to 32%.

National Storage expects to achieve profit per share (EPS) of 9.6 cents in FY19, which is within guidance, and expects growth of more than 4% in FY20. Net tangible assets (NTA) is expected to increase to $1.62 per share.

Is National Storage A Buy?

The REIT has a trailing distribution of 5.6% on the capital raising price, which is quite good with interest rates so low. However, we must always question the fundamentals of the business – the yield is not the only factor. Storage is a booming industry, but I have no idea how long that will be the case for.

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Disclaimer: Any information contained in this article is limited to general financial/investment advice only. The information has not taken into account your specific needs, goals or objectives, so please consider consulting a licenced and trusted adviser before acting on the information. Please read The Rask Group’s Financial Services Guide (FSG) for more information. This article is authorised by Owen Raszkiewicz of The Rask Group, which is a corporate authorised representative No. 1264179 of Strawman Pty Ltd (ACN: 610 908 211) (AFSL: 501 223).

At the time of publishing, Jaz does not have a financial interest in any of the companies mentioned.