National Storage REIT (ASX: NSR) owns and manages a network of over 90 self-storage buildings across Australia and New Zealand.
Founded in 2000 NSR has successfully grown to become one of the largest storage solution providers in the region.
National Storage operates in an industry that doesn’t get a lot of media attention and isn’t ‘sexy’ in terms of investment themes and trends. However, from an investment standpoint, I think there are several features that make NSR attractive.
Why I Like NSR
Unlike a traditional property, storage units require minimal investment (maintenance and development) from the owner. They usually consist of four concrete walls, a roller door, and a quick sweep in between clients. This has a flow-on effect on staffing requirements with only a skeleton staff needed to manage most of the units in a development.
Since its inception National Storage has grown to become a dominant player in its market, this scale provides several benefits for its current investors. Administration, marketing and other fixed costs can be spread over a broader property base ensuring a lower unit cost for the business. For example, marketing material can be rolled out across different sites at a discounted rate. This also ensures a consistent message across regional and metropolitan sites.
Secondly, its scale also provides the business with the ability to negotiate better rates on ongoing business costs such as insurance and print media.
My main reason for investing is the demographic changes that I feel are directly related to National Storage. Storage units are growing strongly mainly due to the increased property downsizing of the Australian population. A transition to apartment living can be traced back to several themes including rising house prices, working commitments (CBD centric) and the growing trend of baby boomers downsizing. As more of the population downsizes the need for storage units should increase since these are seen as a safe and convenient option to traditional storage options.
The Risks
A key consideration for any investor in National Storage is an appreciation of their current growth strategy, which is based primarily on property acquisition. The industry itself is still dominated by independent operators which manage these units as a small business.
In my opinion, the landscape provides a large runway for the aggressive acquisition strategy that is currently occurring. As a long-term investor, I will be assessing this strategy to ensure prices and integration are aligned to shareholder wealth creation.
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Disclosure: At the time of writing, Anthony owns shares of National Storage.
