The Abacus Property Group (ASX: ABP) share price is running higher today following the release of a positive announcement.
At the time of writing, shares in the real estate investment trust (REIT) have lifted 2.89% higher to $2.85.
Completed acquisition
Abacus advised that it has an unconditional agreement to acquire the remaining 75% interest in Storage King. The self-storage operating platform is regarded as a key sector for Abacus, having accumulated a portfolio of 81 locations. The valuation is estimated to be around $1 billion as at the end of June.
Before Abacus’ 25% stake in the self-storage operating platform in August 2018, Storage King managed stores across the ANZ region. Today, the company looks after 170 locations with more than 50,000 customers.
Abacus said that consideration of $50 million was being made for the balance of the Storage King business. The agreement is likely to be completed in late November and will be funded by existing debt facilities.
What did the managing director say?
Commenting on the deal, Abacus managing director Steven Sewell said:
The acquisition of the Storage King operating platform was identified as a key strategic imperative for Abacus, given our ownership of self storage assets exceeds $1.2 billion and comprises 40% of our balance sheet. A more integrated management business is critical to driving our self storage business and enhancing associated asset returns.
Furthermore, Mr Sewell said current Storage King CEO Michael Tate would join the Abacus executive leadership team. The new appointment will be in addition to his existing role as head of Storage King.
Mr Sewell added:
Abacus believes that in conjunction with Michael Tate, given his track record, market credibility, passion and energy for the business, it has the potential to continue to invest actively and substantially into driving the operations, technological advancement and customer value proposition of the Storage King branded stores, owned by Abacus and its third-party owners.
COVID-19 impact
Abacus said trading conditions for Storage King remained solid, with a rebound in occupancy post-COVID-19 lockdowns.
Established portfolio occupancy levels increased to 89.7% at the end of September as all geographical markets strengthened, with the exception of Victoria. Overall average rental yields have also returned to pre-COVID-19 levels with a revenue of $283 per square metre.
Further to the new arrangement, Abacus announced it has made a deal for the acquisition of four self storage properties. The $45.1 million settlement will see three purpose-built facilities located in urban areas of Melbourne and Wollongong. The last site will be developed in Sydney, featuring a multi-level facility.
Abacus share price summary
The Abacus share price has been stagnant since March, moving only within 10% of a rolling 6-month average. Shares in the company reached a 52-week high of $4.07 in February. However the share price is down more than 30%.
Abacus has a market capitalisation of $1.8 billion and a price-to-earnings (P/E) ratio of 21.4.
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Returns as of 6th October 2020
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Motley Fool contributor Aaron Teboneras has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. 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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