National Storage REIT could be good buying value: analysts

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A $US1.8 billion acquisition by the US-based Public Storage of the ezStorage business on its home soil has some suggesting that a return to the negotiating table to buy the Australian-listed National Storage REIT could now be less likely.

Meanwhile, global buyout fund Blackstone is known to be keen on storage assets globally, but the understanding is that National Storage REIT is not currently on its agenda after it considered buying the business once before.

But analysts are indicating that even if Public Storage or Blackstone choose not to vie for the $2.21 billion Australian company, it could appeal to another suitor because self-storage owners here are trading at discounts to their global counterparts.

Public Storage’s acquisition of ezStorage is being purchased at a price that equates to a 3.6 per cent rate of return, or capitalisation rate, and it is funding the transaction through debt.

The US-based group in 2020 launched a $1.9bn buyout proposal for National Storage REIT at $2.40 per share, but later pulled the plans due to the onset of the global pandemic.

Since that time, the Australian listed Abacus Property Group has amassed a 9.9 per cent stake in National Storage REIT, buying in at an average price of about $1.60.

Now the market value of the company, which issued additional shares last year, is about $2.2bn or $2.17 per share.

Some say the price is still too expensive for groups like Blackstone, which would only want to launch a bid at around $2.20 per share.

But analysts at JPMorgan say in a research note that the acquisition by Public Storage of ezStorage highlights the difference between the value of Australian real estate companies in the storage space compared to those in the United Kingdom and the United States.

Public Storage paid a price for ezStorage that equated to a 3.6 per cent cap rate.

UK and US self-storage REITs are trading at implied cap rates of between 4.1 per cent and 4.7 per cent compared to National Storage and its Australian-listed rival Abacus Property Group which are trading at 5.4 per cent and 6.6 per cent respectively, indicating a lower value.

“Both Abacus and National Storage remain industry consolidators and we believe Australian self-storage assets are undervalued.”