Lok'nStore announces sale and manage-back on four freeholds

Self-storage operator Lok'nStore announced the sale and manage-back of four of its freehold stores on Tuesday, for a total gross consideration of £39m, to Self-Storage Trading LLP.

The AIM-traded firm said the purchaser was an existing institutional managed-store client, wholly independent of Lok'nStore and its directors.

Lok'nStore said it would continue to manage the stores in Basingstoke, Cardiff, Horsham and Portsmouth as branded Lok'nStore operations, maintaining its existing operational footprint.

It would receive management and performance fees for that, on behalf of their new owner.

The total consideration of £39m receivable would be subject to a £1.8m downward adjustment for certain committed works to be completed at two of the sites.

It said the net proceeds would be recycled rapidly into new, “fast growing” landmark stores, with the company saying it had three further sites in the hands of lawyers that it expected to secure shortly, and a number of other opportunities progressing as part of its site evaluation programme.

Those new target sites were “over and above” Lok'nStore's current pipeline of 12 stores, which were being funded from its existing £100m revolving credit facility.

In the year ended 31 July 2021, the four stores being sold generated revenue of £2.54m and contributed £1.54m to group EBITDA.

Lok’nStore said that in the first year following the sale, it expected to receive incremental management fees of around £0.2m in respect of the manage-back arrangement, which would flow directly to group EBITDA.

The historic cost of the four stores was £13.75m, and their stated fair value as at 31 July was £31.75m.

It said the transaction would not impact its ability to grow its annual dividend in line with market expectations, which was “well covered” by projected EBITDA levels going forward.

The group's adjusted pro forma loan-to-value ratio as at 31 January, calculated on a net debt basis, would fall to about 8.0%, from 21.0% at the end of July last year.

Looking at its trading since the financial year-end in July, Lok’nStore said it had continued “well”.

The fully-funded 12-store pipeline was progressing well, and in early January the group opened a new landmark store in Warrington.

Lok'nStore said it was onsite at four stores - two of which would open in the coming months.

“This transaction, at a 22.8% premium to the July 2021 independent valuation, demonstrates the value Lok'nStore is creating and the growing institutional demand for UK self-storage assets,” said executive chairman Andrew Jacobs.

“The £37.2m of net cash generated from this transaction will support the further expansion of our new landmark store pipeline.”

Jacobs said the firm’s strategy remained unchanged - to recycle capital to deliver a faster growing return, allowing it to increase the rate of dividend growth for shareholders.

“This is a busy and exciting time for Lok'nStore as we rapidly grow and improve the quality of our owned portfolio creating value for our shareholders without significantly increasing risk.”

Lok'nStore said it would announce a pre-close trading update on 7 February for the six months ended 31 January.

At 0916 GMT, shares in Lok’nStore Group were up 2.79% at 1,027.9p.