Bid for National Storage REIT (NSR)
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We believe the current takeover offer for ASX listed National Storage REIT (NSR) at $2.86 per share is inadequate.
In fact, we agree with the bidders, Brookfield/GIC: NSR is a great real estate platform and the bid price reflects great value for the buyer.
As long-standing investors in NSR, we do not believe the bid price reflects the intrinsic value of this outstanding portfolio and platform.
- NSR is the only publicly traded internally advised self-storage vehicle in Asia/Pac and one of only ten worldwide of any substance.
- NSR operates in a market enjoying strong operating conditions, with population growth and limited self-storage space per capita vs many other developed markets. In fact, the demand / supply set up in Australia is more favourable than in many other developed markets. Growing demand and inadequate supply makes NSR’s portfolio primed for growth in the coming years. This forward growth is not captured in the company’s NAV or other valuation calculus.
- One measure of value is price to replacement cost and the current price does not reflect an adequate premium to replacement costs.
- The NSR portfolio has taken time to accumulate into something meaningful. The portfolio is much more than a sum of the parts. The platform value should reflect the diversity, the development capability, significant IP and IT systems. Management deserves credit for having built a terrific business over nearly 3 decades. They should not be so quick to sell it away at a point of public market weakness.
- NSR is the market leader in the Australian self-storage sector and one of the most recognised brand names in Australian real estate, created over more than a 25 year period. We do not believe the bid price, at a 7% premium to the trailing appraisal Gross Asset Value of the individual assets, incorporates adequate weight to the franchise value, future development potential and market position of the number one player in the industry.
Highlighting the qualities of this platform, this is the second bid for the company in roughly 5 years and comes on the heels of a recent bid for its smaller rival. We do not think it coincidental that the bid comes at a soft point in the cycle for real estate and REIT prices.
To reiterate, this is an unusual and high-quality platform that anyone would struggle to replicate. Once gone it is likely to be many years before we would be able to invest in something of this quality and scale. Hence, we understand the bidder’s enthusiasm.
This is not a REIT to sell easily, and almost certainly this is not the time to sell.
In sum, we believe investors are not being adequately compensated for the robust effective cashflows from a substantial and diverse portfolio, and one of the country’s best real estate franchises. Whilst we await the independent expert’s report, based on the available information, we urge shareholders reject the current bid.
– Andrew Parsons, Chief Investment Officer
Further information
Andrew Parsons
CIO – Portfolio Manager
Email: andrew.parsons@rescap.com
Iddo Snir
Portfolio Manager
Email: iddo.snir@rescap.com
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