The National Storage REIT (ASX: NSR) share price finished last week 5% higher at $2.05 after making a 52-week high on Friday of $2.09. It traded relatively flat yesterday, closing at $2.04.
National Storage owns and operates 168 storage facilities across Australia and New Zealand. Currently 60,000 residential and commercial customers use these facilities annually. National Storage offers solutions for self-storage, business storage, records management, climate-controlled storage, vehicle storage, packaging products and insurance.
In 2019, the National Storage share price traded sideways for most of the year finishing 4.5% higher but since the beginning of 2020 newfound volume has entered and pushed the National Storage share price up.
So, what do investors see in National Storage?
Real estate is always a good investment
At the core of National Storage’s business model is sound property acquisitions. In the first half of FY20 National Storage has acquired 8 new storage centres, totalling $124 million, with an additional 5 centres totalling $36 million under contract or letter of offer.
In FY19, there was a new acquisition settled on average every 10 days and assets under management increased by 36% to $1.95 billion.
The majority of National Storage’s balance sheet is property assets and this is why it is considered a REIT. The ‘rental income’ that is received is in the form of customer payments to use the storage facilities.
Plenty of growth to come
National Storage is forthcoming in its statements about property acquisitions. The move into New Zealand has been successful, with 22 facilities operating and 3 developments in the pipeline for FY20.
At home, 4 new facilities are underway that will add another 33,000 sqm to the lettable space across Australia. Six expansion projects have already been completed in the first half of FY20, which added 28,300 sqm of lettable space.
Management is working hard to ensure that more National Storage facilities are rolled out in a sustainable way that does not overextend its borrowing capacity.
Recent institutional placements bolstering the balance sheet
During FY19, 2 capital raises totalling $358 million were undertaken via a security purchase plan and an underwritten institutional placement. According to the company, the capital raisings were conducted as a result of National Storage’s management wanting to strengthen the balance sheet via debt reduction.
The amount raised by these placements represents 22.5% of the market capitalisation of the company. The size of these placements relative to the company’s market capitalisation is astonishing – clearly the big end of town sees the growth potential in this stock.
National Storage is at worst, a well managed REIT, and at best, an amazing growth opportunity within the property market. The assets alone that National Storage owns equate to almost its entire market capitalisation. The aggressive property acquisition throughout 2019 proves that management isn’t messing about, and I foresee that FY20 will be no different.
For these reasons, I think National Storage shares are a screaming BUY!
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Motley Fool contributor Jack Kaminski has no position in any of the stocks mentioned. The Motley Fool Australia has recommended National Storage REIT. 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.