Valad Property Group and Kennards Self Storage joint venture portfolio grew to more than $290 million at the end the 2006 financial period and yesterday the burgeoning partnership added two new Sydney sites to its portfolio.
The original portfolio of 24 self-storage sites jumped in value by 27% to $290.2 million, on the valuation of $228.5 million at the time of acquisition by the Valad Kennards joint venture in November 2004.
The two sites are 169 Port Hacking Road in Miranda, which was purchased for $9.2 million, and 140-142 Parraweena Road in Miranda, which was purchased for $5.5 million.
The latest acquisitions bring the total number of sites owned in the Valad/Kennards self-storage joint venture to 26 and total value of the portfolio to $304.9 million.
Valad Real Estate Investment chief executive Martyn McCarthy said the steady growth in development and expansion of the portfolio is in line with our strategy of maximising existing sites, and increasing our investment through the acquisition of new sites.
“The significant uplift in the portfolio valuation reflects the re-pricing of this asset class that has taken place since the acquisition of the portfolio and the evolution of quality self-storage properties to institutional grade investment assets,” McCarthy added.
Kennards Self Storage managing director Sam Kennard said that Kennards has been looking to increase its exposure in the Sutherland Shire for over five years.
“These new acquisitions in Miranda will help consolidate our strong presence in the Sutherland Shire and provide medium term growth opportunities to meet growing demand in that market.”
Valad said the Parraweena Road site has been acquired to accommodate future growth opportunities in this market and will be held as a passive investment over the medium term until the Port Hacking Road property is stabilised. The Parraweena site will be leased as a warehouse site in the near term with conversion to storage use expected within a 5-10 year time frame.
Both sites are being acquired for conversion. Existing buildings will be recycled and enhanced. They will be fitted out with storage spaces, security systems, retail stores and customer amenities.
On an individual value basis, the weighted average capitalisation rate of the portfolio has firmed by 195 basis points to 8.70% from the average capitalisation rate at acquisition of 10.65%.
“In addition to the re-pricing occurring in the market generally, the re-valuation also reflects the benefits of the quality of management being provided by Kennards,” McCarthy said.
“The prominence of the Kennards brand and management economies of scale being shared with Kennards’ own private portfolio provide benefits that flow through to the bottom line of the assets held in the Valad/Kennards JV.
“The current portfolio has significant potential for further development through the expansion and repositioning of existing sites,” McCarthy said. “To this end we are continually assessing potential value adding investment across the current portfolio.”
Valad added that two sites in the self storage portfolio have been identified for further development and expansion in the short term, Waterloo and Castle Hill.
“Both Waterloo and Castle Hill are high demand areas for storage demonstrating significant growth driven by increasing housing consolidation in the immediate region,” Kennard said.
“There is significant opportunity to accommodate additional storage demand at both of these sites,” McCarthy concluded.
By Ted McDonnell