Hello, and welcome to Safestore's full year results presentation. If you would like to ask a question during today's call, you can do so by clicking the Raise Hand button on your Zoom control panel. I will now hand you over to Frederic Vecchioli, CEO of Safestore Holdings. Frederic, please go ahead.
Thank you very much, and good morning, everybody. I'd like to start by putting a bit of perspective on our journey. I've been building this company for 25 years. I've seen phases of acceleration and phases of deceleration, but overall, for anyone that look at it from a long-term perspective, it has been a story of fundamental value creation. And my view, as an investor, is that the fundamental of the equity story are as strong as ever when one look beyond short-term volatility, which we have highlighted in the graph that shows how annual storage revenue have evolved monthly over the last 20 years. It is pretty clear in the last three years we outperformed. I think we outperformed the sector, and we also outperformed our own longer term trend of revenue CAGR of 8%.
So it should come as no surprise that that is followed by a phase of consolidation, which is the way I would describe 2023. The drivers of the short-term fluctuations are simply the fluctuations of inquiries. Our conversion rates and pricing power are unchanged, and they rarely move. The way customers behave once they join is very stable. The single and only driver of these variances is the fact that levels of demand fluctuate on a short-term basis. But fundamentally, it is a long-term growth of a relatively new asset class through various economic cycles.
Coming back to our journey, out of a historical investment net of debt of GBP 600 million, we have already paid back GBP 400 million of dividends, and we have created a net asset value portfolio of GBP 2.3 billion without asking shareholders for more money, apart from a minuscule GBP 30 million raised 10 years ago, which I deeply regret. Since that, we delivered a total shareholder return of more than 600%. That is our business model: invest wisely in prime locations, deliver operational excellence, as shown by our RevPAR , create values and cash flows, which enable self-funded future growth, and there is still a long way to go to carry on with that strategy.
We have already built a significant pipeline of 80% of our current MLA, which, together with the non like-for-like stores, should deliver more than 30% EPS on top, EPS growth, on top of the growth that the like-for-like stores will also provide. Our loan-to-value is only 25%, and it is based on what we consider relatively conservative valuation when looking at recent transactions, and they were close to EUR 1 billion of transaction last year, and our loan-to-value is well below our guidance of 30%-40%. The team has built a pan-European management platform that is ready for further growth. Coming back to 2023, I'd like to go straight to slide seven now to talk about inquiries. As you know now, it all starts online.
Investing in our digital platform is something that we have done, and we continue to do constantly. We have always had a state-of-the-art leading website in our industry, and we think that is a differentiator compared to the vast majority of our smaller competitors that have nowhere near the capabilities of the major players. In our portfolio of keywords, we constantly achieve very high impression shares and absolute top rankings. The cost of our paid search operations is modestly up on last year as a proportion of revenue from 3.6%- 3.8%, still well down on close to 6% six years ago. If we look at how our inquiries have evolved over time in our two main markets, U.K. and Paris, that is on slide eight.
I think it illustrates how putting new supply over the year is what creates the market and creates the demand. It was harder to to fill the initial three, four stores I ran in Paris 25 years ago than it is now to fill any new store that we add because the awareness and the demand have increased over time, and as soon as I add a store, customers move in. Demand structurally grow as more people use the product, which is in part driven by new supply. Supply is constrained in the best market by the barriers to entry, and new supply in the good market in which we operate comes at a slow pace every year. In the last few years, COVID was clearly an accelerator.
I guess it created more projects and changes in people's lives, clearly faster than normal, well above the secular trend, so a bit of pullback is, in my view, normal. Year-on-year inquiries in 2023 were down 7% in the U.K., but they were still up 41% on pre-COVID. The London versus non-London split of inquiries and move-in has been remarkably stable over the last 10 years. Both London and non-London growing consistently over the period. The share of London inquiries has been fluctuating over the last 10 years within a very tight range of plus or - 1.5%, versus non-London. It is, in reality, super stable. In Paris, inquiries are marginally up year on year, around 1%, and up 21% on pre-COVID.
In the new territories, on page nine, the growth of inquiries was essentially driven by the implementation of our digital platform in the business that we purchased. If you look at Spain, 2023 growth was also fueled by the opening of Madrid stores, but before that, the acceleration in 2020 to 2022 is the impact in Barcelona of our digital platform, which happened in 2020. Similarly, in Benelux, where most of the stores are the same, you can see the benefits of the implementation in 2020 of our website. Moving to the next slide, I'll make a few comments on the full year trading. Group revenue is up 5.5%. That follows three years of outperformance. Over the last three years, our revenue grew by 27.5% on a like-for-like basis. We've discussed U.K. and French inquiries.
In Spain, we are making good progress. I'm very happy with how the new stores trade. They're online with a business plan, and same in Benelux. I'd like also to dispel a myth about Safestore, which is that we are a company that predominantly caters to business customers more than peers. That may have been true 10 years ago, but that is not true today. Our split at around 80% domestic and 20% business is similar to what our peers report, and in occupied square feet, it is also similar. Our average unit size is around 60 sq ft, which is again similar. Finally, on recent tradings, in the two months since October year-end, we took some limited pricing actions that were efficient to reduce the year-on-year occupancy gap.
The UK like-for-like occupancy improved from -3.8 percentage points year-on-year at Q4 to -1.4. In France, from -0.4 to +0.3. The group revenue broadly was flat, like-for-like revenue down 0.6%. It could decline slightly further in the quarter, but the impact of pricing action will gradually dissipate. The actions we took were small. If you look at the U.K. achieved rates sequentially in the last few months, it was at end of October, at the highest ever for a month of October. It decreased through November, December, and was 1% lower in December compared to October. But in January, the achieved rate is already back to the last October level, up 1% from the prior month, which was December, and we had a slightly higher volume.
Our price list in January is broadly similar to last year, and the gap between move-in rate and vacate rate is as usual. As you would expect after a certain period of reduced move-in activity, vacates are down significantly, down 13% in sq ft year-on-year. The total occupancy is around 4.3 million sq ft. The total occupancy variance is 70,000 sq ft, so that's about 1.6%. Out of these 70,000 sq ft, 50 is business. Domestic occupancy is close to flat. Business shortfall is almost entirely on the larger units, above 250 sq ft. I think that's 90% of these 50,000 sq ft. That suits us as we continue our program to repurpose unit size in the U.K. stores to our typical domestic unit size.
The U.K. occupancy CAGR over eight years has been 5.3% for domestic versus 1.3% for business. In the last five years, we converted 100,000 sq ft of large units into small units and will continue that program. Trading in the other countries is positive in Paris and strongly up in Spain, Netherlands and Belgium. Moving on to RevPAR on slide 11. Our operational business model remains to focus on RevPAR and whatever combination of rate and occupancy that delivers the highest RevPAR. We believe that the strategy that focused on constant high occupancy requires operational strategies that will systematically deliver lower RevPAR, and quite spectacularly so. We break down in slide 11, our RevPAR in the various regions and against our main listed peers.
I won't make names, but one of our peer follow a similar revenue optimization strategy as we do, and they achieve almost identical RevPAR. The other one that focus on occupancy achieves spectacularly inferior RevPAR. There is absolutely nothing new with these numbers. They have been similar for 15 years. But as I keep being asked why we don't pursue a 90% occupancy strategy, I thought that this slide would provide an adequate answer. I would probably skip the next two slide that are usual information but don't require any more comments, and go to slide 15 to discuss the portfolio.
The key points are: We added 500,000 sq ft of MLA in 2023, and on top of that, we have a pipeline of a further 1.5 million sq ft, which again represents, together with the non like-for-like store, more than 30% EPS growth over the next few years on top of the like-for-like, portfolio further growth. These pipelines allow us to build scale in our new geography. We'll soon have 22 stores open in the Benelux and 16 in Spain. That pipeline is also concentrated in the best market, as shown in slide 16. In fact, 96% of our pipeline is London, Paris, Amsterdam, Barcelona, Madrid. When we look at our portfolio, we see that 65% of the value of our portfolio is in the capital cities. 75%, if you include South East U.K.
89% is located in metropolitan areas of more than 1 million inhabitants. And when we add the cities, about 500,000 people, we are more than 95%. And that is probably a second myth about Safestore, which is that we are the regional operator and more so than listed peers. That is, again, simply not borne by facts. None of our main peers has a greater concentration of assets in capital cities, and none has a greater concentration on key metropolitan areas. And our intention is to continue to focus our development efforts predominantly in the largest key metropolitan areas, and our current pipeline clearly shows it. It is described in page 17, it is almost entirely in capital cities, but I'll go straight to page 18. We added 500,000 sq ft, as I said, in 2023.
We'll add 800,000 sq ft in 2024. We have planned, again, 500,000 in 2025, and for the moment, at least 200,000 in 2026 and beyond. But the pipeline is continuing to fill, and it is, in fact, already bigger than the one disclosed here. We are very happy with that pipeline because of the quality of the location and the cost effectiveness of the development at GBP 160 a sqare foo t, which compares very favorably to competitors. And we believe that our track record in making high returns out of our investment, will support further earnings growth in the long term. Our confidence in our pipeline is simply based on our track record, which you can find on page 19. We have a conservative cash-on-cash target above 10% on all investment.
Cash-on-cash being net earnings after tax, before funding costs, so free cash flow before interest. Our average return is 15%, ranging from 21% for our pre-2016 investment, to double digits for all new stores and acquisition done until 2019. On track to double digits for the most recent store development. Our 2020 openings are already above 8% cash-on-cash. In slide 20, we show how the cash-on-cash builds over time with the investment bucket by year of store opening. This graph excludes acquisition. It is only about organic development. Again, there is a clear and consistent trajectory of delivering and exceeding the conservative cash-on-cash targets that we underwrite.
The combination of investing sensibly, not overspending on a square foot basis, and achieving high RevPAS, thanks to operational model, is what allow us to deliver this high cash-on-cash. We also normally invest in properties that can be quickly put to production, which allow us to recycle cash flow as quick as possible and invest for further growth in a compounding way. That is our business model. A quick mention on slide 21 about the reliability of our leasehold portfolio, with U.K. lease regularly regeared, providing remarkable stability on our unexpired lengths, lease lengths, and in France, leases being simply, as always, automatically renewed by law. The combination of our operational strategy and the way we invest and fund our growth has delivered industry-leading EPS growth.
We think that strategy will continue to structurally underpin a higher EPS growth trajectory over the long term, particularly as there are still lots of growth opportunities and low supply, as you can see in page 23. Finally, on ESG, I think our investors have now understood very well that we have a very low carbon footprint already. We reiterate in the next few slides how we plan to go to neutrality. We've gone through these slides already, so I'll focus on page 28, where we show the progress. Well, we are on track. The numbers that really matter is the market-based emission intensity of carbon per square meter of MLA, which is a number that you will find below the chart. That is a number that matters, together with the EPC ratings, and it is what is on the green element of our RCF.
There is a requirement to report the location-based as well, which is why we do it. The difference being essentially that market-based takes into account the green electricity that we purchase from wind farms, whereas the location-based is on what the U.K. grid delivers on average. Our intensity, which starts from a very low level, it was 1.36 in 2020, very low in the real estate sector, has been already reduced by a third to 0.91 in the last three years, and we continue our journey towards neutrality. We are ahead of our own targets. With that, I'll let Andy go through the financials.
Thanks. Thanks, Frederic. Good morning, everyone. I'll start with the financials on page 33 of your slide presentation. So in the year, we achieved 2.2% like-for-like revenue growth. Once adjusted for constant exchange rates, that was 1.7%, and that flowed nicely down to 2.8% growth in EBITDA as a result of strong cost control over the like-for-like cost base. We then overlay the non like-for-like stores, and that's anything we acquired or opened in 2022 or 2023, and the most significant one of those is clearly the Benelux acquisition, the 80% that we bought from our JV partners back in April 2022. And once those non like-for-likes are overlaid, we delivered 4.8% revenue growth and 4.5% EBITDA.
After leasehold costs, EBITDA grew by 4.2%, and not on this chart, but we'll come onto it later, but finance costs did increase by around GBP 5 million, so earnings per share grew by 0.8%. We'll come onto that a bit more later. Consistent with our dividend policy of growing dividend, at least in line with earnings, the dividend for the year is at 1%. From a cash flow perspective, a one-off working capital movement, which I'll come onto in more detail, and higher interest costs resulted in free cash flow declining to GBP 89 million. Moving onto the balance sheet, we saw a 9.3% growth in our investment property valuation, which we'll deal with in more detail shortly.
That, combined with around GBP 100 million higher debt, resulted in a 1.8 percentage point increase in LTV to 25%, well within our internal targets. Interest cover was 6.7x , and we'll deal with that a little bit later as well. I won't dwell too long on this chart. Frederic's dealt with some of the trading, and the story really is pretty consistent across all of the geographies. In the year, we've seen strong rate growth on a like-for-like basis. You can see the middle line there. We've seen 5% rate growth across the year, and that's offset a pullback in the average occupancy, which is around 3.3%.
Combined with solid ancillary revenue growth, 2.8%, we delivered that 1.7% like-for-like revenue growth overall, which is 1.2% in the U.K., 3.6% in Paris, and flat in Spain. Again, I won't go through all of this slide. This is the presentation of the P&L that drives our headline adjusted diluted EPRA earnings per share number. You can see at the top that an overall GBP 10.2 million increase in revenue, and that's driven, relatively flat, EBITDA margins on a total basis at 63.4%. However, if you adjust for like-for-likes, our EBITDA margins move forward by 70 basis points to 64.8%. As mentioned before, leasehold costs did increase by GBP 1.1 million. That's slightly more than normal.
It's around 8%, driven by some rent reviews in the U.K. and in Paris, but also the annualization of the lease costs on the Benelux business. We would anticipate that around 5% is the normal sort of level of leasehold cost increase over the medium term. As mentioned earlier, finance charges grew by GBP 5 million as a result of the slightly higher debt levels, plus interest rates going up since the prior year, particularly on SONIA and EURIBOR, which RCF is impacted by. So as a result, we grew to 47.9 earnings per share, up 0.8%.
Just looking at some of the drivers of the EBITDA in a slightly different way, you can see the GBP 10.2 million of revenue growth in the first two green blocks. GBP 3.5 million of that was from the like-for-like stores, GBP 6.7 million from the non-like-for-likes, with by far the biggest chunk being the Benelux business. So partly driven by a couple of new stores, but also the fact we own that business for 12 months this year, and in EBITDA after rent. Going back to the cash flow, we did see a one-off working capital movement in the period, and that, combined with, higher cash interest costs, really drove that 12% reduction in the free cash flow.
The working capital movement related to national insurance payments on the vesting of the one-off, five-year, 2017 LTIP, which was significant in its quantum and also was a five-year scheme as opposed to a three-year scheme. So we'd anticipate that the working capital movement related to those sort of factors going forward reverts back to a more normalized level, similar to 2022. So free cash flow, GBP 89 million, down 12%. Investment wise, we invested around GBP 115 million this year outside of non-property CapEx or maintenance CapEx, and that compared to about GBP 200 million last year. The biggest piece last year, obviously, being the Benelux acquisition.
This year, the GBP 21 million that's highlighted relates to the acquisition of the freeholds of two of our leasehold stores in Birmingham and Barcelona, and the extensions that we're in the process of building out in Paris and London. The GBP 91 million relates to the stores we've opened in the year and the pipeline that will open in the coming years. Dividends wise, the GBP 66 million relates to the 2022 final dividend and the 2023 interim dividend, and you can see there that we drew down just over GBP 100 million of debt in the period. Moving on to the balance sheet. The property valuation, as I mentioned earlier, grew by 9.3%, largely driven by the improved rate performance. Exit cap rates were pretty much flat year-over-year.
On a like-for-like basis, that valuation grew by 5.4%, and you can see in the geographical split of the growth there, 6.5% in the U.K., 8.1% in Paris, 43% in Spain, driven by new stores, and 27% in the Netherlands and Belgium. It's worth noting that the valuation implies a net initial yield on mature stores of 5.92%, which we think is very comfortably underpinned by external transactional evidence. Net debt grew by GBP 106 million, and that, combined with the valuation movement, resulted in the LTV moving to 25.4%, up 1.8 percentage points compared to last year.
Interest cover ratio did decline to 6.7x as a result of the higher interest charges, but that's well within our internal targets and our banking, our lender targets as well, and you can see there the level of headroom we have within that metric. Effective interest rate after capitalized interest was just under 3%, and our debt capacity at the end of the year was, just under GBP 200 million. The weighted average debt maturity was 4.5 years, and just after the year end in November, we did extend. We took advantage of one of the two options we have to extend our RCF by a further year. So in reality, just after this point, that, that number will have gone up, gone up.
It's worth mentioning that going forward, we only have a EUR 150 million refinancing of a private placement note to do in 2024. Otherwise, our debt maturity is spread between 2026 and 2033, and at the year-end, 73% of our drawn debt was at fixed rates. Moving on to this slide. We've shown this for a few years now, I think it's just worth showing. This is, this is the performance of a 112-store portfolio that we had in 2013, that we still have today. And the purpose for putting this in is really to show, based on true factual evidence, what is achieved over a sort of long period, longer-term period of time, or what can be expected to be achieved in stores.
So you can see here over 10 years, those 112 stores, the rate has grown 34% over that period of time. The square foot occupancy-wise has grown by 31%, which on a closing occupancy percentage of MLA basis, is 17.6 percentage points, from 63- 81. And that's driven 77% of revenue growth in that portfolio over that 10-year period. So just a bit of an illustration, particularly given the pipeline that we have coming forward, of, of what can be expected to be achieved over, over a period of time. I'll just touch briefly on this.
You'll recall at the half year we started to talk, given the pipeline that we have over the last 2 years has grown very significantly, we started to sort of try to give more disclosure around what we think the impact of that pipeline is going to be. And we just wanted to look at the earnings per share growth, split like-for-like and non-like-for-like from the 2023 perspective, as the sort of base for looking forward. So you can see in the bottom there, we got 0.8% of total EPS growth in the year. We estimate that on a like-for-like basis, that was actually around 3.4%, and you can see that we had about a GBP 0.009 per share dilution from the non-like-for-likes in the pipeline.
So that's really the basis for the next slide, and what this slide is trying to do is show you will have seen this for the first time in the half year results, and it's changed slightly, obviously, as the pipeline moves and as interest rates have moved a little bit. But what this really shows is the extremely strong accretion that this pipeline will deliver for us over the medium term. Frederic referenced the number as well, but if you look at 2028, we think this pipeline will give us 15% growth on our 2022 earnings per share number, and five years further out, 32%. So that's the pipeline and the non-like-for-like stores. It does include the Benelux business in there, 'cause we're looking at this from a 2023 definition of like-for-like.
It is worth noting as well, you can see on the left-hand side, the 0.9p of dilution we saw in 2023. We will see more dilution in 2024 as that pipeline's built out, and we expect that to be, at this point in time, around 3.8p, which will mean that earnings for 2024, as we've previously communicated, will probably, probably go down slightly, depending on what like-for-like growth we deliver on the revenue line. Finally, on to the usual guidance line. I won't go through all of this, I'll just focus on a couple of lines. On the interest charges, we're expecting around GBP 28 million-GBP 30 million of gross interest, but we expect to be able to capitalize between GBP 5 million-GBP 7 million of that.
Overall, I expect net interest to be around GBP 23 million-GBP 25 million in the 2024 financial year. Post capitalized interest, we expect that to be around 3.1% effective interest rate. Clearly, despite the news today, if we do get any interest rate reductions over the coming months, a 25 basis point interest reduction would be worth about GBP 600,000 on the gross interest line. You've then got to take into account what's already been capitalized as well. But, and that's on an annualized basis. Finally, on the CapEx side, you know, the total CapEx related to the pipeline was GBP 232 million.
We've spent GBP 104 million of that, with GBP 128 million therefore still to be spent, and we show the phasing of that just below, GBP 65 million in 2024, 26 million in 2025, and 37 million beyond. We'll have maintenance CapEx of around GBP 8 million per year, and over and above all of that, anything we do in terms of buying out leaseholds or such things would be on top of that. As Frederic mentioned, the pipeline results in us having a total spend per square foot of GBP 160 , which does compare very favorably to what we think has been disclosed by our listed competitors. And bear in mind that, the 30 stores in the pipeline, only two are leasehold stores, and all but two, I think, are in capital cities.
That concludes the presentation. I think we're going to go to questions in the room first, and after that, we'll go to online questions.
Thank you. Aaron Guy from Citi. Frederic, just a quick question. You've had 25 years, plus experience in the business. Referring back to slide three, where you looked at the revenue longer term, I acknowledge the flattening of the income this year, but if you step back a little bit and look out, you know, two to five years, would you expect a significant deviation in that trajectory going forward? And I refer to some of the discounting that you've been doing. Should that be just considered a short-term sort of yield management phenomenon or something a little bit more concerning?
No, it's absolutely a short-term and very limited yield management, and I would expect the rate to gradually pick up. In terms of what the next five years are, I mean, if you can tell me what your forecast on GDP growth and general activity and in Europe and in the U.K., then I would probably... It would be easier for me to answer your question. There is no reason other than anything exceptional happening for the trajectory to change, because the fundamentals are still there. The small amount of supply, strong barriers to entry, if you look at where our stores are located and where our next stores will be located, because we won't deviate from that investment policy. So-
... the more, I mean, we start from a very low base in terms of, intensity of use of the product. And, the more suppliers there is, the more people use it, the more people come across storage, the more there will be, a propensity to use it when there is a storage need. So I fundamentally believe that, there is still a very compelling, investment story, and, I intend to continue to invest in it, even at, even personally. And so, no, I don't think what will the rate will be, of course, it's absolutely impossible to forecast. And, we will be, as always, exposed to short-term volatility, which drives short-term volume of inquiries.
But I think the structural story is there, and given the strengths and the importance of the barriers to entry, I think that story is going to be still there for many, many years.
Just switching to the property valuation, up 9.3%, most other property sectors down last year. Can you just give us a bit more color on the buyers, the sellers in the market? What freed up and created the extra transaction evidence last year, and whether with interest rates possibly having turned the corner, should we be more or less confident about the growth rate in 2024?
In terms of transactions?
Property valuation-
Well, um-
The impact from transactions.
I think property valuation, I mean, I don't see clearly a cap rate at the moment, and I think the talk of the day is more at some point a reduction of interest. So I don't see. I think that the demand on this asset class of investment, particularly from all sorts of private equity players, is enormous. And there is clearly much more demand and much more capital willing to be deployed in that asset class, and than there is anything for sale. Even if the close to EUR 1 billion of transaction last year is a record year, I think, and from what we can see is a cap rate at which transactions took place are lower than our valuation.
And you have to consider where these assets are located, because there were not a single transaction in London, Paris, Amsterdam, Madrid, Barcelona. They were all in a combination, I mean, in locations which were much more regional. So I think that is a very strong underpin on our cap rate, and I can't see, at least as of today, I don't see the amount of interest for investment in this asset class reducing. So I think that is a strong, very strong underpin on our valuation. Why did we see more transactions? I think probably there is a generational element to it. Quite a few people started, well, maybe 25 years ago.
And some are probably selling, and just a normal transition. And as there is more stuff around available, it would be normal to expect, but it's just a speculation to see more transactions happening over the next, over the next few years as the asset class grows. But it only happens slowly because it's bloody hard to find good stores in good locations at sensible prices.
Morning, sir. John Cahill from Stifel. I want to ask you one thing about your... your occupancy has come down, not much, but a little bit over the last year. But your yield management systems have meant that your overall revenues are up because rate growth has been so strong. Is that, is that implying that actually the proportion of your tenant base that's priced in elastic is actually probably quite a lot higher than maybe you'd first expected? You know, can we imply that? I mean, it almost looks like there's quite a lot of customers where, irrespective of what you do with the price, they seem to stay, you know, those, those ones that are there for the life events, et cetera.
Well, I think that, well, customers are not stupid, and so when they accept to pay the price that we charge, it's because they find real value, and they understand all the quality of the service that we, that we provide. I don't think that we have any, a pricing issue. When I look at the rate at which customers move in versus the rate at which they vacate, I mean, the gap has not, has not changed. It's a very... all that structure is, is very, is very stable. I think that this yield management, which, and this, rate action that we took, some of which are front-loaded, are really on the margins.
And I don't think that structurally there is anything that is changed, in the way we price or in the way we, in the way we sell and, and the way we manage our rate versus, versus occupancy. And as you can see, that delivers, the highest RevPAR that you get in the industry.
Thank you.
But there is no change of paradigm.
Yeah.
Thank you. Marcus from Bank of America. Can you go a bit into occupancy trends in the first months? You talked about pricing, but how is occupancy in January comparing to October, and year-over-year also?
Well, I think we have that if you look on the outlook, as of end of December. So apologies, I don't have the number, yeah, as of this morning, but, just as two weeks ago, and, you saw that the year-on-year occupancy in the U.K. was up... sorry, the difference was reduced. So obviously, we are on a declining sales season, so you are, I mean, it's always a weak season, so you are comparing two, two curves, which always decline every year. But, clearly, we were much closer to last year as of end of December, in the U.K., than we were at the end of Q4. And, we were up in Paris, versus last year.
I think that, what you say, 0.04 or so?
Yeah, I think, at October, 0.3% down in Paris, then we were 0.4% up in the end of December. In the U.K., we were 3.8 percentage points down in October and 1.4 down in December. So it's a slightly improving trend.
Okay.
because the pricing started to get negative in the U.K.-
Yeah.
With occupancy, closing occupancy, so not like-for-like below 80, more or less, if I understand well. Is this a trigger where you have to go into big discounts or?
No, there's no such thing. I mean, we really don't have a sort of a general approach to it. For us, each store is a different business, and even within a store, the 25 sq ft units or the 200 are different markets as well. So we look at it very granularly, and we try. Our goal is to get the highest possible RevPAR, because in the end, that's what we want. I don't pay dividends with certificates of occupancy. I pay them with cash, and that's what I'm trying to get. And as you can see, the results are there because we do have the highest RevPAR, even having a slightly lower occupancy. So we will continue to do that. This is what we have always been doing.
But there is not such thing as a magical number at which you can increase the rates because it's a business with churn. So if you need a discount to fill your store, it's not because your store is full that you're going to remove your discount, because then the store will—I mean, people will start churning, and you will need the discount. So I think it's based on something else. So we don't look at... I mean, so there is no such threshold in our approach to revenue management.
Okay, thank you. Just on the transaction you have seen last year, what cap rate on average you have regional transaction? And was it mainly U.K., or was it across Europe?
It varied. I mean, we don't see all-- The statistic we quoted was FEDESSA, the European Self Storage Association's estimate of transactions for the whole industry. So, you know, you don't get necessarily disclosure on every single transaction that happens. So there has been quite a variety. I think there was a business in Ireland went for something that we think was in the mid-fours, from memory.
Well, you had that transaction-
Yeah
... in South England.
Yeah.
You had this transaction in Norway. You had a few acquisitions also in Germany taking place. So... Well, I can provide you a list of what we've seen.
Yeah. I think there are a number of them that were below the 5.92% that's implied by our valuation.
Mm-hmm. Thank you.
Good morning. Thanks for the presentation. I'm Peter from Green Street. One question, one big picture question, Frederic, on supply. Because I think your point is more on, obviously, the stock is very low in a per capita, and barriers are high. At least when we look at the listed market, the pipelines as a percentage of investment portfolio are approaching all-time highs. When we look also at the private equity world, there's more capital, as you say, coming in. Ardian just announced a deal in France. They're going to develop more. So there's a lot of capital wanting to develop more self-storage. My skepticism is on your comment on barriers to supply being high. I don't necessarily see it that way. Can you help me understand why I should not worry about supply?
It's more also about a stock versus flow. So maybe the flow is just going to be too much versus the normal demand patterns, and we may be sitting here in a couple of years and thinking, "Wow, there's a lot of space that is being delivered across Europe.
Well, I think, well, just go to... I mean, very happy to Paris with you and look, and basically, you will see that the level of supply that exists, which is actually less than that in London, and that there have been almost no new entrants, despite lots of efforts, very few new entrants. I mean, the two key players in Paris are still Shurgard and Safestore. And we would like to, I mean, our developers are on the ground every day trying to get new stores, and it's very difficult for a combination of reasons. I mean, planning, regulations, lack of available land. If you look at the cities are super dense, already, very built.
If you look at London, it's also difficult and expensive to get new supply. But I think if you look at also the level of supply, I think it is the supply that creates the demands. I mean, as I said at the beginning, I mean, it was much harder for me to fill my first four stores when there were less than 10 stores in Paris than it is to fill now an extra store when there are, well, I don't know how many, maybe 100 stores in Paris.
And of course, if you were at a U.S. level of density, I'm not sure exactly where, how many store you would have to put, if it's 700, 1,000, but something which would just never happen. So I think that people get used to storage. A lot of people still ignore it, don't think about it the day they need it. The more people use it, it is what creates the additional demand. I always remember that in Bristol, when we have a very large store in Bristol, Ashton Gate, which is probably one of the largest of the eight states. Very close to that, we have a Big Yellow store, which has been there for a long time.
Those stores trading well. And we were quite when five or six years ago, even maybe even now a bit more. Access opened a large store just in between the two of us, and we were a bit worried. Actually, we didn't see anything. We didn't notice anything. I'm sure Big Yellow continued to trade very well. We continued to trade very well, and I think that Access is happy of their or their investment there. And I think that just illustrates, and there are many such example, the fact that when you start from such a low base, well, I think actually you need to create the market. So that's really what we see.
Cool. Thank you. And final question, maybe more technical on the maintenance CapEx. Does that also include the splitting up of bigger boxes into smaller and that sort of process as you're doing it? Or is that- in which line is that in the-
That's in the GBP 21 million line, so the projects and build-outs-
Gotcha
sort of in there, yeah.
Okay.
But that, that line also includes the two freehold acquisitions of two of our leasehold stores and some of the extensions that we did in the year. So it's, it's buried in that GBP 21 million number.
Okay, but it's less than a third of that, you would say, in terms of-
Yes. Yeah.
It would be way-
Yeah
Less than that.
Less than a third.
Thank you.
Yeah.
Thank you. Sam Knock from Colletics. A couple of questions, if I can, how you think about developments. So you have a sort of, 10% investment hurdle, cash on cash. And the first question is, does that move with interest rates? Obviously, interest rates have come up, the cost of capital is quite uncertain. Is that something you think about moving, or do you sort of stay that fixed throughout the cycle? And then second question on that, when you're looking at that as a sort of cash-on-cash yield number, why do you look at it in a yield rather than sort of a total return number? Does that bias you towards higher yield but lower growth opportunities?
Well, on the first question, no, we don't, for a very simple reason, because I think... Well, first, our 10% is conservative. I think in reality, we underwrite internally more challenging assumptions, and as you can see in our track record, we do deliver more challenging assumptions. Then I think the way we see investment is as storage, it's for many years. You invest upfront, a new store will have to go through periods of economic expansions, economic recessions, high interest rates, low interest rates. So you cannot really- if you start tweaking your investment policy every year based on news of the day, well, I think it's a recipe for disaster. So I think you have to take a view on a long-term view of what seems sensible and stick and be disciplined.
When the cap rates were lower, and spectacularly lower a few years ago, we didn't lower our threshold because, okay, great, today it was very helpful for our for our P&L and our investment case, but we never assumed that to stay forever. So I know some of my competitors increased their cash-on-cash target. I think they were at 7%-8% when one of them IPO'd. Now they're moving 8%-10%, so they say. But what does it mean, given you invest for the next 20 or 30 years? Does it mean that everything they invested a few years ago is over, has been overspent? So I think that...
So we have to stay very constant, very disciplined, and that's what we've been always doing. And the discipline is always on the price per square foot , which at GBP 160 is clearly much less than others, despite achieving higher RevPAR in some cases. So the answer is no, unless, of course, there was a dramatic change of paradigm, which is outside of the range of what are the potentially foreseeable scenarios. On your second question about total return, I'm not sure I fully understand what you mean, so if you could,
Yeah.
Apologies.
So if I was thinking about a return on investment, you've got the yield element and then the growth on top of that, which gets you to a sort of total return rather than just a cash-on-cash. Whereas you put your hurdle at 10% yield, from the way I understand it, which might undervalue growth, in cash and maybe overvalue something that's higher yielding now but has lower potential for growth. Just how do you think about that?
Well, I think that we don't... Well, if I understand correctly what you're saying, I mean, the other approach is to look at internal rate of return, which would encompass the future residual value and the sale value. But we never intend to sell our assets, so we don't normally flip our stores. So, that's, for us, it's something that we keep forever. So, what matters for us is the cash flow that's gonna be there forever. And, I don't know, I mean, of course, when we make an internal rate of return, we are necessarily making an enormous assumption on what the cap rate will be in 10 years, which, I mean, is, there is no...
I mean, we can try to rationalize every way we want, but the fact is nobody knows. So what we want is we know on day one, we put a certain amount of money, and what matters is how much cash flow we're going to get out of this. Again, the 10% is at maturity, and it's at maturity, which historically has been 4-5 years after opening. But if you look at the... I mean, there is still growth after that-
Yeah
... because it's typically maturity that depend on each store, but it's typically something that we achieve at around, let's say, 70% occupancy. Typically, it varies store by store, depending on the size of the store. So there is still a lot of growth after that, and we don't see that achieving 10% as the end of the story. Quite the opposite, actually. So I think there is much more growth into it going forward. Of course, when you look at our older investment, we are on 20+, 21% cash on cash. If I try to calculate a total return on that, I think it's super high.
... Thank you.
Welcome.
As a reminder, if you would like to ask a question online, you can do so by clicking the Raise Hand button on your Zoom control panel. If you are joining by phone, please press star nine to raise your hand and then star six to unmute yourself. We now have a question from Ben Hunt. Ben, please unmute yourself and go ahead.
Good morning. Can you hear me?
Yes, Ben, please go ahead.
Morning. I just noticed, in your-
... Ben Hunt at Investec. So the stores open during 2020 and 2021 appear to show cash-on-cash returns tracking above average to date. Is there a risk they could, they could mean revert, having overearned? If so, should we assume the expected improvement in cash-on-cash return for the current pipeline and non-like-for-like space may progress more conservatively in 2025 and 2026?
I'm not sure I can hear very well.
Yeah, I can hear.
The question. If you can repeat louder. Sorry, apologies for that.
I said, stores opened in 2020 and 2021 appear to show cash-on-cash returns tracking above average to date. Is there a risk they could mean revert, having overearned? If so, should we assume that the expected improvement in cash-on-cash return for the current pipeline and non-like-for-like space may progress more conservatively in 2025 and 2026?
I don't think you can draw any conclusion out of that. I think it depends on each individual store. And it's really... I mean, each store is an individual asset, an individual investment, and an individual business case. So I think what we are showing. So I don't think you should draw any such conclusions. I think what we are essentially showing here is that, regardless at what investment bucket you look at, we are clearly on track to deliver 10% and more. Okay, well, I think that concludes... There being no more question, that concludes our presentation. Thank you very much for your attention.