Abacus Storage King (ASK) Earnings Call Transcript & Summary

Thank you for standing by, and welcome to the Abacus Storage King HY '25 results presentation. [Operator Instructions] I would now like to hand the conference over to Mr. Steven Sewell, Managing Director. Please go ahead.

Good morning, ladies and gentlemen, and thank you for joining us. We appreciate it's a busy morning here to discuss the half year results for Abacus Storage King. I'm joined here today by the Fund Manager for ASK, Nikki Lawson; our CFO, Evan Goodridge; as well as Cynthia and Chris from the IR team, Lucy and also Ke from the finance team. The Storage King business continues to perform exceptionally well, with continued strength in our sector-leading operating metrics being the most pleasing aspect of the half year result. I'll provide a brief overview of our achievements for the half year. Evan will then take us through the financial results and capital structure in more detail, and Nikki will address the portfolio and platform evolution and progress before I then wrap up with our outlook and guidance. Looking at the business key metrics in summary, we own a unique portfolio of predominantly urban locations, with the valuations of those assets underpinned by a growing rental income stream. The net asset backing of the company now sits at $1.60 per share, up from $1.58 per share at the full year in June 2024. And this reflects the underlying demand and income growth from the self-storage assets during the period. Overall, we remained conservatively geared and have ample liquidity. The new unsecured debt platform also provides us with significant capital management flexibility going forward. The balance sheet is purposefully positioned to add profitable lettable area to the portfolio over the medium term through a combination of the development pipeline and expansions, renovations as well as some opportunistic acquisitions from what remains a fragmented market in both Australia and New Zealand. Importantly, the capital structure and balance sheet can support accretive acquisitions. And we constantly review all opportunities as they come to market. In total, ASK as a self-storage sector specialist vehicle now comprises a significant $3.3 billion worth of assets, comprising a market-leading operating platform, wholly-owned sites that represent over 1.2 million square meters of prime real estate or land, in both Australia and New Zealand and mostly income-producing metropolitan storage locations plus a number of future development sites, which all are wrapped up in the Storage King business. We were pleased in the half to deliver a distribution for investors of $0.031 per share as we forecast. Altogether, this enables us to deliver the market-leading operating results. And these results have again demonstrated the self-storage's business resilience to a range of broader macro factors. Importantly, we believe that self-storage benefits from a number of cyclical and particularly structural tailwinds, combination of population growth, housing market dynamics, and a general consumer category awareness and positive acceptance. On the next slide, we highlight these key competitive advantage that set us apart in the market and particularly drive the strong operating performance you see here delivered period after period. Our portfolio of over 200 owned, managed and licensed stores are strategically selected and located based on demographics and urban density, ensuring we own prime locations that are difficult to replicate. Right-sized stores in these optimal locations drive market-leading rental rates and occupancy levels. That's a fact. We have multiple growth levers that position us well for quality growth and sustained sector performance. Organic growth, future acquisitions and developments, as well as the work we're putting in on our technology initiatives are poised to drive growth in Storage King's brand, customer engagement, and thereby revenue and income over the medium to long term. This platform, the Storage King, platform and business is what we call the secret sauce. As the most recognized and searched brand in the sector, we attract very strong inquiry levels. And this gives us the confidence to continue to acquire and develop and deliver the returns with the opportunity to optimize further. Customers are definitely voting with their feet. Our Storage King dedicated ops team is the backbone of our success, driving this innovation, customer satisfaction and operational excellence. Putting it all together, we believe our locations, brand value proposition and talented team position us for sustained growth and success in the years to come. Turning now to the highlights of what's been a busy half year period. Our operating performance has continued its strong trajectory, with our now 103 established stores delivering a very pleasing RevPAM growth of 5.4% positive on the prior half year period, with occupancy now up 90 basis points to 91%. As you will know, the pricing dynamic of occupancy and inquiry levels, combined with in-place and new customer rental rates delivers RevPAM growth. And with an increase in occupancy levels now up to 91% average plus very strong levels of inquiry, it's pleasing to see. And we forecast continued RevPAM growth to be sustained. Quality of locations is a key. Driving our customer value proposition, our development pipeline remains on track to deliver over 130,000 square meters of new lettable area over the medium term. Three stores are expected to open this financial year, one here in Sydney and Leppington and other 2 in the latter part of the year, Nikki will touch on. These newly developed stores, which are typically larger than our portfolio average, we believe, will drive enhanced average RevPAM growth across the established portfolio over the medium term. We continue to opportunistically acquire assets from the broader market in locations we have judged to be complementary to where we are already invested. During the period to this end, we spent a total of $60 million across 4 operating stores, as well as 3 additional development sites. All we expect to generate strong returns as we bring them onto the platform and complete the projects, curating new and contemporary self-storage products. I'll now hand over to Evan to take us through the financial metrics and capital structure.

Thanks, Steven, and good morning, everyone. The breakdown in the contribution of earnings for the period in summary shows that the group continues to see strong top line growth from all 3 of its operating segments being the established acquisition and stabilizing portfolios. Our reliable established portfolio revenue continues to grow above CPI at the annual rate of 5.4% and pleasingly, up 4% since the June reporting period. This is due to both improved occupancy and rental yield. This strong performance has continued into the New Year, with January's RevPAM for the established portfolio at 1% higher than the previous quarter. Our recent acquisitions increased in income by 95%, with purchased independent operating stores contributing substantially higher levels of growth. This uplift on rebranding confirms both the strength of Australia's most recognized brand, Storage King and the strength of our existing management processes. Our stabilizing assets have also delivered strong income growth, up 78%. Newly completed stores continue to lease at higher rents and faster than our initial underwrites. The breakdown on expenses for the period in summary shows that the group has been affected by higher statutory costs, including land taxes, up 30% on a like-for-like basis, and rising insurance costs, up 20% like-for-like. For the most part, these increases, or at least the rate of increase ought to ameliorate into the future. And we are not expecting these expenses to continue to trend above CPI. The increase in insurance costs has focused our attention on this expense. And we are currently exploring several options to mitigate this impact going forward. Overall, our operating margin decreased, down 1% compared to the second half of FY '24. But importantly, we expect that our margins will improve on a full year basis as our revenue growth will outpace cost growth. Optimizing our operating margin is the critical focus. And we are committed to improving this margin over the medium term. To this end, we are newly trialing the introduction of staff-less satellite stores, and have continued to progress our comprehensive revenue management strategy, which Nikki will discuss in more detail later. Other income increased by $2.9 million for the period. This will not be replicated in the second half, as it primarily relates to gains on the disposal of our last $93 million stake in a listed investment. The past 6 months performance has seen ASK deliver funds from operations of $43.3 million or $0.033 per security. I've already mentioned the value uplift that comes from Storage Kings branding and management. With this in mind, Abacus Storage Kings balance sheet is conservatively presented. First, the true value of the strong Storage King, brand platform and management rights over the 75 independently owned stores, is not captured. Second, our development sites are held at cost, despite our track record of delivering approximately 20% value uplift once completed and stabilized. And third, our store valuations exclude any portfolio premium and further exclude the fact that, we are the owner and operator of the manager Storage King. As at 31 December, almost 75% of the balance sheet were established stores, providing ASK with reliable organic income growth, with the remaining store assets related to the higher growth acquisitions stabilizing and development segments. These segments are expected to deliver some of our best assets and are projected to increase the portfolio's net lettable area by an additional 20%, scaling up both the Storage King Network and future financial performance of the group over the medium term. During the period, Abacus Storage King successfully implemented the transition of its $1.25 billion of debt to an unsecured syndicated facility. The transition to unsecured has reduced margin costs, increased tenor, reset the group's hedge book, improved portfolio efficiency by removing individual asset mortgages, and provided the group greater access to future loan and debt capital market opportunities. ASK's cost of debt for the period averaged 4%. However, we see the group's cost of debt still on track to achieve an average full year rate of no greater than 3.75%. This reported rate reflects the interest expense in our P&L and excludes any interest capitalized into our development pipeline. Taking these together, ASK's marginal cost of debt for the full year will remain under 5%. And this is likely to be maintained over the medium term. Based on current interest rate expectations, we anticipate that our reported cost of debt will continue to hover around 3.75% for the financial year 2026 and remain attractive over the medium term, supporting future earnings growth. As Steven mentioned, ASK has an NTA of $1.60 per security. And its gearing sits comfortably towards the lower end of its revised target range, providing immediate funding capacity of approximately $600 million to help fund future acquisitions and developments, and allow us to further invest in our platform via technology, data and dynamic pricing initiatives. The portfolio has experienced consistent growth through strategic acquisitions, enhancement of the existing development pipeline and valuation increases driven by income growth. This has seen values rise by $37 million or 1.2% for the half despite a minor increase in cap rates. I'll now hand over to Nikki, who will delve deeper into ASK's strong portfolio performance and provide an update on the progress of our exciting platform growth initiatives.

Thanks, Evan. Underpinning this capital growth in our property values lies our irreplaceable ASK portfolio, which, as you have heard, continued to deliver strong income growth in the first half of '25. The Established segment, which delivers our stable returns, delivered a very pleasing RevPAM growth of 5.4% year-on-year, reinforcing the resilience that the quality nature of our portfolio has in tough macroeconomic environments. These results were achieved through delivering a tailored pricing strategy for every unit in every store. But more importantly, this was achieved with a good occupancy result of 91%, important because we use occupancy as a lead indicator of future results. This level of occupancy gives our managers the confidence to take rate increases, with existing customers and to be more discriminating with the rental rates that they acquire new customers at. Turning to the Acquisitions segment, value-accretive acquisitions are an important growth lever for the business. And we remain opportunistic in this area. We judge every opportunity on its merits and the value that it can bring to the portfolio. We acquire assets from the fragmented independent market, where acquisitions like a recent Belkata acquisition have achieved almost immediate rent roll growth of over 14% by moving on to the Storage King platform and being marketed under the Storage King banner. We also acquire assets from the Storage King licensed network, where stores like Storage King Bentley, have outgrown the region with the benefit of an asset refresh and expansion actions. When we add these acquisition stores to the 11 stores in the stabilizing segment and the 21 development sites, these 3 segments represent our step change growth segments, and form 25% of our asset base today. They do drag on our yields short term. But they are the ones that provide the significant upside to the portfolio in the coming years. The stabilizing stores, in particular, continue to grow at significant levels. We have replenished our development site pipeline with new opportunities from our network gaps as completed developments roll into the market. In the first half, we added St. Kilda in Victoria, Kiawe and Ropes Crossing in New South Wales to the pipeline. It is the quality of all the segments of this strategically curated portfolio that allow us to deliver sector-leading operating metrics and to leverage the structural tailwinds in the self-storage industry. Turning to the operating trends by region. All regions apart from New Zealand achieved growth in RevPAM in the half. WA, New South Wales and Victoria were the standout regions. All growing both occupancy and average rent per square meter to exceed the 8% RevPAM growth. New South Wales remains a consistent performer for the business. And with the continued performance in WA, it is now positioning ahead of Queensland on average state RevPAM only behind New South Wales, the ACT and New Zealand. South Australia should also sit in this high-growth group with total rent roll up over 10% in the first half. But RevPAM numbers are being affected by 1 of the 2 stores completing an expansion in February '24, which is now in the process of leasing up. Queensland and the ACT achieved solid growth for the business. Queensland at 3.8% was good considering that the state accounted for more than 50% of the new industry supply in calendar year 2024. And it's the state with the highest number of new developments under construction in calendar year 2025. ACT, as we flagged at full year, is back into growth mode following the occupancy low point 2 years ago in this market. Only New Zealand saw RevPAM declines in the half. Declines were driven by a decline in occupancy, exacerbated by declining New Zealand dollar. When stripping out currency fluctuations, the decline moderates to 1.4%. We have seen some momentum on occupancy in the New Year. But it's too early to say, whether its changes to macroeconomic policy happening in New Zealand that's starting to impact the industry demand. Sharing more details on our recent developments, we remain convinced that the combination of store size, location and asset quality are the 3 legs of our property strategy that deliver the best results. Our newly developed stores continue to lease up ahead of expectations. The 3 stores delivered in FY '24 have been particularly strong, Currumbin reaching 60% occupancy in under a year, standout. As flagged at our last results presentation, our developments are back ended this financial year. We have 3 developments targeted to complete with Morayfield due in March and the remaining 2 targeting May and June. We continue to see value in new developments with our development pipeline set to deliver over 20% additional NLA to the business through developments and expansions in the short to medium-term. Almost half of these developments are in New South Wales, followed by 33% in Victoria. Positioned in quality metro locations and designed to deliver on brand stature and consumer ease, while maximizing NLA. These developments are targeting development margins of over 20% and fill the priority gaps in our network plan. With these state-of-the-art facilities, the evolution of the self-storage product is also helping the growth in the category as it allows self-storage to appeal to a broader group of customers who are using storage for more and more reasons. Moving to what Steven called the secret sauce of the brand, the Storage King operating platform. This is a platform that the ASK portfolio shares with 75 licensed stores. These are licensees who support the growth of the brand and benefit from its scale and expertise. When it comes to the operating platform, there are a few key metrics that matter to us and underpin our growth. We remained the most recognized brand in Australia and New Zealand. We were pleased that this was once again achieved in 2024 with the Self Storage Association of Australasia State of the Industry report. We are the most searched self-storage brand by name on Google. We achieved this in Australia and are working on closing the gap in New Zealand. And it's this metric that ensures we keep growing with quality inquiries. Inquiries have continued this year to grow modestly, cycling the exceptional growth we achieved last year. These all leads to leading RevPAM with healthy occupancy and rental yield increases, which we've shared in the previous slides. And then finally, an important metric for us is that we achieved sector-leading customer exit NPS scores. Storage King has improved the score in the period. And for us, it's an important indicator that when customers, again need self-storage, they will return to Storage King. This is a credit to the incredible people, the team who tirelessly work to deliver on customer expectations and grow the business every day. Despite these great results, we see a large opportunity in continuing to enhance the operating platform and have a number of initiatives underway. The most important of which is our revenue management system. Stepping towards a more consistent approach to revenue management that incorporates best practice at scale, while leaving room for local nuance and input has been our aspiration and the revenue management journey we started almost a year ago is tracking to plan. It's a very considered plan as we are conscious we are dealing with the crown jewels of the business. To this end, our data foundations are now in place as is our strategic road map and partner selection. The integration of our selected systems had been largely developed. And the next 3 to 6 months we'll see us commenced a bit busy period of testing, which will determine the pace and speed with which we roll out our base version. From here, the process is an iterative one. As we build on the model with additional data sets and incorporate other technology advancements, which are already being A/B tested in parallel to the development of the initial model. We continue to believe that the revenue upside of the system will be significant and together with our leading sales process will result in improved margins for the business. We delivered some strong financial results for the half and are equally focused on delivering sustainable financial results into the future, embedding a sustainability lens into all our business processes. From a rigorous process of assessing climate risk, across acquisitions to actively managing our energy usage, we are constantly investing in the resilience of our portfolio against both risk and inflation. The disposal of a flood-prone site in Queensland in June and the 7.5% reduction in Scope 1 and 2 greenhouse gas emissions achieved this half are some of the results of this action. We also recently mapped out the moments of truth in our customer experience. And with the introduction of easy feedback mechanisms, we'll be actioning voice of customer feedback as part of our daily operations, bolstering our customer proposition and our value in the market. On the people side, complementing our investment in superior recruitment process, we are nearing the completion of our end-to-end employee life cycle system, which promises to deliver a more connected employee experience and further enhance the strong Storage King culture that we are so incredibly proud of. With this set of rewarding results and a number of critical projects in play, we remain optimistic and energized by the opportunity ahead. I'll now hand to Steven to talk about our outlook.

Thanks, Nikki, and Evan. So concluding this half year presentation, I hope you will appreciate that ASK, Abacus Storage King is on a purposeful business trajectory to, a, continue to expand its portfolio of stores, always look for commercially the most attractive -- most commercially attractive locations, position our stores to be the optimum shape and size and Storage King will manage the business with enhanced operating technologies. All combined in an overarching aim to provide investors with stable and growing distributions. We're focused on quality growth via our multipronged strategy of organic growth, acquisitions, developments as well as the platform enhancements that Nikki has just taken us through. We were pleased to upgrade our distribution guidance just at the AGM in November. And we affirm that guidance today with an expected distribution of $0.062 per share in the full financial year, which will reflect a payout ratio of between 90% and 100% of FFO. That concludes the call for today. Thanks for joining us. I look forward to having any questions you may have, or meeting up and speaking over the coming weeks. So over to questions.

[Operator Instructions] Your first question is a phone question from Howard Penney from Citi Research.

Congratulations on a solid set of results, team. Just my first question on capacity for funding. So you mentioned that, you have funding capacity of $600 million. And the development pipeline is $281 million cost to complete. So that leaves us with around $320 million of additional capacity. Looking beyond that, do you think that you would follow a strategy of recycling assets or perhaps look at different ways to raise capital beyond the $600 million? What are your thoughts on that?

I think the important point to make, Howard, is that development pipeline is a 4, 5, 6-plus year type program. So it's not as though for the next 12 months. We need to find that $280 million. What that estimate does of point-in-time gearing capacity of $600 million also assumes no uplift or valuation gains on assets. So as we talked about, the development properties and projects have delivered strong gains. As those projects roll through, we will obviously get that valuation uplift and appreciation. So it's not quite apples for apples to say $280 million of the $600 million, $320 million left, because it is a longer term proposition. We're very confident in the current business trajectory on developments and the strategic acquisitions that we judge are suitable for the portfolio that we certainly have capacity for the next probably 2-plus years before we need to start thinking about additional capital.

That makes sense. And just on the operational momentum, it's pleasing to see both, occupancy ticking up as well as rent per square. Just thinking about that momentum, where we are in the interest rate cycle and some of the factors impacting the overall market. How do you see this playing out in the next 2 years?

I think, it's a $64 question, where are interest rates going, Howard. As Evan alluded to, we have seen extraordinary growth in various expenses at the property level. Land taxes continue to ramp up. Council rates as well as insurance costs. We hope we've seen the worst of it. But it's not out of the realms of possibility that those costs do continue to escalate. What we do know is that with a strong occupancy today in the locations that were invested. We're confident in the ability to continue to drive growth, earnings growth, rent growth, RevPAM growth, which underpins earnings growth. And we think that, that will continue to do that in the short to medium term. But like, most participants in the market, we're eagerly awaiting next week's interest rate announcement and then what might occur for the balance of the calendar year.

Your next question comes from Solomon Zhang from JPMorgan.

Two questions from me. Maybe a question for Evan. I just wanted to hone in on a comment you made during the presentation just on the operating margins. You're just commenting that margins were down 1% half-on-half. But you are expecting FY '25 margins to improve on a full year basis. So what's sort of that base margin or base period that you're referencing there?

Sure. So with the operating margin, it reduced 1% compared to the second half of FY '24. What the reason for that is because of the large increase in both insurance and the statutory cost, the -- tax in particular. What we're forecasting for the second half is our revenue will continue to grow. But we've taken that cost impact for the year. So the spread between the revenue inflation and the cost inflation should improve in the second half, thus improving the operating margin.

So it's a half-on-half comment, not saying that you should be ahead of as it in commenced?

Yes, as it was in '24.

Yes. I'm just trying to understand the drivers of that insurance cost increase, because I mean, 20% seems quite high in the context of some of those ABS numbers, which seem to be more sort of low single digits. Is it higher claims rates like fire theft, natural disaster? Just any color there that the insurers have provided to you would be good.

Yes, I can jump into that. Look, one of the big drivers is replacement cost. As building inflation has gone up over the last few years, replacement cost increase is about 2/3 of that and about 1/3 of that sits in risk rating. And that's through incidents. We had an incident with a fire towards the end of last year. So it's the uptick in risk, I think, coming from flood and fire risk, coupled with the higher replacement.

In the previous year as well, we did have a flood event up in Queensland, which was impacted the store quite badly.

Got you. And second question, maybe for Nikki. Just on the revenue management system, you called out in your remarks that, I guess, the revenue upside is fairly significant. Is there also a cost out angle? Just trying to tie in with Evan's comments around driving staff the stores, I mean potentially moving to lower FTE and driving lower center level operating costs?

Look, that's not the driver of why we're doing it. We're doing it to get the best quality outcome for revenue and to not leave any money on the table. I think, as we go forward, working out the role of different players in it. We will figure out as we go forward.

I think from an average FTE perspective, Solomon, you'll recall we're sitting just under 2 FTEs per store. So we're very conscious of that customer proposition and obviously, customer service. What we do know is that systematic approach to revenue, which prices units consistently, systematically across the network. Every single 1% of increase in that margin will drop to the bottom line to the tune of currently about $7 million of additional earnings. So we certainly don't see that revenue management system is a cost-out strategy. We think it's just simply a systematic approach, technological approach to something that has been done quite manually and labor-intensive really since the inception of the business back in the late '90s.

Your next question comes from Larry Gandler from Shaw and Partners.

Well done on the great results, a few questions from me. I guess, Nikki, just to start, with regards to New Zealand being a bit weak. Is there something about maybe the Canberra experience that informs, how you sort of travel in New Zealand now and manage that as that economy may sort of drag results?

Absolutely. Look, I think there are some fundamental differences in a lot of the Canberra problems was from driving strong rental rates and catering occupancy. Our occupancy got as low as 80% in Canberra. And then, we had to do the long fight back to try and recover that. Whereas I think, New Zealand is more a macroeconomic thing. And we were probably shielded by a lot of the macros from a flood that happened in the Auckland area, which helped drive our, keep our occupancies high. I guess, if you look at our occupancy today in New Zealand, it's still around about the 90%. So it's not that we're struggling. There is just a lot of new supply coming into that Auckland market at the moment and getting new customers' rates up is where the fight is. So we're seeing a big drop from all the competitors in the region around the rental rates being offered to new customers entering. So yes, some of it is the same. You've got to play the existing versus the new customer game differently. But I think we're probably -- because of it's not about us sort of maximizing our rate increases at the expense of occupancy. It will be -- we don't expect it to be a long-term problem like we had in the ACT.

And just sort of delving into that, the lesson might be that from Canberra is that you're more in tune with competitive rates, so you're not out of line there. Is that comfort I can take from that?

Yes, that would be fair. Look, in Canberra, where we're a strong market leader as well. So in Canberra, we rates set. And I think, we just pushed the consumer too hard. The consumer is the one who walked away versus going to competitors. Whereas I think the Auckland situation is potentially a more competitive situation in a market where customers are still under huge economic pressure. So, disposable income in Auckland is still a significant issue, despite the rate decreases.

And I guess, with regards to the competitive nature of the industry overall, in the last, I don't know, 6 months or so or even 12 months. We've had a few announcements from foreign entities wanting to invest in Australian storage. Are you seeing any sort of increase in planning or new developments getting ready for 2026 and '27? Is that becoming apparent in sort of acceleration?

Look, we monitor supply really carefully. The 3 big builders are the 3 big players in the market today, so most of the new supply is coming from the 3 biggest players today.

And has that accelerated or planning around?

We've been pretty static, I think, Larry. I think the challenge with a new entrant into the market is always the operating platform element. Purchasing building is almost the easy part. What's actually difficult is managing the inquiry levels and filling up the stores, because that's a 3, 4-year proposition, which often stresses returns, particularly for new entrants.

And then just a couple of quick questions for Evan. Evan, with regards to the distribution, I know, there's 2 things. Some spare franking credits and also it didn't look like the DRP was in effect. Just wondering, if you can comment on whether franking and DRP will be activated in the near future.

So there's $41 million roughly of excess franking credits at the moment in ASK and understand how valuable they are to our investors. And it's something that we are exploring at the moment and hopefully, we'll be able to talk about as we get closer to the end of the financial year. In relation to the DRP, it's a capital management initiative that we constantly review at each time we announce a distribution. We do have a DRP policy. But just for the moment, it's turned off, particularly with the $600 million worth of funding capacity that we have at this moment in time. But as I say, every time we do announce a distribution, we will strongly consider it.

Your next question comes from Ben Brayshaw from Barrenjoey.

Could you discuss the rationale for the change in the target gearing, please, just moving the top end to 40%?

Yes. We took -- you'll recall, we actually did it at the group level. We did take some advice that I think it's almost 70% of the sector participants have an upper level of gearing of 40%. So we were somewhat out of sync with the rest of the market. Our current level of gearing of 29% still gave us quite strong liquidity and capacity. But we thought, it was prudent to lift the top limit. It's not for 1 minute expecting that we're going to run the gearing to that level. Although, I would say that, obviously, in a valuation cycle, at this point in the valuation cycle, it is obviously attractive to have that level of gearing or at least the capacity to go to that level of gearing should it be required even if it's for a short term.

Okay. And just on the increase in the land tax. Is that a national, I guess, change? Or is it administered? Could you just discuss, is that administered at a state level? Just if you could provide a bit more color on that, please, in relation to the key drivers of the increase?

Yes, Ben, it's Evan. So in relation to land tax, it's a state-based tax that each state does it a bit differently. Where we're getting pinged is a couple of states have changed their rates as well as some of the states have an average 3-year land value. And so what's happened is because storage has performed so well over the past 3 years. That valuation strength that we're seeing in our properties, a lot of it is being embedded in the statutory land value and we're getting pinged on that.

And are you comfortable that that's now played out? Or is there potential for further increase in land tax in some states going forward?

I think what Evan was pointing to is that the period-on-period growth has been very high. And we would hope that we're through the worst of that. However, we're very carefully monitoring situations such as Victoria, states where governments are looking at their revenue. And unfortunately, property becomes a bit of a victim in those situations.

[Operator Instructions] Your next question comes from Edward Day from MA Financial.

Nikki, just wondering, if you can provide some color around the spread between your move-out rates versus your move-in?

Yes, happy to. Look, it's not a number I particularly like, because I feel like over the long term, they always converge, because it's often the same people and your short-term move is causing most of that activity. But at the moment, we're probably sitting with around about a 3% to 4% spread, so move-ins coming in under move-outs. But if you look at it by state, you probably -- you've got a few states where there's -- it's close to 0, that's WA, ACT. And you've got New Zealand where it's probably over 10% or close to 10% and Victoria and New South Wales sort of sitting in the middle.

Your occupancy has obviously picked up a little bit. Have you seen any increased churn in your customer base?

It seems to be fairly stable sort of between 5% and 8% monthly churn.

Okay. Just one more. Just on your hedge expiry, Evan, this one for you. Obviously, that looks like it's changed a little bit since the June results. Can you just talk about what you have done there?

Sure. So Ed, when we refinanced our banking facility unsecured, we were required to reset all our hedges in place. Now, we were quite fortuitous at the time that those hedges were reset. And we've been able to set sort of an offer fixed rate, if you'd like, of 3.6%, 3.7%. And based off interest rate market expectations this morning that seems to be where the variable rate will be coming to by the end of this year. So we've been quite fortuitous with the timing. And it's the credit to the treasury team.

And have you seen any change in margin as part of that refinance?

Yes. So when we did the refinance and turning it to an unsecured. So that's less security for the bankers. We actually got a 20 basis point reduction in our margin. And that's due to the strong credit rating of ASK and the self-storage asset class. So usually, when you give away security, your margin goes up. But once again, a credit to the treasury team for what they were able to push.

There are no further phone questions at this time. I'll now hand the conference back to your speakers to address your webcast questions.

There's only a couple on the webcast, one that we've talked about as far as the spreads on move in and move out. And the other one was just in respect of the growth or the softness of the New Zealand market. And just to reiterate that Nikki did mention that on a constant currency basis, the reduction is only about 1.5%, 1.4%, 1.5%. So we're conscious that there is some volatility there in the Aussie, New Zealand dollar exchange rate. That's all the questions we've got. We do, again, appreciate you taking the time and look forward to catching up with everybody in the coming weeks. Thank you.

That does conclude our conference for today. Thank you for participating. You may now disconnect.