Shurgard Self Storage Ltd (SHUR) Earnings Call Transcript & Summary

Good afternoon, everyone. Thank you for joining us in-person and virtually for the Shurgard year-end 2023 results. I'm here with Marc Oursin, CEO; Jean Kreusch, CFO; and Isabel Neumann, Chief Investment Officer. Before we begin, we want to remind you that all statements, other than statements of historical fact included in this management presentation are forward-looking statements. Forward-looking statements are subject to risk and uncertainties that could cause actual results to differ materially from those projected by the statements. This risk and other factors could adversely affect business and future results that are described in our earnings release and in our publicly-reported information. You can find our press release and an audio webcast replay of this management presentation on Shurgard.com site. With that, I will hand over to Marc.

Thank you, Caroline. So welcome to everybody to share with us these great results for the year 2023. So on the first page of the presentation, we have been able to reach 9% revenue growth. Total company is supported by a couple of countries with double-digit Germany, Netherlands and the U.K. This revenue growth has been also translated into almost 10% growth of our NOI, which is our operating profit. And mechanically it's what you see, the margin has increased significantly by 0.6 percentage points over the year '23 versus 2022 for the whole store perimeter. Then if we focus on our same-store perimeter, which is roughly 90% of our operations, you can see that this same-store performed with almost 6%, 5.7% precisely in terms of revenue growth. And this is related to a volume effect and a value effect. The volume is the occupancy. So occupancy has been at a high level of 90.4% stable versus 2022 and the value effects, so in-place rent have grown up by 6.3%, which is very significant. And of course, due to the management, our costs with the 3% growth only, we've been able to grow the margin by almost 0.9 percentage point over the year '23 versus 2022. As a reminder, Shurgard became a U.K. REIT in March 1, 2023, so almost a year ago. And we have been able to deliver EUR 158.4 million in terms of adjusted per earnings with the growth of 12.3%, which is very significant. And this as an EPRA earnings per share, we have been able to grow by 10.9% over the same period of time. If you look at now at the balance sheet, so we will pay EUR 1.17 per share for the full year in terms of dividend. So that's fully in line with our guidance. So no surprise. Then in terms of NTA, well, the EPRA NTA per share, so EUR 44.07, so which is an increase of 8.4% versus December 31, 2022. The exit cap rates have been stable, 5.2% over the same period of time between December '22 and December '23. You know that we have done this successful equity rate so-called ABB in November 2023. So EUR 300 million. So of course on the December 31, we're sitting on a significant amount of cash, EUR 258 million with a low LTV of 13% due to the ABB obviously and a multiple of net debt over underlying EBITDA of 3.1x. And then a nice coverage of the interest of 10.6%. So pretty attractive shareholder returns and with a conservative balance sheet. Talking about pipeline and development. And Isabel will come back in more detail than me later on. So we have been able to create a new capacity of 231,000 square meters, so which is globally 2.5 million square feet for the years '23 till '26, which is representing 17% of our total existing capacity at the end of 2022, which is very significant. And this pipeline of 2.5 million square foot is having a project cost value of EUR 630 million. Our expectation of yield at maturity for this pipeline is 8% to 9%. Of course, depending if it's M&A or if it's organic, the timing is not the same. But at maturity, this is what we're expecting. And we have done also 2 recent acquisitions in Germany which are actually the first one in November, that was Top Box with 5 properties and 2 projects and Pickens recently early this year with 6 properties in Berlin, spread in Berlin and Hamburg. So in total 64,000 square meters. So more or less EUR 230 million of value of investment. So another way to look at the pipeline is what you see on this graphic. So it's what have we done and what is the commitment? So these are the gray bars. So you see the years '20 till '26. So dark rates. What we have done, this is expressed in square meters in thousands of square meters, and the guidance is 90,000 square meter for the years as of 2024, '25 and '26. But what is interesting to look at is the red line too. So which is exactly these numbers expressed as a percentage of the fully built out, so of what was under management just the year before. So you see that we have a kind of run rate between 5% and 6%. So every year we are adding to the platform 5% to 6% of physical additional square meters that will of course sustain our growth. Then a little zoom on Q4, great results also in Q4. So as we said, we had a deceleration of total company between Q1 and Q4, but Q4 is still with a very high level of 7.7% revenue growth and 2 countries, Germany and Netherlands got still a double-digit growth. So great performance over there. On the NOI, we have been able to grow the NOI by 9.4% over that Q4. So still a very, very high speed of growth. And then here on the same-store, so the same logic, our same-store, 90% of our revenue performed well with 4.2% growth and the same-store, if you look at again, volume value effect, we have been able to keep high level of occupancy in Q4, 90.3%. I remind you that the full year was 90.4%, so pretty high. And regarding the value 4.6% in terms of in-place rent, with still having traction for us on our pricing power. And in terms of earning growth, the adjusted EPRA earning grew by 11.3% of the quarter. So fully in line with what the rest of the year has been. So in terms of outlook for 2024, we are forecasting to do at least 7.5% of revenue growth for the full year 2024 versus '23. Secondly, we anticipate a margin that is stable for the whole company in '24 versus '23 after having done a tremendous performance over the past 3 years. So 2.7 percentage points of increase the past 3 years. So well ahead of guidance. Then in terms of development and pipeline, you've seen that. So it will be 90,000 square meter delivered in 2024 and with an investment of -- in excess of EUR 300 million for the year 2024. And then regarding the tax rate since we're a REIT in the U.K., it's helped us to keep that rate at a low level of 17% for the year '24. And then we have kept our dividend policy, what we announced actually in September '21 at the Capital Market Day of EUR 1.17 per share for the full year 2024. So lot of confidence in our model, again, demonstrating great results and a lot of opportunities for growth. And on that, I pass to Jean.

Thank you, Marc. So looking back at our financial results in 2023, we once again deliver a very strong performance with revenue growth of 8.3% at constant exchange rate, both for the quarter and full year. Our NOI margin at 63.3% is up 0.5 percentage point for the quarter. And at 66.3% for the year is up 0.4 percentage point, demonstrating once again our scalability and the continuous digitalization of our operating platform. Finally, our adjusted EPRA earnings at EUR 158.4 million grew by 12.3% for the year at constant exchange rate and by 10.3% at actual rate. In 2023, we continue to show resilience of our top line and we confirm our ability to keep cost under control in a high inflation environment. On the next page, our same-store property operating revenue continues to show a strong growth of 5.7% at constant exchange rate for the year with the fourth quarter growing at 4.2%, demonstrating once again the resilience of the business. For the year, the occupancy at 90.4% remained stable while the average in place rate grew by 6.3% at constant exchange rate reflecting our continued ability to raise board rate for new customers while increasing in place rate to existing customers. On a country level, we continue to show high-single-digit growth in the Netherlands, the U.K., Germany and Belgium. On the following page, our level of growth are contributing to 9.9% increase in our NOI at constant exchange rate. First, first level of growth or same-store NOI grew by 7.1% at constant exchange rate, contributing EUR 14.7 million to the growth while the development and acquisition added another EUR 6.7 million reflecting the ramp up sales of our new stores combined with our digitalization initiatives, which are allowing us to absorb rising salary costs through natural attrition. We're increasingly able to operate a platform in stores more efficiently thanks to our e-rental service, which makes up now around 40% of our move-ins. Moving now to our cash flow. On the next page, obviously the main change compared to last year was the EUR 300 million ABB we did in the last part of the year to fund our acquisition pipeline. We ended the year with a cash balance of EUR 258 million. We also confirmed the payment of a dividend of EUR 1.17 per share for the year. Finally, on Page 12, our balance sheet continues to remain very strong with a low LTV at 13% and a net debt to EBITDA of 3.1x. Our debt has a weighted average interest rate of 2.36%, our maturities are well spread and 100% of our outstanding debt as fixed maturities. Our EPRA NTA per share increased by 8.4%, reflecting the growth of our NOI, while the exit cap rate basically stayed flat at 5.2%. And on this, I'll pass the floor to Isabel to talk about our capital raising.

So in November, we did a successful ABB, which allowed us to raise EUR 300 million of additional equity. The purpose of that ABB was to continue to fund our growth strategy, while of course also to maintain the strong and disciplined balance sheet that we have. I think we can all say that we have very swiftly proceeded in deploying these funds whereby having done and a Top Box acquisition for a total of about EUR 98 million as well as the Pickens acquisition for a total of about EUR 131 million. So a total of about EUR 230 million, adding in total about 7 plus 6 additional properties, 13 properties to our portfolio in Germany. So these transactions will bring 64,000 additional square meters and we hope to continue to deploy the rest of the funds in short order. I think it's important to note that these capital raise and the deployment of these funds will be earnings accretive from year 1 and it also allows us to continue to have a very strong balance sheet as we go and continue to proceed with our growth strategy. Now talking about growth strategy, Marc has mentioned that our pipeline is now standing at a solid 231,000 square meters with an expected investment of about EUR 630 million. But I want to do a bit of a deep dive on Germany because it's important to note what a significant transformation we have managed to do in Germany. You will remember that in 2021, we announced our growth strategy whereby we committed to doubling the growth of the company. Before that, we were only focused on Berlin and in NRW, so North Rhine-Westphalia as areas of development. And at that time we committed to not only double down on these areas, but also to add additional cities of Frankfurt, Stuttgart and Munich in terms of our development. So what we have been able to do is in combination of both our organic development and our acquisition development, we are now in a position that we are aimed to be at, or we should be at 46 stores by the end of 2026, which is when our organic pipeline effectively will have been rolled out. And this is coming from 25 stores or 123,000 square meters. So it's almost doubling effectively of our presence in Germany and it also puts us in a very solid #2 position in Germany. So it's really been transformational in terms of what we've been able to do in terms of growth acceleration in Germany. So it's fair to say that we were with 25 store subscale, this has now been completely kind of transformed to a very, I would say strong addition in terms of the total store portfolio across Europe. What I think is important to know as well is that we have very much with adding these cities now of solid focus on these big 7 cities, which really cities where the demographics are very strong, density is very strong and we see continued kind of growth potential in these areas. What's important I think to know as well is that in consistent with our overall strategy, a 100% of that portfolio is freehold and 70% of the portfolio is purpose-built. I'll now pass it back on to Marc.

Thank you Isabel. So after this let's say great operational performance, the buildup of the pipeline, acquisitions, doubling the size in Germany, for example, then let's talk about what we're doing versus what we call the customer journey. So the first part is what you see on the left side, which is, okay, we are in self-storage business, prospects are looking for space obviously. So find the space. How do they do that? They use this, their mobile. 70% of the traffic on the web and the move-in is coming from the smartphone today. It was 10 years ago less than 20%. So that's the key tool. Then the second thing is talking about price transparency. All right. I go, I use my phone. I have a look on it, what do I see? I see location, I see units, I see prices. And like any other industry, the price you see is the price you pay, which looks pretty normal to you, but in this industry, it's in Europe, it's not still yet a kind of standard. Many operators don't have any transparency on that and we are like this since 2012. So to us, it's the natural way the way prospects are behaving. So we have that full transparency. Thirdly, size has what we call size estimator in order to make the people at their ease to find the right size because some of them have no clue of what the volume that they would store, what they would need. And therefore we have on our mobile -- website, sorry, actually this capacity to help them to define what they need. And what is interesting is out of 100 move-ins down through the web, 20% of the prospects or customers have used that functionality, which is also we think a great stuff for them. And last but not least to find the space and using the phone efficiently is our brand and our capacity to have an optimized traffic acquisition and lead generation with the help of the Shurgard brand. The second step has been for us, if you remember at the end of the first year of the COVID in 2020, we created what we called e-rental, which is something that you know very well when you're traveling with planes where you have a need and you have your boarding pass on your phone and meanwhile you have paid the ticket. So this is exactly the same concept. So what we have done, we have done simply the last phase at that time in December 2020, which was actually you have a complete seamless experience from your need of space till your unit. You have paid, you know your unit and you get there. 3 years down the road today, 40%. So all out of 100 move-ins, 40 of those move-ins are done this way, which is very significant. And what is interesting is that this number continues to grow every year in all the markets. To give you an idea of the bandwidth of that, if you look at the 7 markets where we are, the penetration of this so-called e-rental goes from 35% to 50% at the end of 2023. And we expect this, as I said, to continue to grow. The third step has been the app, what you see here, account management. So we have developed an app, rolled this app almost 2 years ago and it's in the first full year in '23 in all the markets. And this app first allows what allows customers actually to stay in their car facing the entrance of the premise of the properties, the gate, they are recognized with Bluetooth and the gate is opening. Then they step out of their car, they go to the property itself, the building, same story. They are recognized, the door is opening. They have to take their lift because the lift is bringing them to the second floor where they have their unit. They will go to the second floor. They don't have to remember any code, they cannot go to the third or the first floor, by the way, for security reasons. And then, so you see how with a technology in an industry that looks maybe, let's say not very tech, actually, it's super-tech in the end and it goes very fast and people are changing their behavior also very fast. And last but not least is all the data that we can get from all of these new functionalities is the last one, is all the access control that we have changed. So all the properties in Europe have a new system and we did this in the years 2021 and '22. So in '23, all the properties were ready. We have changed the devices, we have changed the software, and in the end with this, we know who is coming, how long, when and with this number of data, we'd be able to adjust different things in our customer policy. So on the top of that, you understood and we started to talk about that last year I think about what we call hybridization, which means that we are doing what many industries are doing, banks, retail banks for example. You push to customers workload and therefore you adjust your structure of cost. This is what we are doing. So meaning that we are doing the same kind of business with less people and this has fed the margin in 2023. Then if we go to the next page, talking about another success is our ESG strategy. So let's start with the commitment and the first one is we want to be net zero carbon by 2030 and therefore we are on our way for getting there. And the priorities related to this objective have been, if I take first the E, so it's what you see in the middle column on the first one. So we have done a couple of things there on the environmental aspect to be in line with this objective. We have changed -- so in the end what we're talking about, the less you consume, the less you emit in terms of CO2, looks pretty, let's say obvious. But in order to do that what we have done is that we have reduced significantly our consumption of megawatts or electricity and also reducing the consumption of gas. So electricity was in a way the last blade of cut was installing LED lights in all the properties. And this is done knowing that LED lights consume 70% less electricity than regular lights. So you imagine the reduction you have and then also transforming the usage of natural gas. We have roughly 120, so 40% of the properties with gas boiler, 2 are actually heat pumps. And this will take more or less 5 years down the road to have transformed and change this 120 gas boilers to heat pumps. And last but not least, of course, solar panel. So we have a strategy there and we will start with the Netherlands and probably the U.K. in 2024 by installing these solar panels knowing that we are in 7 countries. So it's a bit more complicated because each country has its own nice jurisdictions and specificities regarding solar. So it takes some time to understand what's going on and what to do efficiently. The second point regarding ESG is of course, the governance, we have changed in '23. We have reduced the size of our Board from 11 to 9 members first. Secondly, our Chairman became independent because the Chairman has changed from Ron Avner to Ian Marcus. And then in terms of diversity, gender parity, we have already a third of our Board that is female and we'll continue to go into that route of looking for parity in the soon, in the coming years. Last but not least, this topic of ESG is complex in terms of reporting especially when you're in 7 countries meaning that -- but despite this, I mean, we have we think a best-in-class reporting following the EU taxonomy and also what we have done on the physical climate change and this is in the annual report, in the sustainability report. And if I have one advice to you guys is please do the effort of reading our 50 pages, 60 pages of this, our sustainability report. The teams have done -- sorry, Caroline?

More than 100.

More than 100, sorry. So even more. And our team dedicated to this have done a tremendous job in trying to make something complex easy to read that you can understand and I really do encourage you to spend some time on that. And of course, the result of all of this is the third column is the strong ratings and I will just focus on GRESB where for the third year in a row, we are the industry leader for self-storage with the best score 5 stars and 91 out of 100. So on track to reach our commitment for ESG and trying to make all these things simple and understandable to everybody. Last but not least now, the, I would say our conclusion, yes, we're a unique platform with significant runway and why? A couple of things. You got it. Another solid performance, 9% revenue growth, great. Proven benefits from the geographical spread, more or less if you take London, the U.K., France, Benelux, the Nordics, Germany, each of these 5 part of the pie have roughly 20% to 25% of our value or incomes earnings, which means that well spread in terms of geographies. So managing the risk that are related to these geographies. We're not overexposed to one specific country. And by the way, it's what you've seen, a couple of these countries have great performances in '23, double-digit growth in the revenue. 3, the acceleration of the PropTech. Yes, it does bring benefits on the margin, last year 0.9% for all same-store in terms of incremental and as I said, 2.7 over 3 years. Pipeline talking about runway. Here we are 231,000 square meter, massive one, 17% and a very significant, so potential of NOI growth in the coming years due to this pipeline. Isabel mentioned the 2 acquisitions within Germany. We double the size, that's our ambition and to continue, great country and all of that is actually sustained by these 3 levers of growth, what we call redevelopment, developments and M&A times 7 countries. So multiple options to play with. And this is actually framed into actually a discipline of pretty stringent discipline of capital allocations and returns objective with a robust balance sheet without mentioning the fact that we became a U.K. REIT, you know that and sector leader in ESG meaning that and being also on track for that. So indeed #1 platform in Europe for self-storage and the #1 brand. That's what we are. And Caroline?

Yes, thank you Isabel, Marc and Jean for this presentation. Now we are available to take your questions. First, we will take question from the audience, then the question from the webcast. [Operator Instructions] Marios?

It's Marios Pastou here from Societe Generale. 2 questions from my side. Really firstly just thinking about trends you are seeing maybe into this year and also in the fourth quarter of last year. Could you give us an idea in terms of kind of customer demand, the level of discounting you are having to offer to kind of maintain that occupancy level? We saw rate growth slowing into the fourth quarter, but is there any trends that you are seeing where actually demand is coming back and the discounting you are really having to offer is stabilizing albeit with kind of solid rent growth as well on the long-term customer base?

Okay. Thank you Marios for the question. So it's quite obvious that if you look at what happened in '23, it's a deceleration of the total company and the same-store. Okay? If you look at growth quarter-per-quarter, year-on-year. So we started, if I remember on the same-store around 7 Q1 and we end at 4 or something, 4.7 for Q4. Knowing that this pyramid of same-stores are 90% of the total company revenue. So it's a big chunk and need to make sure that this one is on track. So how do we approach '24? So the way we approach '24 is that we think that this deceleration will stabilize in '24, which means that we expect the first half of '24 to be probably still slightly lower than Q4 '23 and then the second half to be back bit higher. So which makes the whole year stabilizing at a level which is slightly below '23 Q4. That's the way we anticipate the year for the same-store for the year 2024. Of course on the other side now, we come back on the customer behavior, Marios. So on the other side, in terms of non-same-store, so the differential between the total and this perimeter, so the other 10%, this 10% are fed by all the stores we have opened less than 3 years ago, plus the acquisitions that we have done. And plus the acquisitions that are taking place this year in '24. So for example, Pickens obviously. Back to the demand because that's the point. So we don't see a change in the demand, so what we call prospects and whatever the country, the demand is there with good levels. The only thing we see is that we need to continue to do promotions more than what we're doing in '21 or in '22 to convert that demand into customers. So what we have anticipated is a level of discount that is slightly above what we had in '23 in the budget, but still at the level that explains the mechanism I was just describing. So Jean, if you want to know, I think we're good. Is it answering the point?

Yes, absolutely. That's very clear. And then just secondly, Marc, I think you are looking now for around EUR 200 million of CapEx per annum. That's slightly higher than it was before, but you're maintaining the level of square meterage and also maintaining the yield on cost you're looking for at stabilization. Are you confident on achieving that level of yield on cost in terms of what you're seeing in the wider market? And secondly, are you also committing to any mix between new development and acquisitions, or are you keeping flexibility there?

Sure. So we are very comfortable with our commitment of 90,000 for the year 2024. So we can confirm that. With regards to the mix, I'm quite agnostic with regards to it in a sense that acquisitions sometimes we see a lot of opportunities in one year and then we see less of it. Clearly with Top Box and Pickens, we have a larger mix of acquisitions than we have had, for instance, in previous years. I suspect that to be in '24 to be the case again. So I'm not married to a specific mix as long as we can reach 90,000, which is much more important to me. And this also allows us to really seek best value and really achieve indeed the 8% to 9% kind of yield that we are obtaining.

So Rob Jones from BNP Paribas. One on margin and a one on M&A following up from Marios' question. You've done a great job in the last few years in terms of that 2.7 percentage point margin improvement, obviously guidance for this year is flat. Why is it flat? On Slide 15, you talked about the kind of improvement in e-rental business and that will only keep increasing in terms of percentage utilization of the lower cost elements of that customer journey. So why is it flat for '24?

Okay. So it's an easy one. Thank you. So why is it flat? Because we have more headwinds than the benefits that we are gaining. And these headwinds are of 2 kinds. You remember that business rates, what do you call that in English? In the U.K., sorry. So real estate taxes have increased massively actually in '23 as of April. But it was a wave of, with 3 blades, if I remember. The 100% in total was like 60%, the first one, 30% the second one, 10%. So we are in the second wave or second blade and we have the full effect, well, last year it was only from April. Well, this year you have the full effect of what last year happened, plus the second increase. So that's why and by the way, a real estate tax in the self-storage P&L in the U.K. is usually, if you look at the operators between 8% to 10% of the revenue is the first line in terms of cost in the P&L, while on the continent, labor cost is the first line. So the good news we have offset by that. And secondly, we had fixed electricity costs for the year '21, '22, '23 and we are open on the market in '24. So despite the LED benefits that I was mentioning, we expect still an increase. So all in all, that's why, but we have not changed our guidance regarding the medium term, which is to have a gain of 0.2 percentage point on the margin all store later on. So that's the answer.

Okay. Very clear. And the last one just on M&A. Isabel, if I gave you another EUR 300 million in H2 this year, could you go and find sufficient quantum of acquisition opportunities that met an 8% stabilized yield hurdle? I'm just trying to understand the acquisition.

Be careful giving me money. No, so let's put it that way. On the development side, on the organic growth, we clearly are much more in control of what we're doing in each of the countries. And this is also why we usually say over the years, over the cycle of the 90,000, 70,000 is development and 20,000 is M&A, knowing that of course, as I mentioned, that 20,000 can go up and down. And as I was mentioning before, frankly I'm agnostic from that perspective. Now from an M&A perspective, it is still a very new sector, new market. And we have by no means reached the maturity. So what does that mean? You have a number of very large players, you have very little medium-sized players and then you have a whole lot of little players. I think we are very well knowing all the smaller and medium-sized players and we are in constant contact with them. But often there are people with their own business, right? And when do they sell? Well, when they want to retire or when? So meaning there is not a volume like you have in the U.S. whereby you kind of constantly can say something's churning. So we are a little bit at the moment still in Europe, depending on the willingness and the appetite of also vendors to sell. So yes we, if opportunities come along, I will happily take more. But sometimes there is just not.

Well, to complement the answer is we think that we're in a better position if we have money and capacity with a balance sheet to seize opportunities than not. So that's why the leverage we have is done for that. We don't know when some of these guys, as said Isabel, will sell. What we know is some of them are over 60, which is a great age, but on the top of that, they have been the funders. So for them it's time to cash in. So Pickens is exactly what happened. And therefore, we know that opportunities will arise. When we don't know exactly, but they will. And it's better to be in a position you can seize them because you have the money than not.

Just to follow up on that, so obviously last year you did Top Box and Pickens. So 2 deals done. How many did you appraise? What was the number of deals that you looked at or the number that you walked away from? Or was it 2 for 2?

Well, of course, well, let me put it that way. We have a number of projects in the pipeline that we are working on, which we hope to materialize over the course of this year. In general, we monetize or we complete all the deals we start on. But some of them we are happy to pass on because they're not strategic to us. They are not in the right location. They do not generate the necessary kind of results. So we are cutting, we're putting some deals aside fairly quickly, but the ones we think are strategic and meet our objectives and meet our return, we complete it.

Yes, yes. The discipline is still the same. It hasn't changed in the 7 countries, the cities where we are or where we want to be.

Yes.

And is it good real estate? Are you the owners? And does it make sense in terms of returns?

And could contribution in kind potentially be an option rather than...

You mean share deal?

Yes.

Yes, of course.

You have someone, they might not be 60, they might be 50, they still want to be invested in the business, but maybe they could own Shurgard shares instead.

Yes. But Rob, the only thing is if I take the example, and I don't want to make it too personal with the recent acquisition we made in Germany, but maybe 65 years old, you really want shares with compound growth for the coming 20 years, probably not. You want cash to have a nice house somewhere in South Spain or Italy enjoying nice wine and the beaches, so shares it's not anymore your stuff. Having said that, we are ready. And again, and that's the beauty of being listed and the way we are and who we are happy to do deals where a part of it is shared, the rest is cash. So we are very open to that too. So if someone and we know some guys who are willing for that, that if when they will sell, they want shares, okay, let's go for shares.

Yes. It's a tool we have in a toolbox.

Exactly.

Because in most cases, the owners, they prefer cash.

Marc Mozzi from Bank of America. Can you remind us what will be your investment in 2024 when we combine everything development and acquisition? And I'm going to have another question after that.

You mean the amount for 2024?

Yes.

Yes. So it will be in excess of EUR 300 million.

That's a combined CapEx and acquisition?

Yes. That's M&A, what I think what you call acquisition and organic growth. It will be around EUR 300 million, yes.

Okay. And looking at what you have spent in 2023 in term of acquisition, development CapEx, and what's going to go through 2024 in terms of rental income, how would you qualify your 7.5% top line gross? Is that conservative? Is that the best case scenario? Is it what case scenario? Because it looks to me that if we try to understand what is a breakdown between same-store growth and what is going to come from acquisition investment, M&A whatsoever, meaning money you're going to spend, it looks to me it's very conservative. Am I right to saying that?

No, you're not right. And I would tell you why, Marc. And feel free to elaborate, Jean, but I mean, you are not right. Let's say that yes, you are not right, I would tell you why. Yes, exactly. And that's what I'm going to answer actually. So why? Because first, let's take the example of Top Box that we have acquired. Top Box, we acquired these guys in November, but what have we acquired? We have acquired, and what we have disclosed actually and said publicly is that this portfolio we are buying, actually, we have only 1/3 of it versus the maturity of what it will be in 2025. Meaning that you buy 5 existing properties plus 2 that will be built and open in '25, but the 5 first are not occupied at 80%. They're occupied at that time I think it was 30%, plus the 2 that we will open in '25, you have to ramp them up. So which means that the timeframe, thinking that an acquisition drives right away an incremental revenue full blow in that case of Top Box was not the case. Pickens is different. Pickens a different animal, the level of occupancy is much higher, close to 80% and said Isabel they're bringing value right away. So those ones will bring additional revenue. So that's why thinking that the 7.5% you say, oh, okay, but if your same-stores, as I said to Marios, they will be probably above 4%. And then the incremental, the difference of growth, because it's 90% is 3.5%, 7.5% versus the 4% more or less, it looks pretty conservative. No, because the profile of what we're buying plus the ramp up of the existing remaining stores in this part are bringing this more or less 3.5% growth. So it's not conservative, it's not.

How should we read it or should...

If we have both, sorry. If we have both, for example, a company like Top Box where it was 90% occupied, high rates, mechanically, of course this will feed the revenue growth of '24 much more than what we acquired in '23 with Top Box, for example.

Or could we read it the other way around? That your same-store growth will be significantly lower than 4% and as such the 7.5% will be essentially achieved by your acquisition in near term?

No. No, no. That's here, I stick to what I've said, which is because the key topic first in this business is the same-store, what we call same-store like the U.S. operators is how the same-store are evolving. Because the question we had already many -- for the Q3 disclosure, it was last year in November, especially due to also what's going on in the U.S. and what our peers are experiencing in the U.K. was, hey guys, you are on the slope and you're sliding down, it's in the Alps here, so where do you end there? Are you stopping the sliding or not? And the answer first is, by the way, our slope is with a very different angle than our peers in the U.S. And so we are decelerating much less. And secondly, what we anticipate and what we start to see in the first weeks of the year, it's the stabilization of the same-store. So back to your point, we think that the same-store will stabilize in '24. Okay. And on the top of that, acquisitions that we have done and development will bring the difference to reach that 7.5%.

Which will then mean that you're going to outperform massively your peers in the U.K.?

Yes.

Okay. Because -- but in U.K. this year is going to be negative in term of same-store growth, most likely combination of decline in occupancy and pricing power being flat at best. So you have 75% was going to do then 6% or 5%, same-store growth?

You've said it.

Okay. Just to make sure.

A question from the audience. Do we have a question? No. Maybe on the webcast? Okay.

[Operator Instructions] We have a raised hand question from Paul.

Just a quick follow-up on Marc's question and I just want to make sure I understand completely on the forward guidance, the investment. So it's EUR 300 million is going to be spent in total, which covers both development CapEx and M&A or inorganic. Now is Pickens in that number, you've already spent EUR 120 million of it and you've got EUR 180 million to go. That's the first thing, just to clarify.

Yes, indeed.

That's correct.

You're right.

So of the remaining EUR 180 million, how much of that is kind of known CapEx with no risk that you can kind of deploy into the development pipeline and how much of that is potential new opportunities?

So what you can see in our reports is that currently disclosed is about just under EUR 200 million of disclosed pipeline for about 68,000 square meters. So we have announced 90,000 square meters, so I don't have to make a drawing that there's some additional acquisitions that will come. So that's the first one. The second one, what I think is very important to note is that there's an impact as well from our acceleration in our growth. And what do I mean with that is that before I'm talking about 2021 and previously we were running a development of about 25,000 square meters per year. That organic development run rate is now around 70,000. Clearly it steps up. So you can see in 2025 that we already have almost 80,000 square meters of organic development because we of course don't have anything announced on the acquisition side for 2025. Because you have this complete ramp up, it means that 2024, you will see a disproportionate amount of 2025 pipeline, which you have to pay for in '24, for instance. Normally we pay -- once we get the permit, we pay for the property, we pay for the asset, and then the next year the CapEx will be spent. So because you have this quite significant kind of step up from a run rate of 25,000 to 70,000, it means that this year in '24 is going to be the year we're also going to be spending a disproportionate amount comparatively to previous years on the purchase of the land of the property, et cetera. So those I think are the 2 components, which you cannot see in the numbers yet, but I cannot give more details on that on it.

Yes. No, that's really helpful and I appreciate that. Just one final follow up then, is that in the extra acquisitions that as you said that you can kind of work out the implication of how big they might be, that is in addition to the 7.5% guided in terms of the revenue growth, right? So the 7.5% is your known opportunities today, or are you saying that the 7.5% includes an assumption around those acquisitions completing?

It includes the acquisitions that we are internally aware of.

So don't forget that the time you make the deal, you close the deal, you integrate, you are probably in June, July, so the effect is only half year.

Our next question comes from Wim. [Operator Instructions] We seem to be having trouble with Wim's connection, so we will move to the first typed question. This question comes from James Matthews and it starts with a quotation. Shurgard will continue to review its dividend policy to ensure it remains competitive. James asks, please, can you elaborate on what this means?

It means what it means.

So I'll take that one. So first we announced in Capital Day in 2021 that we had a fixed dividend policy of EUR 1.17 per share. The way we look at it is total shareholder return. So we kind of want to have around 10% total shareholder return. And as long as we can get the growth, we believe that's where we want to go. So looking at keeping our dividend fixed, using the additional capital to spend on growth at 7% to 8% or 8% to 9% return, we believe that that's a much better proposal than pushing the dividend up. Obviously, when we see that the growth is not there, then yes, obviously then at that time we look at increasing the dividend. But currently, no, with the opportunities that Isabel sees and she explained on the market and that we have seen in the past, both in acquisition, in development, we continue to maintain our dividend fixed and go for growth, external growth with a return of 8% to 9%.

Our next question comes from Stephanie, who asks, in which countries do you see higher risks on occupancy and where you are granting far higher discounts except from Sweden where we know the competition is tough?

Well, here, I would say we don't see any specific countries aside what we shared with you regarding Sweden where there is a major risk of having to increase significantly the discounts. Up to now we don't see that the level of demand and what we're doing in terms of feeding that demand with the discount levels we have for country is enough. But again, what will be the situation in H2 for a given country precisely, we cannot commit to that. But based on what we know today and what we see, it's fine. We don't see any particular risk.

That's all the questions we have. So I hand back to you in the room.

Thank you.

Okay. Thank you all for joining us today. We look forward to reconnecting with you in this venue.

Thank you. Thank you very much. Thank you.

Thank you.