Shurgard Model update, growth continues, despite headwinds in FY23

In this note, we update our model as we expect the residential market mobility to cool over FY23 as interest rates have pushed up. However we expect mainly a shift in time that is compensated by higher rent/sqm. Hence, we maintain our target price at EUR 58. We believe that occupancy could suffer a little over FY23 as the residential market transactions cool down and as Shurgard has increased its investment pace. New developments typically have a much lower occupancy rate and are only included in the same-store rental income 3 years after opening. At the 3Q22, Shurgard reported a strong increase in rent per sqm of 8.7%. We expect this pricing trend to continue over the next 18 months and this will compensate a potential occupancy rate gap. The interest rate increase affects Shurgard much less than other REITS as its LTV amounts to around 17%. In this note we detail our estimates that are now based on the All-Store reported figures. In the past, we started from the same-store figures, but as development activity accelerated, it became much harder to reconcile these to All-Store figs, due to the complexity of the pipeline mix (Development, Re-developments and M&A). We maintain our Buy and EUR 58 target price.