Guiding you to an Inspired Investment

Transcription

1 Guiding you to an Inspired Investment

2 Contents Market Appraisal 3 Market Analysis 5 Introducing Store First 6 The Investment Opportunity 8 Return on Investment 9 Further Benefits 10 Exit Strategies 11 Costs & Charges of Ownership 13 Costs & Charges of Purchase 16 Why choose Blue Horizons? 17 Market Appraisal Self-Storage was first established in the UK in the 1980 s, initially in the London area. The industry continues to grow steadily in the UK and for the five years to 2009 has recorded growth rates of between 8% and 15% per annum. Storage rental has continued to increase in both price and volume during this period. This has been fuelled by the growth of multi-site operators. The latest UK Self-Storage Industry Association (SSIA) annual report, prepared by Mintel in February 2010 reveals that the UK self-storage industry has remained resilient and continued to grow throughout the recent economic slowdown. The report concludes that new operators are coming into the market and that consolidation and reorganisation is starting to take place within the sector - a sure sign of business confidence in the industry. Nearly half (49%) of operators state that they plan to open one or more sites in the next five years. Multiple site operators such as Store First have continued to push through above inflation to increase returns. In comparison, other commercial property sectors have seen a sharp decline since 2008 due to the recession and subsequent economic slowdown. Demand for storage facilities has historically exceeded all targeted projections and demand is still increasing - as shown in the Mintel report. There are a number of reasons why both consumers and businesses are increasingly turning to self-storage. 3

3 Why do people use storage? For consumers the primary reasons remain social factors such as the increase in single occupancy households, families moving home, marriage, divorce, retirement and downsizing. Lack of available suitable housing stock for families and single people all result in the need for consumers to enter into storage for both short and long term contracts. Businesses are increasingly using self-storage solutions to store and archive files and paperwork, to store stock and office equipment and to meet fulfilment needs driven by e-commerce. The flexibility of self-storage has a strong appeal to small and medium sized businesses who do not want to make a large capital outlay for storage space. In addition to this, growing public awareness of the industry and the concept of selfstorage has also contributed to its development. For these reasons, the UK s Self-Storage companies have seen the highest growth and highest yielding returns within the commercial property sector over the last decade. Size of the Industry There are now more than 350 companies operating more than 750 self-storage facilities in the United Kingdom. The UK now generates revenues of about 360m, has over 235,000 customers using the service and provides employment for 2,700 people. There are around 750 significant facilities in the UK and around 26m rentable square feet, averaging 0.44 square foot per head of population. This compares to 7.4 square foot in the US and 1.1 in Australasia. The largest concentration of centres remains in London and the South East. Market Analysis A review of the annual reports that the large Self-Storage PLC s have made available to their investors, shows a fast growing industry with great confidence in the outlook for the future. Market Penetration When compared to more mature markets, the levels of market penetration in the UK are low at just under 0.5 Sq/Ft per person. The US has more than 7.4 Sq/Ft per person and Australasia has 1.1 Sq/Ft per person. Despite such high levels of market penetration, the market in the US continues to grow at 10-15% a year (based on net lettable space). On this evidence it is clear that the UK market has much further to grow. Regional Market Penetration 28% 35% 14% 23% London South Midlands/Wales Northern England and Scotland Big Yellow Year to March 2011 Occupancy growth of 215,000 sq ft Store revenue up 8% to 59.6 million Average net rent per sq ft up 2% to Safestore 2010 Year-end report Revenue grew by 5.7% to 89.2 million 9,941,000 sq ft of occupied space, up 6.1% Average rent per sq ft up 1.2% to Lok nstore Interim results January 2011 Revenue grew 4.5% to 5.42 million Occupancy up 2% Prices up 3.5% 4 5

4 Introducing Store First Dedicated to continue the very best infrastructure and support, Store First are fast becoming an exemplary business that is the envy of their competitors. Store First s sites are located on vibrant office and commercial business parks, within easy access to motorway links and within short driving distance of major conurbations. All of the sites have maximum vision to large traffic flow from either motorways or large main roads. All centres are located in highly populated areas. Tenants pay one month s rent as a deposit and one month s rent up-front. Rent is then collected monthly by direct debit or card payment. If any tenants default on their rent, Store First is legally entitled to open the Storepod, sell the contents and use the proceeds to cover any outstanding rent. Store First Differentiators Store First offer their storage space at least 30% cheaper than their competitors. All of the sites will have office facilities, breakout areas, packaging facilities and van hire, goods pickup service, forklift truck facility and reception areas. Tenants have the use of a PO Box Address along with private meeting rooms, office space, free Wi-Fi, and in and out bound mail services. All Storepods are VAT exempt and so do not attract VAT on completion. Price Comparisons All of the below prices are per week prices for 25 Sq/Ft of storage space in the North West and are correct as of May 2011: 1. Armadillo Big Yellow Safe Store Store First 8.17 Meeting Room Storepod Business First Centre - Liverpool Packing Materials Storepods Easy Access Reception 6 7

5 The Investment Opportunity Investors purchase a long-leasehold (minimum 250 years) on a storage unit, then enter into a 6 year agreement to sub-let their Storepods to Store First Management Ltd. Store First Management Limited will then sublet the units, under license, to end users. Features include: 2 years guaranteed fixed rental return of 8% for the first two years. Upward only rent reviews every 2 years. Low entry level of investment. Guaranteed exit options. SIPP approved. Investment Levels Investment levels start at 3,750 for 25 Sq/Ft. As a commercial property investment, Store First is fully SIPP approved and has been accepted by all the major SIPP providers. That is why I am always on the lookout for an investment that goes up rather than down. Like a guaranteed 8% in the first 2 years and up to 10% in years 3 and 4. This is an investment concept that you really do need to listen to! Return on Investment The following examples are for illustration purposes only. Our typical investment amount now exceeds 60,000 per client. Total Return Store First Ltd plan to have all their sites at 80% occupancy within two years, giving them revenue from three income streams. 1. Services charges 2. Management charges 3. Sales of other products such as packaging, gloves, tape and boxes (Sales of these products can contribute as much as 25% of the total revenue of a storage site.) This gives them a large margin of comfort to pay Storepod owners their fixed rental payments and the fact that the agreement between Store First Management Limited and the Storepod owners contains upwards only rental reviews is an indication of their confidence in their business model. Income All figures are net of costs average Investment 60,000 Year 1 8% 4800 Year 2 8% 4800 Year % 6160 Year % 6160 Year 5 onwards 12.53% 7520 *Year 1 & 2 are fixed, years 3 onwards are forecast returns and could vary. The rent per square foot paid to investors by Store First Management Limited is scheduled to grow from 17 per Sq/Ft in years 1&2, to 21 per Sq/Ft in years 3&4, to 25 per Sq/Ft in years 5&6. Quentin Willson 8 9

6 Further Benefits Security for the Investor This is a UK investment covered by UK regulations and UK Law. The rental returns of 8% are guaranteed for the first two years. The buildings and contents are covered by a fully comprehensive insurance policy from Brit Insurance - as subsidiary of Lloyds of London The property is registered in the investor s name on a single title deed at the UK Land Registry. Responsibilities and Liabilities Store First Management Ltd is responsible for: Refurbishment Ongoing maintenance and upkeep Steps to prevent any theft, vandalism or criminal damage Utility bills Insurance Contracting with the end users Servicing the end users Collection of rent and collection of bad debt Marketing the facilities If tenants use the Storepods for any illegal activity, that is their responsibility and they will be liable for any consequences. Store First Management Ltd is responsible to ensure reasonable steps are taken to prevent illegal activity. Investors are responsible for business rates, however at the moment the Storepods rateable value is currently well below the threshold where they become liable for business rates. Rating revaluations are undertaken on a five yearly basis and the last revaluation came into effect on April More details can be found on: businesslink.gov.uk/ Exit Strategies This investment has a flexible exit achieved by the sale of your Storepod. Store First Ltd will help market your Storepod. There are four possible markets: Resale to another investor A Storepod with a proven rental track record will be an attractive investment for other investors looking to purchase income. Resale to owner occupiers Many tenants who let the Storepods on long term deals will welcome the opportunity to purchase rather than rent their Storepod as this will reduce their overheads, secure an appreciating asset for their business and bring tax benefits. Resale to a large PLC Safestore and Big Yellow Storage are two examples of large PLC self-storage companies with an appetite for expansion who may purchase Storepods in bulk as part of their growth strategy. Store First Management Ltd In year 5, Investors have the option to enter the guaranteed buy-back scheme. In this scheme, Store First Management Ltd will guarantee to buy the Storepod back off the investor for the original price paid within the next 5 years

7 Costs & Charges of Ownership Termination and Early Exit There is no fixed term for the investment the term of the sub-lease with Store First Management Limited is six years with two year break clauses; however the leasehold interest can be re-assigned at any time. The two year break clauses allow the investor to break with Store First and rent the Storepod out themselves, but in this scenario they would no longer benefit from Store First s marketing and service infrastructure. Solicitors Store First s preferred solicitor is The Hetherington Partnership Solicitors in Merseyside. They have completed many sales of Storepods and as they are familiar with the product they are quick and efficient. The charge is 400 per contract (note that multiple Storepods can be purchased on one contract, so this represents excellent value). Personal cash investors can use a solicitor if they wish, but this is not compulsory. However, using a solicitor is compulsory for SIPP investors. Costs or Deductions Investors pay all of their costs out of the rental income they receive. Un-tenanted Charges When the Storepod is not tenanted the owner is responsible for a small ground rental based on the size of the unit. This charge is only payable once the unit is let and will be deducted from the first rental payment to the investor. Property Type (Store First Ltd) Size Sq/Ft (per Storepod) Sale Price (per Storepod) Rental Income ( 17 per Sq/Ft) Tenanted Charges When the Storepod is tenanted the owner is responsible for an additional 15% management charge & a service charge of 1.95 per Sq/Ft. These will be deducted from the quarterly rental payments. Note that if investors find and service their own tenants for their Storepod, the 15% management charge does not apply. All of the returns that have been quoted in the marketing literature are net of these charges. Ground Rental (per annum) Management Fee (15% per annum) Service Charge ( 1.95 per Sq/Ft) Net Rental Return (8% for Years 1&2) Storepod 25 3, Storepod ,000 1, , Storepod ,000 3, , Storepod ,000 6, , Storepod ,000 10, , Store First Ltd General Sizes Sale Price Gross Income Cost once let Cost once let Cost once let Net Income *(based on years 1&2) 12 13

8 Centurion Business Park Ample parking is provided. The unit has ideal motorway access, located next to the M65 and with easy access to the M6, M61, and M66. MAKE YOUR MONEY WORK HARDER Storepod Sizes 25 sq ft - 3, sq ft - 5, sq ft - 7, sqft 100 sqft 125 sqft package 18, sqft 75sqft 75sqft 175 sqft package 26, sqft 35 sqft 150sqft 220 sqft package 33, sqft 35 sqft x4 50 sqft 75 sqft 150 sqft 440 sqft package 66, sqft x 3 35 sqft x 6 50 sqft 960 sqft package 144, sqft x sqft 150 sqft x2 75 sq ft - 11, sq ft - 15, sq ft - 22,500 Hotpods Breakout Area Location: Blackburn BB1 2QY website: Store First

9 Costs & Charges of Purchase Why choose Blue Horizon? Conventional Investment A client completing a cash investment pays a deposit of 10%, payable to StoreFirst Ltd. SIPP Investors No deposit is required. Prospective investors will receive full details of the purchase and reservation form prior to completion. Upon completion, a contract pack will be sent outlining confirmation of the purchase along with important contact numbers for future reference. Following completion a quarterly newsletter will be sent to all investors keeping them informed of the centres activities and points of interest. Use of Funds Investor s funds are transferred on completion and are used purely to purchase the asset. They are not used to fund other activities or go to any third parties. Legal Considerations, Ownership and Regulations Upon completion the investor will own the chosen Storepod Property. The investor will have a single title deed in their name registered at H.M Land Registry. Store First s solicitors will complete the purchase and liaise directly with the investor or their solicitor to ensure all legalities are completed. Multiple Storepods can be purchased using one Land Registry title deed to save on completion costs. Formed by two city professionals, Blue Horizons have set themselves the goal of becoming leaders in this sector. Blue Horizons challenges the status quo in business because we believe there s no such thing as perfection, just improvement. Blue Horizons are prepared to work harder and work smarter by investing time into ourselves and our team. We focus on our team because they are the people that drive our business forward. We believe that we can achieve more results for our clients within the market place by constantly demanding more from ourselves. We have set ourselves a mission to be the very best. On that basis we aim to produce a service for our clients whereby people understand how the market functions, and the opportunities that could benefit them from involvement in the market. I like it so much, I ve got one myself! 16 17

10 Disclaimer Investor Payments Blue Horizons Trading Ltd are not authorised to give investment/tax advice and you should seek independent financial and legal advice on all information included in this document prior to making any investment decision. All forecasts are based on historical performance and are purely indicative. The value of your property may rise or fall. No guarantees as to future performance in respect of income or capital growth are given either expressly or by implication and nothing expressed or implied should be taken as a forecast of future performance. This is not an offer to participate in a collective investment scheme as defined in the Financial Services and Markets Act 2000 (section 235) and as such buyers have no access to statutory or regulatory protections including the Financial Ombudsman Service and the Financial Services Compensation Scheme. Blue Horizons is not regulated by the FSA and is not authorised to offer advice to the general public concerning any regulated or unregulated investment. Although every care has been taken to make sure that the information in this brochure is accurate, Blue Horizons Trading Ltd cannot accept any responsibility for mistakes or omissions. You should take your own professional advice before taking or refraining from any action based on the contents of this brochure which are only intended as a general outline to the matters referred to in it. All content is under copyright and remains the property of Blue Horizons Trading Ltd unless otherwise agreed. Storepod is a copyrighted product of Store First Ltd. Investors will receive their rental yield payments quarterly, net of charges, paid directly into their bank account or SIPP by direct debit, making this a truly hands off, low maintenance investment. Tax Considerations Storepods are VAT exempt. The rental yield and capital gains should be treated the same as any other commercial property investment however everybody s tax situation is unique and it is recommended that investors seek their own independent expert advice on taxation. Store First Limited s intention is to build the company to be one of the top players in the UK self-storage market by using a similar blueprint as many other large PLC self-storage companies, but with an improved business model and aggressive profit driven marketing strategy. Store First offer flexible and affordable storage solutions in the North West for both domestic and commercial clients

11 CERTIFIED CARBON NEUTRAL 1 Farnham Road, Guildford, Surrey GU2 4RG Tel: Fax: info@blueh.co.uk Website: CARBON NEUTRAL INVESTMENTS 20 Blue Horizons Trading Limited Registered Office: 78 York Street, London, W1H 1DP Registered in England No: CNI