INVESTING WITH STORE FIRST

Transcription

1 INVESTING WITH STORE FIRST (A member of the GROUP FIRST GLOBAL Group of Companies) JWK Legal Group Limited JWK Solicitors 5 Thurnham Street Aalborg Square Lancaster LA1 1XU

2 INVESTING WITH STORE FIRST This manual introduces you to the rationale behind investing with Store First Limited, part of the Group First Global group of companies. DISCLAIMER The information and references contained within this document are not intended to solicit investment funds in any jurisdiction or provide the reader with any financial, accounting, tax or legal advice. In particular, no comment is made on the suitability of an investment for meeting an investor s needs or objectives. Whilst the information and references contained in this package are believed accurate as at the 1 st April 2014, the reader must rely on his own professional advice without reliance on the information herein contained and no liability can be accepted if any information or references prove inaccurate. 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 Investors have no access to statutory or regulatory protections including the Financial Ombudsman Service and the Financial Services Compensation Scheme. Neither Group First Global Limited nor Store First Limited are regulated by the FCA and are not authorised to offer advice to the general public concerning any regulated or unregulated investment.

3 BACKGROUND 1. Along with Residential First, Business First and Park First, Store First Limited is the wholly owned subsidiary of Group First Global Limited. 2. In connection with its associated companies, Group First Global Limited has many years experience in successful property development including several prestigious apartment and office developments in the North West of England. These include:- Mann Island, Liverpool Damaz Building, Manchester Krupa Building, Manchester Trinity Way, Manchester Ludford Court, Crewe Broad View, Rochdale Fresh, Manchester Priestley Court, Boteler Court and Beaumont Court, Warrington St Mary s Street, Crewe Birchview, Rochdale Skyline One, Manchester Moorgate Mews, Rochdale Skyline Chambers, Manchester Trooper Lane, Halifax The Works, Manchester Lulworth Road, Birkdale Meadowcroft Lane, Bamford Herons Reach, Barnsley Westgate, Burnley

4 Raddon Court, Warrington Henry Street, York Street and Argyle Street, Liverpool Ludgate Hill, Manchester Alexander Place, Warrington Mono Project, Liverpool St Austins Court, Warrington Quebec Building, Bury Street, Manchester Smithybridge Road, Littleborough Ribble Court, Shuttleworth Mead Business Park, Padiham, Burnley Burnley Business Centre, Burnley Liverpool Business Centre, Goodlass Road, Speke, Liverpool 3. Since the year 2003 the JWK Legal Group Limited (formerly Jobling & Knape Solicitors) has represented Group First Global Limited and its associated companies in the acquisition and sale of over 1 billion pounds worth of mixed residential and commercial property. 4. Store First s current sites are:- Centurion Business Park, Blackburn Empire Business Park, Burnley Crown Business Park, Rochdale Estuary Banks, Speke Ashroyd Business Park, Barnsley Stanney Mill Road, Ellesmere Port Freeway Drive, Castleford (West Yorkshire) Quantum Business Park, Stourton, Leeds Millennium City Park, Preston

5 Linwood Point, Phoenix Business Park, Paisley, Glasgow Pride Park, Riverside Road, Derby Unit 2, Clarke Industrial Estate, St Modwen Road Trafford Park 5. Reference is made to the SSA UK s 2013 Annual Survey (the Survey) carried out by Drivers Jonas Deloitte.

6 THE RATIONALE 1.1 THE BASICS In the last 3 years, Store First Limited has acquired and developed 12 substantial purpose-built self-storage sites. On that basis Store First qualifies as a large operator based on the list of large operators given in the Survey. The Survey shows a number of operators 1 refinancing debt (with Big Yellow arranging a 190m loan in October 2012 and Safestore being reported to have refinanced to a tune of 400m in May 2012, whereas all of Store First s sites are free of mortgage. 1.2 Store First investors can therefore not only take considerable comfort from the absence of any mortgage being secured on the Store First sites but can also take additional comfort in the fact that the large lending institutions have sufficient confidence in the sector to be willing themselves to invest so highly in the industry. 1.3 The Survey quotes Cabot Square Capital as saying The sector is ideal for capital that is looking for long term sustainable yields. The Survey shows that UK self storage turnover is up more than 7% on the previous year 2 and the average length of stay for all customers has increased to 41 weeks from 37 weeks in the previous year. 1.4 The Survey also shows 3 average occupancy rates amongst mature facilities to be 68%. The Survey quotes a Lok n Store spokesperson as stating that their facilities make good money at 60%. In Store First s model, occupancy only has to be at 25% for a healthy profit to be made. 1.5 According to the 2011 Survey, just over one third of customers are renting space whilst moving house and there is a growing market amongst those carrying out house improvements, which is itself an increasing market given the slow housing market. The 2013 Survey reports that the residential lettings market continues to perform strongly Store First is securing several more sites to acquire with an aim of acquiring and developing at least 50 buildings in all. 1.7 Evidence of the potential for the growth of the self storage industry in the UK is shown in the Survey s findings that the average storage space available in those areas where Store First is operating (Glasgow, Manchester and 1 Source 2013 Report 2 Source: Page 2 3 Source: Page 4 4 Source: Page 6

7 Liverpool) is square feet per person whereas in the much more advanced market of the United States it is RIBA REPORT 2.1 In addition to the encouraging information contained in the SSA s 2012 and 2013 Surveys there is another useful recent document to consider in the form of the Royal Institute of British Architects report first published in September 2011 entitled The Call for Space. 2.2 Whilst a cynical view might be that the SSA s Surveys may, to some extent, be self-serving for the sector, this could not be said to be the case for the Royal Institute of British Architects (RIBA) (see and it is encouraging to note that the 2013 Survey does itself make mention 7 of this RIBA Report. 2.3 The RIBA report states that existing research suggests that consumers are right to be worried that new-build homes just are not big enough. Research found that residents in private homes did not have enough space to store their possessions. 57% said there was not enough storage for their possessions. 2.4 This trend in modern house building, whilst unfortunate for the residents involved, can only be good news for the self-storage industry as more and more people turn to self-storage to solve this problem. 2.5 With the apparent need for storage by ordinary households, plus the needs of small businesses, and even national concerns such as British Gas, Store First Limited is confident that its product will be in demand by the end-user for some considerable time to come. 3. EXPANDING COMMERCIAL USE 3.1 Substantial comfort for investors in Store First can perhaps also be found in the article published by Katie Prescott, BBC Business reporter on the 19 th December 2013 (see ). 3.2 The report highlights the finding that, as well as self-storage being used for the more obvious purposes of storing personal belongings that simply do not fit in the home any more (especially modern housing as referenced by the RIBA report (see para 2 of this manual) there is a growing trend for small businesses to utilise self-storage centres such as Store First as a highly efficient and economical platform from which to run their businesses. 3.3 As the report says, such businesses are attracted by the flexibility, the short notice period and low overheads that self-storage offers. 5 Source Page 3 6 Source page 2 7 Source Page 6

8 And when it comes to low overheads, few facilities can compete with Store First. 3.4 As is typified by Store First forward thinking, its facilities include the free use of meeting rooms, wi-fi and catering facilities and very substantial car parks and manned reception (as well as the usual rest rooms that one would expect). 3.5 Store First s business model is aimed with uncanny accuracy at exactly the sort of growth in this area of business which the report highlights. Not only does Store First offer exactly the sort of storage facilities that businesses require but it also offers an environment to allow those businesses to run their operations without having to incur the very considerable expense of renting offices and distribution centres and paying for all the attendant overheads including heating and lighting for individual buildings. 3.6 The Store First business model really does seem destined to thrive. It fits exactly what one small-business man is quoted in the report to like so much i.e. It gives you choice. If the business isn t performing you can give one month s notice and move on, or you can reduce your space so it gives you nice flexibility. It s a kind of depot. We keep our distribution centre here to use the flexible space and save some money. 3.7 Another small business which uses self-storage centres in the same way is quoted as having increased the amount of storage it needs tenfold within 3 years. 3.8 Store First s manned reception areas add even further value to small business customers by making it possible to receive deliveries on behalf of storage customers thus freeing-up valuable time to those customers to get on with their businesses rather than hanging around for deliveries. 3.9 Whilst the likelihood of growing demand for personal storage is supported by the RIBA report, the sector is also showing a growth in commercial use with 2013 showing that 42% 8 was for commercial use in 2013, compared with 39% in 2012, according to the BBC report And in Store First s case it is not just small businesses that are enjoying the benefits of Store First offices. One of Store First s major customers is British Gas, for whom the Store First facilities provide what is needed to cater for its distribution needs in that area. 4. CUSTOMER WELFARE Ahead of its time, as always, Store First is not only going the extra mile for its commercial and personal customers so far as their storage needs are concerned but is also addressing the fact that for all of us our working environments are important for our general well-being, so not only does Store First provide attractive kitchen and office facilities but some of the centres are 8 Source: Page 4

9 fitted out with modern gym facilities entirely free of charge! Store First believes in looking after its customers! 5. INVESTMENT VALUE 5.1 Furthermore, such is Store First s confidence in the product that it will arrange to rent the units from the Investor with a rental return guaranteed for the first two years at 8% per year. The income which the Investor enjoys, therefore, is earned from day one. 5.2 To ensure that Store First s Investors will enjoy a competitive edge over the rentals being offered by the large nationals, it has two strong selling points. 5.3 Firstly, its Investors are not obliged to charge VAT to their tenants (under current UK law) unless their income from the rentals exceeds the threshold (currently 79,000 p.a.), whereas the large nationals must charge VAT. In this way the Investor ought always to be able to offer his tenants a lower and more attractive rental deal. 5.4 Of course, the Investors are not obliged to rent out their storage units. They are free to use the units themselves (restrictions apply to SIPP investors) and whilst Store First is happy to supply a comprehensive management/ letting service, each Investor is entirely free either to self-manage or employ any management agent of his choice. By doing so he would not incur any management or arrangement fee from Store First. 5.5 Whilst the rental levels and facilities are important selling advantages for attracting tenants, the Investor, also, enjoys an advantage rarely afforded in this sort of investment. Potential Investors may be aware of other investments involving paying money into schemes centring, for example, or so-called Green Energy and other esoteric investments. 5.6 The Store First product, on the other hand, is solid commercial property. It comes firmly within HMRC s definition of what is suitable for SIPP investment and carries with it the benefit of having its own registrable title at the UK Land Registry. Each Investor will be able to register his own title at the Land Registry. He will be able to visit his storage centre, view his storage pods and experience, first hand, the facilities available. He will be able to do what he likes with the storepods. He can rent them out, use them himself, sell them, leave them empty and make whatever management arrangements he wants. He will be truly in control of his investment product. 6. HIGH SPECIFICIATION 6.1 But cheapness of rental is not the only selling point. The second is the very high fit-out specification that Store First has brought to its storage facilities and continues to improve. Borrowing from its experiences in office developments, Store First offers its storage users perks and benefits which one would never normally have expected.

10 6.2 These include: office facilities, catering facilities, and conference rooms and free wi-fi as well as the facilities you would also expect such as manned reception areas, security facilities and supplies. The current generation of storage buildings will even be equipped with gyms. 6.3 Store First is confident that these factors will make its facilities the natural choice for the storage end-user and in turn will provide healthy investment returns for its Investors. 6.4 Cabot Square Capital is quoted in the Survey as saying The future of the industry s high quality, built-for-purpose sites with a focus on service led, retail experience for the residential and business customer. This fits Store First s model to a t. 7. MARKET PRESENCE 7.1 As the Survey says 9, given the increase in internet enquiries Triple A location is no longer a necessity but with the latest site acquisitions by Store First its investors enjoy the best of both worlds; not only top-end internet presence but top-end physical location as epitomised in the new Trafford and Glasgow Airport sites as well as demonstrated in the high visibility motorway junction sites. 7.2 As a spokesperson for Lok n Store is quoted as saying 10, prominence is still key - arguably the most important thing. 50% of people searching for us on the web have already seen the building. Store First is happy to endorse that principle from the prominence of its own sites. 9 Source: Page 9 10 Source: Page 10

11 DUE DILIGENCE 1. Sites already owned by Store First Limited Site Address Title Number(s) Registered Proprietor Mortgage Outstanding Unit 6 Centurion Park, Davyfield Road, Blackburn, BB1 2QY LAN Store First Blackburn Limited Unit 8 Centurion Park, Davyfield Road, Blackburn, BB1 2QY LAN LAN LAN LAN LAN LAN LAN LAN LAN Store First Limited Unit 9 Centurion Park, Davyfield Road, Blackburn, BB1 2QY LAN LAN LAN LAN LAN LAN LAN LAN Store First Limited Unit 1 Enterprise Way, Burnley, BB12 6LT (Empire) LAN LAN LAN LAN LAN LAN LAN LAN LAN LAN LAN LAN Store First Limited

12 Unit 2-4 Enterprise Way, Burnley, BB12 6LG (Empire) LAN LAN LAN LAN LAN LAN LAN LAN Store First Limited Unit 5 Crown Business Park, Cown Top Lane, Rochdale MAN Store First Limited Unit 6 Crown Business Park, Cowm Top Lane, Rochdale MAN MAN Store First Limited Unit Estuary Banks, The Estuary, Speke MS Store First Limited Unit Estuary Banks, The Estuary, Speke MS Store First Limited Unit 4a Ashroyd Business Park, Barnsley, S74 0EZ SYK SYK SYK Store First Limited Unit 2, Stanney Mill Road, Stanney, Ellesmere Port Unit 1 Freeway Drive, Castleford, West Yorkshire CH Store First Limited WYK Store First Limited Unit 2, Quantum Business Park, Stourton Haigh, Stourton, Leeds WYK YY3600 Store First Limited Millennium City Park, Bluebell Way, off LAN Business First Limited

13 Longridge Road, Preston Lot 1 Linwood Point Phoenix Business Park, Paisley, Glasgow REN Store First Limited Lot 2 Linwood Point Phoenix Business Park, Paisley, Glasgow REN Business First Limited The Box, Riverside Road, Pride Park, Derby DY Store First Limited Unit 2, Clarke Industrial Estate, St Modwen Road, Trafford Park MAN Store First Limited

14 1. The Contract 1.1 A sample contract is available on request. 1.2 This contract is governed by UK Law and is enforceable in the UK courts. 1.3 It legally binds Store First Limited to sell to the Investor the storage units it is buying by way of long-lease. 1.4 It documents the Investor s right to call for Store First Limited to take a lease back if the Investor wishes. 2. The Title Document 2.1 A sample Title Document is available on request. 2.2 Each Investor will receive a document evidencing its title to the storage units it is buying. This will usually be in the form of a long lease of typically 250 years registrable at the Land Registry in England. 2.3 This document will contain a full description of the storage units and the Investor s rights and responsibilities. 2.4 If Store First Limited went into liquidation after the sale to the Investor had been completed, the Investor s ownership of the storage units it had purchased would remain intact. The Title Document would remain valid. The Investor s right to access and use the storage units would remain valid. 2.5 The Investor is free to sell, mortgage and rent out the storage units as he thinks fit. If the Investor has required Store First Limited to take a lease back then the Investor can sell with the benefit of that lease. The ownership of the storage units can be passed down to future generations subject to the status of the Investor. 3. The Lease Back 3.1 A sample Lease Back is available on request. 3.2 The Investor can insist that Store First Limited takes a lease of the storage units (via Store First Management Limited). This guarantees rent for the first two years at a return rate of 8%. 3.3 The Lease lasts 6 years. Both the Investor and Store First Limited can call for the lease to be ended on the second and fourth anniversaries.

15 4. The Buy-Back Option 4.1 A sample Buy-Back Agreement is available on request. 4.2 The Investor may ask Store First Limited to buy back the storage units after five years (subject to conditions). If Store First Limited does so it will pay to the Investor the same price as the Investor paid. 5. Management/Letting The Investor is entirely free to choose its own manager or manage the units itself. 6. Financial Service and Markets Act Sections 235 of the Act states: (1) In this Part collective investment scheme means any arrangements with respect to property of any description, including money, the purpose or effect of which is to enable persons taking part in the arrangements (whether by becoming owners of the property or any part of it or otherwise) to participate in or receive profits or income arising from the acquisition, holding, management or disposal of the property or sums paid out of such profits or income (2) The arrangements must be such that the persons who are to participate ( participants ) do not have day-to-day control over the management of the property, whether or not they have the right to be consulted or to give directions. (3) The arrangements must also have either or both of the following characteristics:- (a) the contributions of the participants and the profits or income out of which payments are to be made to them are pooled; (b) the property is managed as a whole by or on behalf of the operator of the scheme (4) If arrangements provide for such pooling as is mentioned in subsection (3)(a) in relation to separate parts of the property, the arrangements are not to be regarded as constituting a single collective investment scheme unless the participants are entitled to exchange rights in one part for rights in another. (5) The Treasury may by order provide that arrangements do not amount to a collective investment scheme:- (a) in specified circumstances; or

16 (b) if the arrangements fall within a specified category of arrangement 6.2 Each Investor s investment exists independently of other Investors investments. There is no interdependency imposed on Investors. Each has its own Title Document (see Paragraph 3 above). There is no pooling of Investors investments and there is no imposition of an overall management structure on the storage units. 6.3 The documentation of the set-up (as outlined above) has been submitted to Legal Counsel for an opinion as to whether it amounts to an unregulated collective investment scheme. Counsel has confirmed that the documented set-up neither is, nor forms part of, such a scheme. 7. SIPP Investment 7.1 Her Majesty s Revenue & Customs in the UK states certain types of investment which are suitable for inclusion in self-invested pensions (SIPPs). Immoveable commercial property containing no residential element is suitable for SIPP investment. 7.2 The storage units are immoveable commercial property containing no element of residence million worth of storage units have already been acquired by SIPPs operating out of several different SIPP providers. 8. Unregulated Collective Investment Schemes and Close Substitutes Order On the 13 th June 2013, the FCA (formerly the FSA) published new rules to come into force in These new rules do not detract from the Counsel s opinion mentioned above. If anything they strengthen Store First s status as a provider of a quality investment product. 8.3 The new rules will prohibit non-mainstream pooled investments and various examples given by the FCA (e.g. fine wine, crops, timber, speculative financial instruments and traded life policies). 8.4 The availability of these investments will therefore shortly come to an end. The solid commercial property offered by the Store First investment provides a good alternative for investors money and will be available to those investors who can no longer invest in the type of product described above and soon to be outlawed. 8.5 Store First will also be available for those investors already committed to the soon to be outlawed investments and who need an alternative to which to swap.

17 8.6 The FCA announced that serious problems have been identified in the distribution of high-risk, complex investments to ordinary retail investors. Again, this should serve to boost the attractiveness of the Store First product which is not complex and results in the investor owning tangible commercial property with a UK Land Registry title which he can deal with as he wishes. 8.7 All in all, therefore, the new close substitutes rules have no detrimental effect on the Store First product and, if anything, serve to increase its attractiveness. Disclaimer The information given above is not to be relied on as legal advice given to any individual. Anyone considering the contents of this document should take and rely on his own independent legal and other professional advice.