EVOLVE ASSET FOCUSED EIS PORTFOLIOS MANAGED STORAGE INVESTEE COMPANIES

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1 EVOLVE Our new investee companies aim to address the ongoing demand for managed storage across the UK by offering service led proposition in high-end facilities. Led by an innovative management team, the companies have strong prospects and are set to progress quickly, becoming well established and in a position to anchor the revenues required to establish growth and profitability. ASSET FOCUSED EIS PORTFOLIOS MANAGED STORAGE INVESTEE COMPANIES RICHARD COOK CHIEF EXECUTIVE A STEADILY GROWING MARKET WITH ONGOING DEMAND FOR PERSONAL AND BUSINESS STORAGE AN INNOVATIVE MANAGEMENT TEAM WITH EXTENSIVE KNOWLEDGE, SECTOR EXPERTISE AND IN ASSET BACKED FINANCING HMRC ADVANCE ASSURANCE GRANTED FOR INVESTEE COMPANIES Total sector turnover in the UK is 540 million, with increases in occupancy and rental rates, and demand outstripping supply in some areas. UK average net rental rate increased to per square foot per annum, the highest level since the study began in Source: Cushman & Wakefield authored SSAUK Annual Survey 2017

2 Blackfinch is pleased to announce the launch of new investee companies as part of our Evolve Asset Focused EIS Portfolios. OPPORTUNITY SUMMARY Blackfinch Evolve Asset Focused EIS Portfolios intends to acquire storage companies, investing in a series of facilities and services that address the growing market for storage in the UK, focusing on the managed storage section of the self storage sector. Over the last 40 years, the industry has grown to include nearly 1,500 storage sites nationwide, with approximately 25% focusing on low end container storage. This equates to approximately 42.2 million sq ft of storage space. The market has shown itself to be resilient throughout recessions and during the recent financial crisis, with profits and earnings being maintained by the largest providers. Yet the UK storage market has failed to keep pace with customer demands for capacity, convenience and service, with a gap in the higher-serviced end of the industry. Both individuals and businesses use managed storage and the industry continues to grow steadily. This is reflected in increases in occupancy and rental rates within regions, with demand outstripping supply in some areas. Occupancy increased from 73.1% in 2015 to 75.8% in 2016 on current lettable space. The UK average net rental rate has increased to PSF per annum, the highest level since Key social factors driving the growth of the market by individual customers include a growing elderly population, high divorce rates, immigration, social and labour mobility, and major life events such as moving home, marriage or marriage breakdown, downsizing and retirement. Regarding property drivers, these include smaller properties, higher density developments and an increase in the average ages of a first-time buyer to 34. For businesses, ongoing requirements relate to storage of archives, stock or office equipment. Demand has also increased due to the explosion in the online business sector with internet-based businesses requiring flexible and accessible storage solutions. Public awareness of the managed storage industry is also increasing due to high visibility storage centres found along key transport routes and in many major cities, and following advertising campaigns by leading operators. As a result of all of these factors, the managed storage market is expected to continue growing. From an industry perspective, market growth is driven by the activity of multi-site operators as well as smaller businesses diversifying into the sector. Around a third of UK managed storage facilities are owned or managed by large operators of 10 or more sites. However, due to these being located in higher rent locations, in terms of total available space 2

3 and revenue, their share of the market is likely to be close to 50%, leaving a market for new businesses with a competitive advantage. The proposal would add 0.1% capacity to the market, for each new facility opened. The companies are led by an innovative management team with technical skills, strong operational experience and sector expertise. This includes a background in land asset acquisition and infrastructure delivery in the industrial/warehousing sector. Blackfinch Evolve Asset Focused EIS Portfolios aims to invest in independent companies championing the successful American concierge storage model, asset backed by commercial property. The team will acquire and develop managed storage sites in underserved areas of the UK, then offer managed storage facilities and services to target customer segments identified as requiring them. The investment will be underpinned by these well-chosen managed storage sites, providing an asset base and a platform from which to develop a strong operational business. Further benefits to investors include the companies relatively low operating costs and good value development costs usually 30-50% lower than office, retail or residential developments. Meanwhile equivalent rental rates compare with mid-market apartments. The investment also has the potential to generate a secure income stream: Deloitte Real Estate s research showed that the average length of stay for all customers of managed storage facilities was 41 weeks. The companies have strong prospects and the team will develop it with the intention to become a market leader. The companies are set to progress quickly becoming well established and in a position to anchor the revenues required to establish growth and profitability. THE BUSINESS STRATEGY The companies management team will acquire storage sites across the UK. The companies will be responsible for developing the warehouse space and arranging storage service contracts with customers. Development opportunities have already been identified along transport corridors linking major urban areas in the UK mainland. It is targeting efficient, safe and technology integrated growth enterprises that benefit from the Enterprise Investment Scheme (EIS) while taking advantage of an asset class providing excellent returns with traditionally low volatility. Each investee company will target development of 30,000 to 40,000 sq ft managed storage facility in the mould of a regional distribution centre. 3

4 THE ASSET STRATEGY The approach to managing planning and development risk has been considered against achieving the greatest value uplift and the time restrictions inherent in EIS models. There is strong demand in the warehouse development sector due to online shopping trends and developing flexible commercial space at scale provides a tradeable asset base from which to operate. There is also a steady turnover of land for commercial and industrial development that the team are tracking that will fall inside its two-year development window. Raising equity at this stage allows proof of funds and makes the companies an attractive buyer of freehold or long-lease development sites. The management team consider an equity-funded purchaser to have a commercial advantage in securing development opportunities early in the cycle and maximising development uplift. The storage companies have significant potential for growth and with a sticky customer base, each facility breaks even at approximately 30% occupancy. The companies are seeking to initially raise between 9-15 million through equity. HMRC advance assurance has been granted, providing our investors with confidence that their investment can deliver the available tax reliefs. THE MARKET The market for managed storage in the UK is large and growing. Deloitte Real Estate reports that business customers are currently providing 40% of revenue. Meanwhile, 65% of storage customers are aged between 40 and 65, an age group that has become receptive to paying for higher serviced and higher tech offerings. The companies will look to meet the established requirements of individuals and businesses around managed storage. Retail customers demand high service and convenience offerings in shopping, and managed storage is no different. The businesses will meet these demands by providing storage as a service in secure facilities, within which customers can store their belongings or companies their stock or surplus goods. Wider market trends revolve around convenience, service, occupancy and capacity. Customer requirements cover presentation and cleanliness of unit, security facilities including video monitoring, presence of staff onsite, relatively close proximity of unit to residence or place of business, and accessibility of unit in terms of vehicle and out-of-hours access. The companies will look to offer customers premium service and benefits with a focus on digital marketing. It is established that nearly half of managed storage customers find services through online research, via a mixture of web and mobile devices. 4

5 THE MANAGEMENT TEAM MARTIN GODET ASSETS & OPERATIONS In a 20-year career, he has delivered project financed infrastructure assets in many sectors initially as a Chartered Civil Engineer, then finance specialist and now investment manager. At SeismiVP, Martin has maintained a successful record in the investment of shareholder equity, delivering and operating infrastructure projects. This is the second EIS fundraise following on from the successful raise and deployment of 5m into the Swindon facility. GILES THOMAS PROPERTY ACQUISITION (Partner at Matthews & Goodman) has over 25 years experience in the industrial & warehousing markets across the UK. He deals with the core elements of development process from identification, product development through to occupier disposals. He is also involved in agency activities both in terms of acquisitions and disposals of existing, speculative and design and builds units. These skills enable him to provide integrated advice to the team. IAN BEITH LOGISTICS & WAREHOUSE MANAGEMENT Ian Beith has 15 years experience in the development of IT systems for warehouse management services and in the operation of logistics and warehouses (collectively termed Fulfilment). Ian s role is to assess the operational capabilities of the investee companies management teams and support as necessary. ANDREAS KOALL DIRECTOR Andreas is a chartered civil engineer with a track record of company, project and SPV directorships with successful business strategies, project development and infrastructure delivery. For more than 10 years Andreas s has been developing and delivering project financed energy and infrastructure projects and of running franchises and operational businesses. SAM WHITAKER DIRECTOR An experienced infrastructure programme manager with over 20 years of industry experience. Living in the North East, Sam holds a BSc Honours degree in Construction Management and became a member of the Chartered Institute of Building in His previous role saw him deliver Hull s 400m+ Building Schools for the Future Programme which included the design, construction and operation of over 20 schools in the City. Sam has just completed the set-up of a logistics training centre for the North East which has seen him develop excellent connections into the logistics sector. 5

6 RETURNS PERFORMANCE The companies will target returns of 1.10p 1.25p. This will mean that these returns are in line with our overall target returns for the Asset Focused EIS Portfolio of 1.20p. COSTS AND CHARGES INVESTEE COMPANY ARRANGEMENT FEE Typically, a fee of 5% is charged to each underlying company, on a pro rata basis, when it is initially funded. Please note that this fee is charged to the qualifying investee companies, so investors should receive tax relief on the entire amount invested and the fees charged to the companies. The fee is payable by the investee company to cover fundraising expenses, the dealing of shares, the drafting of the company business plans and confirmation of advance assurance from HMRC. ANNUAL MANAGEMENT FEE Blackfinch will charge an annual management fee equivalent to 2% of the capital invested. Blackfinch ongoing fees are charged to the investee companies so investors should receive tax relief on the entire amount invested into the companies as the fees charged to the companies. All fees and costs are exclusive of VAT, which will be charged where applicable. PERFORMANCE FEES Blackfinch will be entitled to a 25% share of returns from the investment, subject to the investors receiving 1.05 for every 1.00 invested (ignoring tax reliefs). Blackfinch and its affiliates retain the right to recover reasonable expenses (e.g. legal, director, accounting, arrangement, company secretarial, audit) incurred in administering and managing the service together with the investee companies in which the Evolve Asset Focused EIS Portfolios invest. Blackfinch also retains the right to charge monitoring and exit fees to the investee company. FINANCIAL INTERMEDIARY FEES On agreement with your Financial Intermediary, intermediary fees will be paid through the investee companies. Typically, up to 3% for the initial charge and 0.5% annually. As the financial intermediary fee comes directly from the investee company, you will benefit from more of your capital being eligible for tax relief. 6

7 EIS EXIT It is possible that an exit could be facilitated in years 3 to 4 for investors. There are three well-established paths to exit that would be applicable to these storage businesses. One would be for the companies to be sold at a market-trading multiple of EBITDA to an established storage operator. A second option would be for a management buyout and a third would be as part of a property refinancing or acquisition. The combination of the commercial property asset base and an innovative entrant into a steadily growing market place will position the business well for all potential exits. SUMMARY Blackfinch Investments believes that there is considerable demand for an innovative, service led and scalable entrant into the managed storage market. The storage industry has demonstrated persistent growth for over 10 years whilst average occupancy rates have steadily climbed even as capacity has increased. This indicates that demand continues to exceed supply and significant growth is expected to be maintained in the sector. The management team has technical skills and track record in asset creation combined with operational experience of the storage industry. The sector model has remained static for over a decade, making room for an innovative new entrant with a high service brief. IMPORTANT INFORMATION: THIS DOCUMENT IS ISSUED BY BLACKFINCH INVESTMENTS LIMITED (BLACKFINCH), WHICH IS AUTHORISED AND REGULATED BY THE FINANCIAL CONDUCT AUTHORITY (FCA NUMBER ). REGISTERED ADDRESS: MONTPELLIER COURT, GLOUCESTER BUSINESS PARK, GLOUCESTER, GL3 4AH. REGISTERED IN ENGLAND AND WALES COMPANY NUMBER THIS DOCUMENT IS FOR INTERMEDIARY INFORMATION ONLY AND DOES NOT FORM ANY OFFER OR INVITATION TO INVEST. ALL INFORMATION CORRECT AS AT FEBRUARY ANY DECISION TO INVEST IN THIS SERVICE SHOULD NOT BE BASED ON THIS DOCUMENT BUT RATHER MADE BASED ON THE INFORMATION CONTAINED IN THE BROCHURES AND TERMS AND CONDITIONS. WHILST BLACKFINCH HAS TAKEN ALL REASONABLE CARE TO ENSURE THAT ALL THE FACTS STATED IN THIS DOCUMENT ARE CORRECT, NO REPRESENTATION OR WARRANTY, EXPRESSLY OR IMPLIED, IS GIVEN AS TO THE ACCURACY OR COMPLETENESS OF THE INFORMATION OR OPINIONS CONTAINED IN THIS DOCUMENT AND NO LIABILITY IS ACCEPTED BY BLACKFINCH INVESTMENTS LIMITED, OR ANY OF THEIR DIRECTORS, MEMBERS, OFFICERS, EMPLOYERS, AGENTS OR ADVISERS, FOR ANY SUCH INFORMATION OR OPINION. 7

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