Prospectus Store First Ltd 2012 Company No. 07463355
Contents The UK Self-Storage Market 4 Market Analysis 5 The Store First Business Model 6 Store First Differentiators 7 The Investment Opportunity 7 Return on Investment 8 Total Return 8 Rotation of Storepods 8 Exit Routes 9 Responsibilities and Liabilities 9 Security for the Investor 9 SIPP Compliance 10 Costs or Deductions 10 Purchase Process 11 Termination and Early Exit 11 Ownership Structure 12 Investor Payments 12 Tax Considerations 12 Store First Ltd 2012 Prospectus 3
The UK Self-Storage Market in the London area. The industry continues to grow steadily rates of between 8% and 15% per annum. Market Analysis A review of the annual reports that the large Self-Storage PLC s have made available to their investors. These reports outlook for the future. Market Appraisal Market Penetration Big Yellow 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 such as Safestore, Big Yellow, Access, Lok n Store, Shurgard, Space Maker, Storage King and HSIL Property, as well as smaller businesses looking to enter the sector. 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 reorganization is starting to take place within the sector - a Businesses are increasingly using self-storage solutions to 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 self-storage 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 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. 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 26.82 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 25.55 half (49%) of operators state that they plan to open one operators such as Store First have continued to push 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 evidenced in the Mintel report. There are a number of reasons why both consumers and businesses are increasingly turning to self-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. 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 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 biggest players are large, multi-centre companies such as Safestore, Big Yellow, Access, Lok n Store, Shurgard, Space Maker, Storage King and HSIL Property. Between them they operate over 250 facilities. The largest concentration of centres remains in London and the South East. Regional Market Penetration 28% 35% 14% 23% Lok nstore Interim results January 2011 Revenue grew 4.5% to 5.42 million Occupancy up 2% Prices up 3.5% London South Northern England/Scotland Midlands/Wales 4 Store First Ltd 2012 Prospectus Store First Ltd 2012 Prospectus 5
The Store First Business Model Store First business model that guarantees we stand out from the crowd; our values, ethics and commitment have helped develop the business model to be the highest standard available within the industry. Store First Make a Difference Dedicated to continue to provide the very best infrastructure and support we are fast becoming an exemplary business that is the envy of our competitors. Store First has sites in the following locations: Centurion Business Park, Blackburn Empire Business Park, Burnley Shuttleworth Mead Business Park, Padiham Blackpool Airport Liverpool Airport And Store First has sites under construction in the following locations: Manchester City Centre Millennium City Park, Preston Kings Court, Rochdale Store First Ltd has sites under option in Birmingham, Leeds and three sites in Greater London. Store First are focused on the North West, where levels of market penetration are lower and higher levels of growth are projected. Each facility is purpose built and will offer the following sizes of Storepods: 25 sq/ft 50 sq/ft 75 sq/ft 100 sq/ft 125 sq/ft 150 sq/ft 175 sq/ft 200 sq/ft business parks, within easy access to motorway links and within short driving distance of major conurbations. All of the sites have maximum vision to roads. All centres are located in highly populated areas. Tenants pay one month s rent as a deposit and one month s rent upfront. 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 There are a number of differentiators in the market for end users that separate Store First from their competition: Store First offer their storage space at least 30% cheaper than their competitors areas, packaging facilities and van hire, goods pick up service, forklift truck facility and reception areas Every site has 24 hour digital CCTV and a state of the art alarm system installed. Coded electric gates, belongings Tenants have the use of a PO Box Address along and in and out bound mail services Risk assessments are conducted in conjunction with provide cover for tenants contents All Storepods are VAT exempt and so do not attract VAT on completion This amounts to a comprehensive service at a lower cost than their competitors which appeals to private individuals and small business. 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: Armadillo 12.00 Big Yellow 14.50 Safe Store 17.00 Store First 8.17 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. Summary terms of agreement: After two years, and every subsequent two years, Store First offer investors a further two years at a The new rate offered will be higher than the previous rate Points to note Investors can accept the two year extension at the for a variable rate of return instead If investors choose to exit the lease, Store First will continue to market & let their Storepod on rotation with the other Storepods and service the tenants. Investors are just opting for a variable rate of return return offered by Store First. Store First also has the option to break the lease every two years. 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. (Some small quantities of varying sizes are produced within different Store First Sites but the above are the most popular sizes). 6 Store First Ltd 2012 Prospectus Store First Ltd 2012 Prospectus 7
Return on Investment The following examples are for illustration purposes and are based on the minimum initial investment of 3,750. Our typical investment amount now exceeds 60,000 per client. Maximum investment level 1,000,000. Exit Routes Storepod. Store First Ltd will help market your Storepod. There are four possible markets: Resale to another investor 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. Total Return Including the income, this gives a forecast total return of 7,575.00 over 6 years. Store First Ltd plan to have all of their sites at 80% occupancy within two years, giving them revenue from three income streams: Service charges Management charges 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 agreement between Store First Management and the Storepod owners contains upwards only rental reviews model. Rotation of Storepods Storepods of equivalent size are rented out on rotation to ensure that no one particular Storepod has any advantage over another. Income Initial Investment 3,750 Year 1 8% 300 Year 2 8% 300 Year 3 10% 385 Year 4 10% 385 Year 5 onwards 12% 470 Capital Growth 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. 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 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. 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 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 on April 1 2010. More details can be found on: http:// www.businesslink.gov.uk/ Security for the Investor The buildings and contents are covered by a fully comprehensive insurance policy from Brit Insurance a subsidiary of Lloyds of London. The property is registered in the investor s name on a single title deed at the UK Land Registry This is a UK investment covered by UK regulations and UK law two years. In a worst case scenario, if Store First or Store First Management were to cease trading, the investor would still be the owner of an underlying asset - a storepod which would still have a commercial value. 8 Store First Ltd 2012 Prospectus Store First Ltd 2012 Prospectus 9
SIPP Compliance As a commercial property investment it is fully SIPP compliant and accepted by all of the major SIPP providers. Purchase Process Cash Investors A client completing a cash investment pays a deposit of 10% SIPP Investors No deposit is required Termination and Early Exit 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, 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 the investor. Table of Costs and Revenues 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 monthly rental payments. 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. Prospective investors will receive full details of the purchase and reservation form prior to completion. Upon completion, a contract pack will be sent outlining 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. Solicitors Store First s marketing and service infrastructure. 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 the 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. Property Type Size Sq/Ft Sale Price Rental Income Ground Rental Management Fee Service Charge Net Rental Return (Store First Ltd) (per Storepod) (per Storepod) ( 17 per Sq/Ft) (per annum) (15% per annum) ( 1.95 per Sq/Ft) (8% for Years 1&2) Storepod 25 3,750 425 12.50 63.75 48.75 300.00 Storepod 50 7,500 850 25.00 127.50 97.50 600.00 Storepod 75 11,250 1,275 37.50 191.25 146.25 900.00 Storepod 100 15,000 1,700 50.00 255.00 195.00 1,200.00 Storepod 125 18,750 2,125 62.50 318.75 243.75 1,500.00 Storepod 150 22,500 2,550 75.00 382.50 292.50 1,800.00 Storepod 175 26,250 2,975 87.50 446.25 341.25 2,100.00 Storepod 200 30,000 3,400 100.00 510.00 390.00 2,400.00 Store First Ltd General Sizes Sale Price Gross Income Cost once let Cost once let Cost once let Net Income Store First s preferred solicitor is The Hetherington Partnership Solicitors. They have completed many sales of Storepods and as they are familiar with the product contract (note that multiple Storepods can be purchased on one contract, so this represents excellent value). Margaret Hetherington The Hetherington Partnership Solicitors 32 Market Street Hoylake Wirral Merseyside CH47 2AF Tel 0151 632 3411 Personal cash investors can use a solicitor if they wish, but this is not compulsory. Using a solicitor is compulsory for SIPP investors. *(based on years 1&2, full details are in the brochure) 10 Store First Ltd 2012 Prospectus Store First Ltd 2012 Prospectus 11
Ownership Structure Store First Limited Owns the Freehold to the site Investor Purchases the storepod on a long leasehold (250 years) from Store First Limited Store First Management Limited Sub-lease the Storepod from the investor on an initial 6 year lease, and rent it out to end users Disclaimer Store First are not authorised to give investment/tax 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 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. Store First is not regulated by the FSA and is not authorised to offer advice to the general public concerning any regulated or unregulated investment. Investor Payments 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. Although every care has been taken to make sure that the information in this brochure is accurate, Store First 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 Store First Ltd unless otherwise agreed. Storepod is a copyrighted product of Store First Ltd. 12 Store First Ltd 2012 Prospectus Store First Ltd 2012 Prospectus 13