Portfolio Management
Our approach to store development and acquisitions in the UK, Paris and Spain and now the Netherlands and Belgium, continues to be pragmatic, flexible and focused on the return on capital.
Our property teams continue to seek investment opportunities in new sites to add to the store pipeline. However, investments will only be made if they comply with our disciplined and strict investment criteria. Our preference is to acquire sites that are capable of being fully operational within 18-24 months from completion.
Since 2016, the Group has opened 22 new stores: Chiswick, Wandsworth, Mitcham, Paddington Marble Arch, Carshalton, Bow (all in London), Birmingham Central, Birmingham Merry Hill, Birmingham Middleway, Altrincham, Peterborough, Gateshead and Sheffield in the UK, and Emerainville, Combs-la-Ville, Poissy, Pontoise and Magenta in Paris, Nijmegen in the Netherlands and Pronvenca in Barcelona, with a further two stores opening in Madrid in November 2022 adding 1,093,000 sq ft of MLA.
In addition, the Group has acquired 46 existing stores through the acquisitions of Space Maker, Alligator, Fort Box, Salus and Your Room in the UK, OhMyBox! in Barcelona, and the Lokabox and M3 group from our Benelux JV acquisition. These acquisitions added a further 1,844,000 sq ft of MLA and revenue performance has been enhanced in all cases under the Group’s ownership.
We have also completed the extensions and refurbishments of our Acton, Barking, Bedford, Chingford, Wimbledon, Edgware, Southend, Paddington Marble Arch, Winchester and Longpont (Paris) stores adding a net 122,000 sq ft of fully invested space to the estate. All of these stores are performing in line with or ahead of their business plans.
The Group’s current pipeline of new developments and store extensions (see below) has grown significantly over the last year and now constitutes c.1,407,000 sq ft of future MLA. The pipeline and store openings since the end of the 2022 financial year is equivalent to c.19% of the existing portfolio. The outstanding capital expenditure of £146 million is expected to be funded from the Group’s existing resources. The total capital expenditure on stores opened in the 2022/23 financial year-to-date as well as the outstanding pipeline is estimated to be c. £245m. At our usual cash on cash return hurdles of c.10% we would estimate that these stores will add c. £24.5m of EBITDA at stabilisation (c. 4 years after opening).
Property Pipeline
Open 2022 |
FH/LH |
Opening Date |
MLA |
Other |
Redevelopments and Extensions |
|
|
|
|
London- Old Kent Road |
LH |
Q1 2022 |
8,500 |
Extension |
London- Woodford |
FH |
Q1 2022 |
10,100 |
Extension |
London- Morden |
FH |
Q1 2022 |
22,900 |
Extension |
London- Bermondsey |
FH |
Q1 2022 |
9,000 |
Extension |
Shoreham |
FH |
Q4 2022 |
11,000 |
Extension |
New Developments |
|
|
|
|
London- Bow |
FH |
Q1 2022 |
74,000 |
Conversion |
Central Barcelona |
FH |
Q1 2022 |
12,500 |
Conversion |
Nijmegen- Netherlands |
FH |
Q1 2022 |
40,000 |
Conversion |
Open 2023 |
|
|
|
|
New Developments |
|
|
|
|
Northern Madrid |
FH |
Q1 2023 |
53,000 |
Conversion |
Southern Madrid |
FH |
Q1 2023 |
32,000 |
Conversion |
In September 2020 the Group received planning permission to extend its Southend store by 10,100 sq ft. The existing store has an MLA of 49,400 sq ft and was 86% occupied at the end of September 2020. The extension opened in December 2021.
In January 2021, the Group exchanged contracts on a freehold building in a densely populated area in Central Barcelona. The conversion of the existing building into a 12,500 sq ft MLA self storage facility is complete and the store is now open.
In March 2021 and April 2021, the Group exchanged contracts on two freehold buildings in Southern Madrid and Northern Madrid respectively. Both acquisitions have been completed with planning granted and the existing buildings have been converted into 32,000 and 53,000 sq ft MLA self storage facilities. Both sites opened post-year end in November 2022.
In April 2021, we exchanged contracts on the acquisition of a 0.5-acre site adjacent to our existing London Wimbledon store (MLA 58,800 sq ft). We completed this transaction in December 2021 and construction was completed just after the period end. The existing reception area has been relocated to a more prominent and visible roadside location and a further 9,000 sq ft of storage capacity and 1,000 sq ft of offices have been added. The Wimbledon store’s peak occupancy, prior to the Covid-19 pandemic, was 92%.
In May 2021, the Group completed the freehold acquisition of a 0.8-acre site with a 108,000 sq ft warehouse to the east of London in a prominent position on the A12 in Bow. The building had existing consent for storage and we only required planning consents for some external modifications to the building. Otherwise, the building was suitable for immediate conversion to self storage. The 74,000 sq ft store opened in December 2021.
In addition, in May 2021, the Group exchanged contracts on a leasehold basement car park adjacent to our existing London Paddington Marble Arch store. The occupancy of the Paddington Marble Arch store on 31 March 2021 was 80%. The extension opened in December 2021, adding 8,500 sq ft of MLA.
The Group has also received planning permission to extend its Edgware store by a further 22,900 sq ft. The existing store has MLA of 24,000 sq ft and reached a peak occupancy of 91% prior to extension works commencing. The extension opened in December 2021.
An 11,000 sq ft extension to our existing Winchester store opened in the quarter. The existing store has an MLA of 42,000 sq ft and has peaked at more than 90% occupancy.
In January 2022, the Netherlands business opened a new store in Nijmegen. The store is freehold with an MLA of 40,000 sq ft and is a conversion of an existing building. Nijmegen has a population of 177,000 and the site is well located on a main road with good visibility and access.
Development sites
UK
In June 2018, Safestore opened its Paddington Marble Arch store. A separate satellite store at Paddington Park West Place, with MLA of 13,000 sq ft, will open during 2024.
In April 2021, the Group exchanged contracts on a freehold 1.3-acre site at Lea Bridge in Northeast London. The acquisition of the site has now been completed and we plan to open a 76,500 sq ft MLA store in 2024 as the leases for existing tenants on the site have up to two years to run. Rental income of approximately £170k per annum is currently received on this site.
In addition, in April 2021, the Group exchanged contracts on a freehold site in Woodford in Northeast London. Subject to planning, we will open a 76,000 sq ft MLA store in 2025.
In July 2021, the Group exchanged contracts on a freehold 0.8-acre site in Shoreham, West Sussex. Shoreham is situated between Brighton and Worthing on the south coast of England. Subject to planning, we will open a purpose built 54,000 sq ft MLA store in 2024.
In November 2021, the Group completed the acquisition of a 1.2-acre freehold site off Old Kent Road in the London Borough of Southwark in Southeast London. Subject to planning, we hope to open a c.76,500 sq ft MLA store in due course. Existing tenants on the site will provide a rental income in the meantime.
In May 2022, the Group completed the acquisition of a 2.1-acre freehold site including an existing warehouse in Wigan in Greater Manchester. Subject to minor planning approvals for elevations and signage, we plan to convert the existing building and open a c.42,700 sq ft MLA store in 2023.
The Group has also previously acquired two additional sites in London at Morden and Bermondsey. Morden is a freehold 0.9-acre site in an established industrial location. Planning permission for a 52,000 sq ft self storage facility has now been granted and construction on this site is underway with a view to opening in 2023. Bermondsey is a 0.5-acre freehold site with income from existing tenants and is adjacent to our existing leasehold store. Our medium term aim, subject to planning permission, is to extend our existing Bermondsey operations with the addition of a new self storage facility to complement our existing store.
In Romford in London, we have secured a freehold site with an existing warehouse which will be converted, subject to planning permission, to a 41,000 sq ft store, opening in 2024.
In Crayford, we have secured a leasehold site on which we will convert an existing warehouse to a 9,400 sq ft extension to our existing Crayford site. We hope to open the satellite store in 2023.
In Walton-on-Thames in London, we have secured a freehold site with an existing warehouse which will be converted, subject to planning permission, to a 20,700 sq ft store. We hope to open the store in 2025.
Our total UK development pipeline now amounts to c.511,800 sq ft of which c.415,100 sq ft is in London.
Paris
Safestore has for many years owned a vacant freehold site in the town of Nanterre on the edge of La Défense, Paris’ main business district. This area of Paris is undergoing significant development and Safestore has invested a 24.9% stake in a joint venture development company, PBC Les Groues SAS, which is constructing a c.300,000 sq ft development of offices, retail, a school and residential properties.
Safestore has contributed its Nanterre site into the project, receiving cash of €1.0 million in addition to the delivery of an underground storage area and reception within the complex, ready to be fitted out into a 44,000 sq ft self storage facility. Planning for the project has been received and construction has commenced.
It is anticipated that the project will be completed in 2025 when the self storage facility will open.
In August 2021, the Group exchanged contracts on a freehold site in Southern Paris with a significant frontage onto the N104 motorway. The site includes an existing building which will be demolished and replaced by a 55,000 sq ft MLA store. We expect the store to open in 2023.
Over the first half of 2022 we exchanged contracts on three freehold development sites to the west of Paris. All sites required planning permission and newly built stores of 56,000 sq ft, 20,000 sq ft and 58,000 sq ft were planned to be constructed by the end of 2023. Our Paris West 2 site (20,000 sq ft) did not receive planning permission and has been removed from the pipeline.
Paris East 1 and Paris North West 1 are freehold sites on which we will convert existing buildings, subject to planning, to 60,000 sq ft and 54,000 sq ft stores respectively. We expect the stores to open in 2023.
Our Paris pipeline now amounts to c.349,200 sq ft.
Spain
In December 2019, the Group completed the acquisition of OMB Self Storage which operates three leasehold properties and one freehold property, all very well located in the centre of Barcelona. The four locations (Valencia, Calabria, Glories and Marina) have an MLA totalling 108,000 sq ft. A fifth store, in Central Barcelona, was opened during 2022. The occupancy of the business at the end of October 2022 was 78.9% and 85.9% on a like-for-like basis.
The Group is continuing its expansion of the business in Barcelona and its entry into the Madrid market with the acquisition of the following sites.
In April 2021, the Group exchanged contracts on a freehold building in Northern Barcelona. Subject to planning, we will convert the existing building into a 42,000 sq ft MLA . It is anticipated that the site will open in the 2022/23 financial year.
In June 2021, the Group exchanged contracts on a freehold property in South Barcelona. The site includes an existing industrial building which will be converted into a 30,000 sq ft MLA self storage facility. Planning has been granted and we expect to open the site in the 2022/23 financial year.
In August 2021, the Group exchanged contracts on a leasehold site in Central Barcelona. The site is a former car dealership which will be converted to a 24,700 sq ft MLA store which, subject to planning, should open in 2024.
In December 2021, the Group exchanged contracts on a freehold building in a commercial and industrial area of Eastern Madrid. Subject to completion, we will convert the existing building into a 50,000 sq ft MLA self storage facility. It is anticipated that the site will open in 2023.
In August 2022, the Group exchanged contracts on a freehold building in a commercial and industrial area of South West Madrid. Subject to planning and completion, we will convert the existing building into a 46,800 sq ft MLA self storage facility. It is anticipated that the site will open in 2024.
A new freehold site has been secured in Southern Madrid (Southern Madrid 2) on which we will convert an existing building, subject to planning permission, into a 68,800 sq ft storage facility. It is anticipated that the site will open in 2024.
Our Spanish pipeline now amounts to c.262,300 sq ft including 165,600 sq ft across three stores in Madrid and 96,700 sq ft over three stores in Barcelona.
The Spanish business now has seven open stores and a pipeline consisting of a further six stores amounting to c.262,300 sq ft of MLA.
Netherlands
During the year we exchanged contracts on a freehold site at Amersfoort, 40 minutes east of Amsterdam. The acquisition is subject to planning permission and we anticipate that the new store, which will have an MLA of 58,000 sq ft, will be opened in 2023.
The Group completed the acquisition of a freehold site in Almere, a city with a population of 214,000 which is 20 minutes’ drive from Amsterdam. Subject to planning, we will convert the two existing buildings on the site into a 44,500 sq ft MLA self storage facility. It is anticipated that the site will open in 2023.
New freehold sites have been secured in Amsterdam and Aalsmeer where we will build new stores, subject to planning, of 61,400 sq ft and 48,400 sq ft respectively. The two stores should open in 2024.
Since the year end, the Group has secured a freehold site in Rotterdam for construction of a 71,000 sq ft MLA store subject to planning. Rotterdam is one of the major cities in the Netherlands with a population of 588,000 and forms part of the larger Randstad area. The new site forms part of a larger re-development within the heart of an affluent district of the city.
In the Netherlands, our pipeline now consists of 283,300 sq ft of space in five stores.
Store extensions
The Group plans to redevelop and extend its Pyrénées store in Paris. The extension will add 22,200 sq ft and is planned to open in 2023. As of September 2022, the store occupancy was 94%.
Lease extensions and assignments
During the period we extended the lease on our Exeter store in the UK. The lease will now continue until February 2045 with tenant-only break clauses in 2035 and 2040. A six-month rent-free period was agreed as part of the renegotiation.
In Crayford, we have extended the lease on our existing store to 2042, with a tenant-only break option in 2032. A rent-free period of four months was agreed as part of this agreement. The lease on the new satellite store reported above also terminates in 2042.
In Sunderland, we have extended the lease on our store to 2047 with a tenant break option in 2037. A six-month rent-free period was agreed as part of this lease extension.
As part of our ongoing asset management programme, we have now extended the leases on 27 stores or 70% of our leased store portfolio in the UK since 2012. As a result, since 2012 the remaining lease length of our UK stores has remained at c.11-13 years.
Site Disposal
In April 2021 we opened our Birmingham Middleway store (58,000 sq ft MLA) and closed our Digbeth store (44,500 sq ft MLA) shortly thereafter. Customers were relocated to the bigger, better located new store. At the time, we stated that we intended to sell the Digbeth site.
We are pleased to confirm that the Digbeth site sale was completed in August 2022. The proceeds received funded the entire acquisition and construction of the Middleway site. As of September 2022, the Middleway site was 83% occupied.
Property pipeline summary
Our pipeline of c.1.4m sq ft represents c.18% of our existing property portfolio.
Open 2023 |
FH/LH |
Status* |
MLA |
Other |
Redevelopments and Extensions |
|
|
|
|
London- Crayford |
LH |
C, UC |
9,400 |
Extension |
Paris- Pyrenees |
LH |
C, UC |
22,200 |
Extension |
New Developments |
|
|
|
|
London- Morden |
FH |
C, PG, UC |
52,000 |
New build |
Wigan |
FH |
C, UC |
42,700 |
Conversion |
Paris- South Paris |
FH |
C, PG |
55,000 |
New build |
Paris- West 1 |
FH |
CE, STP |
56,000 |
New build |
Paris- West 3 |
FH |
CE, STP |
58,000 |
New build |
Paris- East 1 |
FH |
CE, STP |
60,000 |
Conversion |
Paris- North West 1 |
FH |
CE, STP |
54,000 |
Conversion |
Eastern Madrid |
FH |
C, PG |
50,000 |
Conversion |
Northern Barcelona |
FH |
C, PG |
42,000 |
Conversion |
South Barcelona |
FH |
C, PG |
30,000 |
Conversion |
Amersfoort- Netherlands |
FH |
CE, STP |
58,000 |
New build |
Almere- Netherlands |
FH |
C, STP |
44,500 |
Conversion |
Open 2024 |
|
|
|
|
Redevelopments and Extensions |
|
|
|
|
New Developments |
|
|
|
|
London- Paddington Park West |
FH |
C, PG |
13,000 |
Conversion, Satellite |
London- Lea Bridge |
FH |
C, PG |
76,500 |
New build |
London- Romford |
FH |
C, STP |
41,000 |
New build |
Shoreham |
FH |
CE, STP |
54,000 |
New build |
South West Madrid |
FH |
CE, STP |
46,800 |
Conversion |
Southern Madrid 2 |
FH |
CE, STP |
68,800 |
Conversion |
Central Barcelona 2 |
LH |
CE, STP |
24,700 |
Conversion |
Amsterdam- Netherlands |
FH |
CE, STP |
61,400 |
New build |
Aalsmeer- Netherlands |
FH |
CE, STP |
48,400 |
New build |
Rotterdam- Netherlands |
FH |
CE, PG |
71,000 |
New build |
Opening Beyond 2024 |
|
|
|
|
New Developments |
|
|
|
|
London- Old Kent Road |
FH |
C, STP |
76,500 |
New build |
London- Woodford |
FH |
CE, PG |
76,000 |
New build |
London- Bermondsey |
FH |
C, STP |
50,000 |
New build |
London- Walton |
FH |
C, STP |
20,700 |
Conversion |
Paris- La Défense |
FH |
C, STP |
44,000 |
Mixed use facility |
Total Pipeline MLA (let sq ft- million) |
|
|
c.1.407 |
|
Total Outstanding CAPEX (£’m) |
|
|
c.146.0 |
|
*C = completed, CE = contracts exchanged, STP = subject to planning, PG = planning granted, UC = under construction
Acquisitions
Acquisition of Your Room Self Storage, Christchurch2
In December 2021, Safestore acquired Your Room Self Storage in Christchurch, Dorset, for £2.45 million. The freehold Christchurch store has an MLA of 14,000 sq ft and the Group anticipates that the initial yield in the first year will be in excess of 6%.
The Group will rebrand the store and has taken over operation of the site with immediate effect. The store will operate as a satellite store to our two existing Bournemouth stores.
Acquisition of remaining 80% of Carlyle JV1
As announced on 31 March 2022, Safestore acquired the remaining 80% of the equity owned by Carlyle in the Joint Venture1 formed in 2019 (the “Joint Venture"). The total consideration paid to Carlyle was €67 million. The total initial cash outflow was €135.3 million and included the share purchase (€53.6 million), debt purchase (€13.4 million), and refinancing of the existing borrowings (€68.3 million) and was funded from the Group's existing loan facilities. The Joint Venture was acquired based on an enterprise value of €146 million.
The Joint Venture1 was set up in 2019 to acquire and develop assets in the Netherlands and Belgium in order to leverage Safestore's operating platform outside our core markets. Since then, the Joint Venture has grown to a portfolio of 55,000 sq m (600,000 sq ft) of MLA.
The portfolio is made up of 15 high quality properties (twelve freehold properties, two ground leases and one leasehold property). Nine properties are located in the Netherlands, six of which are concentrated in the Haarlem/Amsterdam area with additional properties in The Hague, Het Gooi and the recently opened Nijmegen store. In Belgium, two stores are located in the Brussels area, two in the city of Liege and further properties in Nivelles and Charleroi. Safestore has managed the properties since acquisition by the Joint Venture.
The Group's investment was marginally accretive to Group Earnings per Share in FY2021/22 and supports the Group's future dividend capacity. The expected initial yield based on total enterprise value was 3.9% which we expect to grow to Safestore's normal returns hurdles as the portfolio matures.
New Joint Venture with Carlyle and Investment in myStorage in Germany
Safestore has entered the German self storage market via a new joint venture with Carlyle, which has acquired the myStorage business.
Safestore has developed a multi-country highly scalable platform with leading marketing and operational expertise in self storage, with a proven track record for developing its platform in new markets.
The acquisition of myStorage represents an excellent opportunity to develop our platform into the attractive German self storage market. The Joint Venture builds upon our previous successful relationship with Carlyle having entered the Benelux market in 2019. Our common intention is to target development and acquisition opportunities through the Joint Venture, providing the opportunity to achieve operational scale and to develop local market knowledge, whilst also retaining the option for Safestore to develop its own wholly owned self storage sites in Germany. We look forward to continuing our working relationship with Carlyle, and to developing a long and mutually beneficial relationship.
The German market is one of Europe’s more under-penetrated markets with just 0.09 sq ft of storage space per capita which compares to 0.76 sq ft in the UK, 0.24 sq ft in France, 0.24 sq ft in Spain, 0.60 sq ft in the Netherlands and 0.20 sq ft in Belgium. According to the 2022 FEDESSA report, there are just 320 facilities in Germany and 7.6m sq ft of lettable space.
myStorage has seven medium to long-term leasehold stores and 326,000 sq ft of MLA in Berlin, Heidelburg, Mannheim, Fürth, Nuremburg, Neu-Ulm and Reutlingen.
The occupancy of the portfolio is 67% with two of the stores having opened in 2021.
Safestore’s initial investment in the Joint Venture was a c.€2.2 million equity investment for a 10% share of the Joint Venture. Safestore will also earn a fee for providing management services to the Joint Venture. The Group expects to earn an initial return on investment of c.15% for the first full year before transaction related costs reflecting its share of expected joint venture profits and fees for management services.
Portfolio summary
The self storage market has been growing consistently for over 20 years across many European countries but few regions offer the unique characteristics of London and Paris, both of which consist of large, wealthy and densely populated markets. In the London region, the population is 13 million inhabitants with a density of 5,200 inhabitants per square mile, 11,000 per square mile in Central London and up to 32,000 per square mile in the densest boroughs.
The population of the Paris urban area is 10.7 million inhabitants with a density of 9,300 inhabitants per square mile in the urban area but 54,000 per square mile in the City of Paris and first belt, where 69% of our French stores are located and which has one of the highest population densities in the western world. 85% of the Paris region population live in central parts of the city versus the rest of the urban area, which compares with 60% in the London region. There are currently c.245 storage centres within the M25 as compared to only c.95 in the Paris urban area.
In addition, barriers to entry in these two important city markets are high, due to land values and limited availability of sites as well as planning regulation. This is the case for Paris and its first belt in particular, which inhibits new development possibilities.
Our combined operations in London and Paris, with 78 stores, contributed £113.2 million of revenue and £82.3 million of store EBITDA for the financial year and offer a unique exposure to the two most attractive European self storage markets.
1 – On 30 March 2022, the Group acquired the remaining 80% of the Joint Venture with CERF. Prior to acquiring the 80%, the Joint Venture with CERF, which represented a 20% investment, was accounted for as an associate using the equity method of accounting, as described in the “Investment in associates” note to the financial statements..
2 – The enterprise value paid for Your Room Self Storage in Christchurch, Dorset, on 7 December 2021 was £2.45 million.