Portfolio Management
Our approach to store development and acquisitions in the UK, Paris and Spain continues to be pragmatic, flexible and focused on the return on capital.
Our property teams in the UK, Paris and Spain 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 17 new stores: Chiswick, Wandsworth, Mitcham, Paddington Marble Arch, Carshalton (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, adding 870,000 sq ft. of MLA.
In addition, the Group has acquired 31 existing stores through the acquisitions of Space Maker, Alligator, Fort Box, OhMyBox! in Barcelona and our London Heathrow store. These acquisitions added a further 1,238,000 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 and Longpont (Paris) stores adding a net 65,000 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 has grown significantly over the last year and now constitutes c. 732,000 sq ft of future MLA (equivalent to c. 11% of the existing portfolio) with an associated outstanding capital expenditure of £96 million.
Property Pipeline
Store openings
In July 2020, the Group completed the acquisition of a freehold 2.17-acre site including an existing warehouse in Birmingham. The site is well located on the southern side of the inner A4540 ring road and the new 58,500 sq ft MLA Birmingham Middleway store opened in April 2021. Our existing nearby store at Digbeth (MLA 44,500 sq ft) closed shortly afterwards and customers were relocated to the Birmingham Middleway store. In due course, we intend to sell the Digbeth site, which has residential development potential.
In April 2018, we agreed a lease on a site at Magenta in central Paris. We are pleased to confirm that the 50,000 sq ft store opened in late April 2021.
Lease extensions and assignments
In the period, we agreed a new 18-year lease on our Hayes store which starts at the expiry of the current lease in June 2027. The new lease is protected under the Landlord and Tenant Act. A six-month rent-free period was granted immediately under the current lease with a further three-month rent-free period when the new lease commences.
As part of our ongoing asset management programme, we have now extended the leases on 23 stores or 64% 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. 12-13 years.
Development sites
UK
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 has 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 April 2021, the Group exchanged contracts on a freehold 1.3 acre site at Lea Bridge in North East 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 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 South East 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 April 2021, the Group exchanged contracts on a freehold site in Woodford in North East London. Subject to contract and planning, we will open a 56,500 sq ft MLA store in 2025.
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 H2 2022. 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 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 Q4 of 2022.
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 2023.
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. The site is valued at €6.85 million in the Investment Property valuation on the Group’s Balance Sheet. 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 plans to complete a c 300,000 sq ft development of offices, retail, a school and residential properties subject to planning. The maximum investment for Safestore in the joint venture is €2 million.
In addition, Safestore will contribute its Nanterre site into the project and will receive cash of €1.7 million in addition to 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 early 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. Subject to planning we expect the store to open in the third quarter of 2022.
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. The occupancy of the business at the end of October 2021, was 86.0%.
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 a high population density area in northern Madrid. The acquisition has been completed and planning granted and we will convert the existing building into a 48,000 sq ft MLA self storage facility. It is anticipated that the site will open in the fourth quarter of the 2021/22 financial year.
In March 2021, the Group exchanged contracts on a freehold building in southern Madrid. The acquisition has been completed and planning granted and we will convert the existing building into a 29,000 sq ft MLA self storage facility. It is anticipated that the site will open in the fourth quarter of the 2021/22 financial year.
In December 2021, the Group exchanged contracts on a freehold building in a commercial and industrial area of eastern Madrid. Subject to completion and planning permission, we will convert the existing building into a 49,000 sq ft MLA self storage facility. It is anticipated that the site will open in the second quarter of 2023.
In January 2021, the Group exchanged contracts on a freehold building in a densely populated area in central Barcelona. The acquisition has been completed and planning granted and we will convert the existing building into a 13,500 sq ft MLA self storage facility. It is anticipated that the site will open in the third quarter of the 2021/22 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 19,000 sq ft MLA store which, subject to planning, should open in Q4 of 2022.
In April 2021, the Group exchanged contracts on a freehold building in northern Barcelona. Subject to contract and planning, we will convert the existing building into a 36,300 sq ft MLA self storage facility. It is anticipated that the site will open in the first quarter of 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 first quarter of the 2022/23 financial year.
The total further cost of the acquisition and construction of the new Spanish sites is anticipated to be c €32 million and the seven stores will add 225,000 sq ft of additional MLA.
Store extensions
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 at 31 March 2021 was 80%. The extension opened in December 2021, adding 8,500 sq ft of MLA.
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 work will commence in January 2022. The existing reception area will be 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 will be added. The Wimbledon store’s peak occupancy, prior to the Covid-19 pandemic, was 92%.
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.
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.
In September 2021 the Group received planning permission to extend its Winchester store by 11,000 sq ft. The existing store has an MLA of 42,000 sq ft and has been more than 90% occupied for the last twelve months. It is anticipated that the extension will be open in the fourth calendar quarter of 2022 and that there will be minimal impact on day-to-day operations of the store during construction.
Property pipeline summary
Store |
FH/LH |
Status |
MLA sq ft |
Target opening |
Other |
London Lea Bridge |
FH |
Completed/ Subject to Planning |
76,500 |
Q1 2025 |
New build. £170k pa of rental income prior to opening |
London- Old Kent Road |
FH |
Completed/ Subject to Planning |
76,500 |
TBC |
New build. Rental income receivable prior to opening |
London- Woodford |
FH |
Contracts exchanged/ Subject to Planning |
65,000 |
Q4 2025 |
New build |
London- Morden |
FH |
Completed/ Planning granted |
52,000 |
Q1 2023 |
New build |
London- Bermondsey |
FH |
Completed/ Subject to Planning |
50,000 |
Q4 2026 |
New build |
Shoreham |
FH |
Contracts exchanged/ Subject to Planning |
54,000 |
Q4 2022 |
New build |
London- Paddington Park West |
LH |
Completed/ Planning granted |
13,000 |
Q2 2023 |
Conversion of basement car park- satellite store to existing Paddington store |
London- Wimbledon |
FH |
Completed/ Planning granted |
9,000 storage
1,000 office |
Q2 2022 |
Extension of existing site |
Winchester |
FH |
Planning granted |
11,000 |
Q4 2022 |
Extension of existing site |
Paris- La Défense |
FH |
Completed/ Planning granted |
44,000 |
Q2 2025 |
Facility within mixed use development |
Paris- Southern Paris |
FH |
Contracts exchanged/Subject to Planning |
55,000 |
Q3 2025 |
New build |
Northern Madrid |
FH |
Completed/ Planning granted |
48,000 |
Q4 2022 |
Conversion of existing building |
Southern Madrid |
FH |
Completed/ Planning granted |
29,000 |
Q2 2023 |
Conversion of existing building |
Eastern Madrid |
FH |
Contracts exchanged/Subject to Planning |
49,000 |
Q2 2023 |
Conversion of existing building |
Central Barcelona 1 |
FH |
Completed/ Planning granted |
13,500 |
Q3 2022 |
Conversion of existing building |
Central Barcelona 2 |
LH |
Contracts exchanged/Subject to Planning |
19,000 |
Q4 2022 |
Conversion of existing building |
Northern Barcelona |
FH |
Contracts exchanged/Subject to Planning |
36,300 |
Q1 2023 |
Conversion of existing building |
South Barcelona |
FH |
Contracts exchanged/Subject to Planning |
30,000 |
Q4 2022 |
Conversion of existing building |
Total Pipeline MLA |
|
|
c. 732k |
|
|
Total Further Capex |
|
|
c. £96 m |
|
|
Acquisitions
Acquisition of Your Room Self Storage, Christchurch2
In December 2021, Safestore acquired Your Room Self Storage in Christchurch, Dorset for £2.45m. 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.
Joint venture1 with Carlyle - investment in Opslag XL
As announced as part of our 14 January 2021 results announcement, the Group’s joint venture with Carlyle acquired the three-store portfolio of Opslag XL in the Netherlands in December 2020. Safestore’s equity investment in the joint venture, relating to Opslag XL, was c. €0.9 million funded from the Group’s existing resources. Safestore also earns a fee for providing management services to the joint venture. Safestore expects to earn an initial return on investment of 12% before transaction related costs for the first full year reflecting its share of expected joint venture profits and fees for management services.
Opslag XL has three locations in The Hague, Hilversum and Amsterdam. The Hague and Hilversum are freehold; the Amsterdam store is a short leasehold (December 2021). The business had 7,000 sq metres (75,000 sq ft) of MLA and an occupancy of 58%.
In June 2021, the joint venture acquired a freehold site with an existing building in Nijmegen in the Netherlands. Nijmegen has a population of 177,000 and the site is well located on a main road with good visibility and access. Safestore provided 20% of the equity required to acquire and develop the site which will have an MLA of c. 40,000 sq ft.
These acquisitions complement the six stores in Amsterdam and Haarlem in the Netherlands acquired in August 2019 as well as the six stores purchased in 2020 in Brussels, Charleroi and Liège, Belgium. In total, the joint venture will own 16 stores with 57,300 sq metres (614,000 sq ft) of MLA. The Group’s further investment in the joint venture has been immediately accretive to Group Earnings per Share from completion and will support the Group’s future dividend capacity.
Our joint venture provides an earnings-accretive opportunity to gain detailed operational exposure to new markets while carefully managing the investment risk. The Group’s leading digital platform has already delivered substantial marketing benefits both in terms of costs and volume of enquiries. The operational integration has been completed in an efficient manner, leveraging the skills and capacities of our existing Head Office teams in the UK and Paris.
Our local property development team also enables us to further our understanding of local property markets, which will allow the Group to allocate equity investment efficiently with a risk/reward profile similar to that of our historical core markets.
Owned store portfolio by region
|
London and South East |
Rest of UK |
UK Total |
Paris |
Spain |
Group Total |
Number of stores |
71 |
57 |
128 |
29 |
4 |
161 |
Let square feet (m sq ft) |
2.41 |
2.28 |
4.69 |
1.10 |
0.09 |
5.88 |
Maximum lettable area (m sq ft) |
2.80 |
2.69 |
5.49 |
1.36 |
0.11 |
6.96 |
Average let square feet per store capacity (k sq ft) |
34 |
40 |
37 |
38 |
23 |
37 |
Average store capacity (k sq ft) |
39 |
47 |
43 |
47 |
27 |
43 |
Closing occupancy (%) |
86.1% |
84.7% |
85.4% |
80.7% |
86.0% |
84.5% |
Average rate (£ per sq ft) |
30.85 |
19.45 |
25.32 |
33.78 |
28.00 |
26.95 |
Revenue (£'m) |
89.7 |
54.4 |
144.1 |
39.9 |
2.8 |
186.8 |
Average revenue per store (£'m) |
1.26 |
0.95 |
1.13 |
1.38 |
0.70 |
1.16 |
Note
The reported totals have not been adjusted for the impact of rounding.
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 in the region, 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 77 stores, contributed £103.5 million of revenue and £75.0 million of store EBITDA for the financial year and offer a unique exposure to the two most attractive European self storage markets.
We have a strong position in both the UK and Paris markets operating 128 stores in the UK, 71 of which are in London and the South East, and 29 stores in Paris.
In the UK, 62% of our revenue is generated by our stores in London and the South East. On average, our stores in London and the South East are smaller than in the rest of the UK but the rental rates achieved are materially higher, enabling these stores to typically achieve similar or better margins than the larger stores. In London we operate 48 stores within the M25, more than any other competitor.
In France, we have a leading position in the heart of the affluent City of Paris market with ten stores branded as Une Pièce en Plus (“UPP”) (“A spare room”). Over 60% of the UPP stores are located in a cluster within a five-mile radius of the city centre, which facilitates strong operational and marketing synergies as well as options to differentiate and channel customers to the right store subject to their preference for convenience or price affordability. The Parisian market has attractive socio-demographic characteristics for self storage and we believe that UPP enjoys unique strategic strength in such an attractive market.
Together, as at 31 October 2021, London, the South East and Paris represent 62% of our stores, 69% of our revenues, and 60% of our available capacity.
In addition, Safestore has the benefit of a leading national presence in the UK regions where the stores are predominantly located in the centre of key metropolitan areas such as Birmingham, Manchester, Liverpool, Bristol, Newcastle, Glasgow and Edinburgh. Our 2019 acquisition of OMB in Barcelona represents a platform into the Spanish market where we hope to take advantage of development and acquisition opportunities and have recently announced the acquisition of six development sites in Barcelona and Madrid.
1 – The joint venture with Carlyle, which represents a 20% investment, has been 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. The total transaction costs are expected to be £2.6 million subject to customary working capital adjustments.