Fundraise of £10 million completed in November 2017
Following a successful fundraise of £10 million, the investee companies have been in the acquisition and establishment phase for the four managed storage sites.
Storage (North) Ltd
In our September 2019 update, we advised that the company had sold its Northwich site to an institutional buyer. As that sale progressed, it became apparent that larger purpose-built facilities were commanding a higher price per square foot when sold. The proceeds generated from the sale of the Northwich site are therefore be used by the company to fund the development of its second site, a 45,000 sq. ft. facility in East Manchester. This site has been chosen in priority to alternate sites mentioned in the September report as it is more advanced.
The terms of purchase for the East Manchester site are agreed and Exchange, with Completion subject to planning permission, is imminent. The pre-application meeting has taken place and planners advice received; reaction to the scheme has been positive. Assuming formal planning is forthcoming, the plan was for building work to commence in the summer of 2020, completing in early 2021. We anticipate that the Government’s restrictions following the Coronavirus outbreak will result in a delay in receiving planning permission. If that delay is too long, we would expect the building work to start and finish later than planned.
Storage (Midlands) Ltd
The company’s 50,000 sq. ft. Lichfield facility opened to the public in October 2019. Up until the Government’s restrictions following the Coronavirus outbreak, trading was well ahead of plan, with both occupancy and sq. ft. rates being higher than originally forecast. Indeed, February was a particularly strong month and March has held up.
It should be noted that managed storage is classed as an essential service due to its position in the supply chain hence can continue to trade. However, and in-line with the Government’s guidance, the store is now operating reduced opening hours with skeleton staffing, taking the necessary precautions to protect both staff and visiting customers. Calls are being dealt with remotely by staff working from home. The payment receipts at the end of March were good with minimal defaults. However, it is still early and going forward default rates may rise. To preserve cash, capital expenditure on further fit-out will be reduced until the market returns to growth, however, this has proven to be a resilient business model in previous times of recession.
In terms of a second site, various options have continued to be progressed since our last report, there remain two options, these being the purchase of a plot of land in Merseyside from a major supermarket and an alternative site in West Yorkshire. As at March 2020, the Merseyside option is looking more likely to progress and is now entering legals, as outline approval has been obtained from the Board of the supermarket involved. There are finer points in the legal transaction to be agreed but Exchange would be subject to planning permission and unfortunately further delays are anticipated as a result of the Coronavirus outbreak.
In our view, the successful sale of the trading unit at Northwich, as well as the sale of a further facilities from our first Managed Storage EIS Fund, vindicates the site choices made by the Surestore team and whilst it can take longer than originally anticipated to locate the optimum sites and obtain planning consent, the facilities generate high demand from potential buyers once they are fully operational.
There will be some inevitable delays and costs incurred following the Coronavirus outbreak. However, this has proven to be a resilient business model in previous times of recession and following the asset sales the businesses are well funded.
Please see www.surestore.co.uk for further information.