Pramerica forms £150m investment partnership in UK self storage sector

Pramerica, the real estate investment and advisory business of US firm Prudential Financial, has renewed its involvement with British self storage group Big Yellow by forming a £150 million (€210 million;$309 million) partnership to develop 25 further sites.

Pramerica first invested in the company in September 1999 when Big Yellow had just one operating store and remained an investor when the company floated on the London Stock Exchange in 2000 before existing from its investment in February 2005.

For the new venture, Pramerica and Big Yellow will invest up to £50 million and £25 million, respectively.  The partnership has secured an additional £75 million loan from the Royal Bank of Scotland to fund investment and development.

According to a statement issued by Pramerica, Big Yellow has initially agreed to sell five sites currently under development to the partnership, along with an existing store in Leeds, which has 71,644 square feet of net rentable space.  Big Yellow Group has also entered into a conditional agreement to sell two additional development sites in Manchester and Birmingham to the partnership.

The agreement to work exclusively together in the target regions is to last four years. The two parties aim to build high-quality, self-storage buildings with 50,000 to 60,000 square feet of storage space targeting key cities such as Edinburgh, Glasgow, Liverpool and Sheffield. Big Yellow will manage site acquisitions, oversee development and operate the stores.

The UK is the most developed self-storage market in Europe, though the UK Self Storage Association currently estimates that the industry has the potential to grow further by a rate of about 15 percent a year.

Big Yellow currently has a portfolio of more than 40 stores, primarily situated across London and Southern England.

Philip Barrett, Pramerica’s chief investment officer for merchant banking in Europe, said: “This partnership not only gives our investors an opportunity to benefit from the growing UK self-storage market, but enables them to participate in the growth of one of the most visible and respected self-storage operators in the UK.”

To date, Pramerica has invested more than $2 billion in the self-storage sector worldwide, including a 2006 investment in Spanish self-storage operator Blue Self Storage.  In the US, the company's portfolio includes a $1.5 billion investment in 2005 to acquire Storage USA in a joint venture transaction with Extra Space Storage.