IN A RECENT ARTICLE, I WROTE ABOUT THE EUROPEAN SELF-STORAGE ENTREPRENEUR'S DREAM or probable reason for investing in self-storage—to build it up and sell it. In September, Norman Galbraith and Alistair Jack realized their dream with the sale of their nine-site self-storage operation, Aardvark Self Storage Ltd., to Mentmore PLC for $46.5 million (£30 million), including assumed debt.
In the past three years, Galbraith and Jack turned their two-site operation into the largest privately owned self-storage business in the United Kingdom. There are a number of key reasons they managed to pull off this deal and turn a small independent operation into a business worth $46.5 million:
1. They raised finance in the cash-starved European self-storage arena to fund their expansion plans.
2. They acquired a number of good-quality buildings that were suitable for multistory mezzanine conversions.
3. They refurbished these buildings to the required standards and fitted them out to five-star standards.
4. With good position, signage and marketing, they filled the facilities faster than the current U.K. fill-rate benchmark of about 1,200 square feet per month.
5. They had the vision and determination to grasp the opportunities they created.
6. They worked hard—I mean bloody hard.
7. Because they worked so hard, they had a bit of good luck along the way.
A $46.5 million sale may not seem such a big deal on the U.S. side of the pond, but in the United Kingdom and Europe, it is one of the biggest deals of this decade. Over here, self-storage development of a small, first- generation operation to a chain is hard work and generally takes a long time—organically grown or not.
It is well known that lack of funding and suitable buildings impede the growth of self-storage in the United Kingdom and Europe. However, the funding is gradually becoming available, in part due to people like Galbraith and Jack, who turned something small into a multisite operation bought by a major PLC.
The buildings, however, are another story. Notice I say "buildings" and not "sites"; 95 percent of all U.K. operations are conversions. There is no such thing as just going out and purchasing a piece of land on a main road and knocking up some units. Here, it's a fight to obtain the freehold or the leasehold of a building that meets the standard criteria of urban main-road frontage and sufficient height for one or two mezzanines to make it pay. Competition is not only with other self-storage operators, but also retailers, motor dealer or other businesses.
But things are slowly changing. There appears to be more than 10 percent market awareness of self-storage in areas of London, a five- to ten-fold increase within the last five years. All of these facts reinforce what a fantastic result Galbraith and Jack's disposal deal is for our U.K. and European marketplace. The more deals there are like this, the better for everyone in self-storage. Everyone wins—the operator, vendor, purchaser and supplier.
Andrew Donaldson is the founder and chief executive of Active Supply & Design (CMD) Ltd. of Cheshire, England. He is also the founder of the Self Storage Sentinel newsletter, Rent-A-Space Ltd. and selfstorage.uk.net. For more information, e-mail [email protected]; visit www.askactive.com.