U.K. Self-Storage Operator Big Yellow Shares Q1 2012 Occupancy Numbers, Comments on Proposed Sales Tax

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U.K. self-storage operator Big Yellow Group PLC released a pre-close statement for the quarter ending March 31 with news of steadily increasing occupancy. The statement comes a week after government officials met about a nationwide budget deficit and released a proposal to levy a value-added tax (VAT) on self-storage consumers, beginning Oct. 1.

Occupancy among Big Yellow’s wholly owned stores is 64 percent, compared to 63.4 percent on Sept. 30, 2011, and 59.3 percent on March 31, 2011. For the first time since 2007, the first-quarter occupancy in the company’s portfolio is higher than the previous September, which is traditionally the peak month. Occupancy growth in the first quarter is 86,000 square feet, compared to 41,000 square for the same quarter last year.

The company expects to meet market expectations in terms of its full-year earnings.

"We now look forward to our traditionally busiest trading period from a new all-time high of occupied space," the firm's executives said in a statement.

Referring to last week's VAT proposal, the executives added, "The proposed changes to the VAT status is an industry-wide issue and this, together with the current levels of demand we are experiencing, gives us increased confidence that our previously articulated strategy of wholly or substantially mitigating the impact of those changes has a reasonable chance of success.

"The proposed VAT change would see a significant reduction in the cost of construction of new stores given that VAT on the construction costs would be recoverable. Furthermore, the group would be entitled to a repayment of previously unrecovered VAT on past construction expenditure, which we believe would be sufficient to fund the £14.3 million ($22.7 million) construction cost of new stores on three sites that the group currently owns. This would have the desirable effect of turning fallow assets into income-producing contributors to the group."

Big Yellow Self Storage has 53 wholly owned and 65 total facilities in the United Kingdom, with most concentrated in Greater London.

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