Big Yellow Limited Partnership
Big Yellow Limited Partnership, a joint venture with Pramerica Real Estate Investors Limited, owns self storage centres and development sites in the Midlands, the North, Scotland and four locations in the South. In the consolidated accounts of Big Yellow Group PLC, the Partnership is treated as an associate. We have adopted equity accounting for the Partnership, so that our share of the Partnership’s results are disclosed in operating profit and our net investment is shown in the balance sheet within “Investment in Associate”. We have provided in note 13d the balance sheet and income statement of the Partnership, along with the Group’s share of the income statement captions.
Structure
The Group and Pramerica have committed equity in a one third, two thirds split respectively. The Board of the Partnership comprises two representatives of both Pramerica and Big Yellow. Pramerica have the casting vote over the approval of the Partnership’s annual business plan.
The Partners have resolved not to develop any further stores. Our total further commitment required to fund both the capital expenditure required for Phase II developments is estimated at £1.5 million.
The Group earns certain property acquisition, planning, construction and operational fees from the Partnership. For the year to 31 March 2012, these fees amounted to £0.7 million (2011: £0.9 million).
Funding
A five year term development loan of £62.7 million is in place from the Royal Bank of Scotland plc and HSBC Bank plc to further fund the Partnership.
The Partnership’s policy is to fix the interest rate on at least 50% of drawn amounts to 30 June 2013 (as required in its facility agreement), and to leave the balance benefiting from the currently low levels of short term interest rates. £31.8 million of the £62.7 million drawn down at 31 March 2012 has been fixed to 30 June 2013 at a weighted average interest cost post margin of 5.5%. The weighted average interest cost of the overall facility at 31 March 2012 was 3.9% including margin. Following the year end the partners reduced the outstanding debt drawn to £60 million, through repaying and cancelling £2.7 million of the facility.
Results
For the year ended 31 March 2012, the Partnership made a loss of £1.8 million (2011: profit of £5.5 million). This loss arose following the valuer’s assessment of the impact of the proposed imposition of VAT on self storage. Big Yellow’s share of this loss was £0.6 million (2011: share of profit of £1.8 million).
The operating profit of the Partnership was £1.8 million (2011: £0.2 million), with the majority of the stores being profitable at the operating level. After adjusting for non-recurring items (revaluation losses of £1.4 million, and fair value gain on interest rate derivatives of £0.4 million), the Partnership made an adjusted loss of £0.8 million (2011: adjusted loss of £1.9 million), of which the Group’s share is £0.3 million (2011: share of loss of £0.6 million). The Group earned management fees from the Partnership of £0.7 million in the year (2011: £0.9 million). The Partnership is tax transparent, so the limited partners are taxed on any profits.
Big Yellow has an option to purchase the assets contained within the Partnership or the interest in the Partnership which it does not own exercisable from 31 March 2013. On exit, whether by way of exercise of the option or a sale to a third party, Big Yellow is entitled to certain promotes, which could result in Big Yellow sharing in the surplus created in the Partnership ahead of its equity participation.