Fox Moving & Storage has acquired its 17,000 sqft premises in Stourbidge, West Midlands after occupying the site as a tenant for almost forty years.
“We were facing a heafty rent increase of around 30% and the landlords were reluctant to commit to major improvements,” said Fox’s Managing Director Paul Fox. “After two years’ of negotiations we were no further forward and neighbouring rents were rising, which meant the boot was very much on the landlord’s foot. We faced mounting legal fees and arbitration costs to resolve the matter.”
Paul explained that during the negotiations his company’s plans to expand its self storage operations were put on hold. “A terse meeting with the MD of the property company resulted in a head to head when a challenge to put up or sell up was made,” he said. “An inflated price was quoted as perhaps a bluff and this was accepted on the spot. I was doing the mental arithmetic whilst shaking hands. In my view, exchanging rent for a mortgage at similar monthly payments was a no-brainer.”
He said that by buying the site his company will be investing in its own property and securing its long-term future in the area. “Without this control we may at some stage have been forced to relocate,” he said. “That would have carried huge costs in transferring our self store operation as much of the internal structure would have to be removed and scrapped. The present site is close to the town centre and is very prominently positioned next to the ring road. We would never had been able to find a nearby site, because land just isn’t being made available any longer. The option of replacing our existing premises with a purpose-built, out-of-town facility would have run to perhaps £3m. Even then we would have lost presence and faced the prospect of the landlord leasing our old warehouse to another self storage operator, who would have effectively stepped into our old shoes.”
Negotiations, however, were far from easy. “Our landlord, of course, drove a very hard bargain, both on the price of the site and management charges whilst holding interim rental payments and dilapidations they always claim at the end of a tenancy. We also needed 1.5 million pounds in funding from the bank, so there were a lot of negotiations between solicitors: the landlord’s, the bank’s, and our own. Additional security was needed from Fox’s other properties and all along we half expected the landlords to change their minds or raise the asking price.”
Paul is confident that it will all be worth it, despite the uncertainties brought on by Brexit and the current political situation. “We found that even in the 2008 recession the self storage side of our business remained strong and continued to grow. So, if the economy does take a turn for the worse, I am confident that we have enough resilience built into the business to ride another major storm.”
The acquisition of the Stourbridge site means that all six of Fox’s properties are now owned by the company, rather than being leased. “I would advise people in the moving business to buy their properties if they possibly can, rather than pay rent,” said Paul. “This is a business with relatively small margins, so if you can build up a property holding funded by the operational business, this should protect your business and your own personal security, when the time comes to retire or cash out. Also, you’ll not have to put up with ever increasing rent and the sometimes ‘amoral’ tactics of professional landlords.”
Paul said that the money previously set aside for dilapidations will now be used to fund a two-year refurbishment programme, which will include repairs to the roof, reconditioning of cladding, new windows, new signage, office refurbishment, yard fencing and the addition of another floor to the self storage mezzanine. This will result in considerable improvements for Fox’s local staff, its customers and take this successful branch onto a new chapter.
Photo: Paul Fox (left) with Adrian Coles from NatWest.