In­ter­est­ing deal

Finweek English Edition - - MARKETPLACE SIMON SAYS -

Stor-Age Prop­erty is do­ing an in­ter­est­ing deal to ul­ti­mately ob­tain a new stor­age com­plex in Bryanston. The com­pany is selling land to a re­lated com­pany (Stor-Age Prop­erty Hold­ings Pro­pri­etary), which will de­velop the land and then sell the devel­op­ment back to Stor-Age Prop­erty at a fixed cost and with a guar­an­teed ren­tal agree­ment for three years at a ren­tal of R160 per square me­tre. This is a great rate con­sid­er­ing its last set of re­sults in­di­cated an av­er­age ren­tal for the group of R86 per square me­tre.

Over­all this deal does re­duce the risk for Stor-Age Prop­erty and guar­an­tees ren­tal in­come above Stor-Age’s av­er­age. It is a re­lated party deal with the two com­pa­nies shar­ing three di­rec­tors, but it has been de­clared and in­vestors can de­cide if they’re be­ing prej­u­diced. My sense is that it seems above board. Stor­age is a big seg­ment in de­vel­oped mar­kets, al­though I have writ­ten be­fore about my con­cerns of the cost of client ac­qui­si­tion as the av­er­age ren­tal pe­riod is rel­a­tively short. How­ever, clever use of on­line marketing can help to man­age the cost is­sues even with high client churn.

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