Pramerica forms joint venture with Big Yellow (UK/US)

Pramerica Real Estate Investors has announced the formation of a joint venture investment partnership with Big Yellow Group Plc (LSE: BYG) to develop and operate self-storage units throughout the Midlands, Northern England and Scotland. Pramerica is the real estate investment and advisory business of Prudential Financial, Inc. of the United States (NYSE: PRU)

The joint venture renews Pramerica's relationship with Big Yellow. Pramerica first invested in the company in September 1999 when Big Yellow had just one operating store. Pramerica remained an investor when the company listed on the London Stock Exchange in 2000, and exited in February 2005, by which time Big Yellow had grown to a market leading company operating 31 stores with an additional 11 under development. Today Big Yellow operates 45 stores with a further 27 under development.

For this new venture, Pramerica and Big Yellow will invest up to £50 million (c. €65m) and £25 million (c. €32m), respectively. The partnership has secured an additional £75-million (c. €79m) loan from the Royal Bank of Scotland PLC to fund investment and development.

To launch the venture, Big Yellow has initially agreed to sell five sites currently under development to the partnership, along with an existing store in Leeds, which has 71,644 ft. of net rentable space. Big Yellow Group has also entered into a conditional agreement to sell two additional development sites in Manchester and Birmingham to the partnership.

Pramerica and Big Yellow have agreed to work exclusively with each other for four years within the joint venture's target region. The partnership aims to build high-quality, self-storage buildings with 50,000 to 60,000 ft² of storage space targeting key cities including Edinburgh, Glasgow, Liverpool and Sheffield. Big Yellow will manage site acquisitions, oversee development and operate the stores.

The U.K. is the most developed self-storage market in Europe, and the U.K. Self Storage Association currently estimates that the industry has the potential to grow by a rate of about 15 percent annually. Big Yellow is a leading company in the U.K., with a portfolio of more than 40 stores, primarily situated across London and Southern England.

Commenting on the joint venture, Philip Barrett, Pramerica's chief investment officer for merchant banking in Europe, said: "We are delighted to renew our relationship with Big Yellow. This partnership not only gives our investors an opportunity to benefit from the growing U.K. self-storage market, but enables them to participate in the growth of one of the most visible and respected self-storage operators in the U.K."

To date, Pramerica has invested more than $2 billion for its investors in the self-storage sector worldwide, including a 2006 investment in Spanish self-storage operator Blue Self Storage. In the U.S., the company's portfolio includes a $1.5 billion investment in 2005 to acquire Storage USA in a joint venture transaction with Extra Space Storage.

Source: Tavistock

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