Accounting & Advisory for Self-Storage Owners – New Development Case Study

In 2019, the soon-to-be owners of a substantial five-acre property in regional Victoria sought the expertise of Ewen Fletcher at Sharp Accounting to navigate the complexities of a greenfield self-storage development. Although adept in business operations, the clients were newcomers to the self-storage industry and relied on Sharp Accounting to play a pivotal role in all financial aspects of the project.

Sharp Accounting’s Involvement:

Sharp Accounting’s engagement spanned across various stages of the self-storage development, including:

Development stage: establishment of purchasing and business entities, financial projections and obtaining of bank financing.
Stages 2, 3 & 4: financial projections, establishment of operating software (Sitelink/Xero), ongoing budgeting and obtaining further bank finance.
Ongoing services: including taxation planning and minimisation, budget and cash flow projections, strategic advice and business profitability improvement advice.

Key Steps:

Step 1: Business Structure

With a greenfield development, the initial step involves establishing the optimal structure or purchasing entity. This step was critical as it determined asset protection, future tax obligations, and the eventual taxation impact of any sale. Considering the significant financial implications involved, Sharp Accounting ensured a thorough approach tailored to the specific needs of the project. The owners/purchasers for the greenfield site were a mix of self-managed superannuation funds (SMSFs) and companies.

Step 2: Development Budget and Cashflow

Following the completion of an external feasibility study, Sharp Accounting was tasked with developing construction budgets and cashflow projections. These meticulously crafted budgets provided the owners with confidence regarding key project milestones and construction payment schedules, ensuring a smooth progression toward completion.

Step 3: Obtaining Bank Finance

Banks and other financiers generally require an external valuation to be completed before providing lending. To support this process, Sharp Accounting developed three-year forward projections of unit fill rates and an operational cash flow/budget to provide targets for focus and also to determine when the self-storage operation would become cashflow positive. Additionally, the team developed best, middle, and worst-case projections for the first three years of operation, providing comprehensive financial insights to the clients.

COVID-19 Impact

This particular client’s launch also coincided with the onset of the COVID-19 pandemic. While adding complexity to the project’s financial management, the surge in demand for self-storage during this period contributed to a strong start in the business’s financial performance. Sharp Accounting worked closely with the team to navigate these unprecedented challenges and capitalise on the opportunities presented.

Due to the demand during the COVID period, the self-storage development quickly progressed from the initial stage to a further three stages in the first three years of operation (both an opportunity and a challenge). Ewen and the Sharp Accounting team worked continuously with the financier and valuers to ensure each stage’s lending was obtained.

Industry Experience & Tailored Solutions

Sharp Accounting’s unwavering involvement from project inception to ongoing operations underscores their deep industry experience and commitment to providing tailored solutions, ensuring clients receive unparalleled support and guidance across all stages of the self-storage business. Find out more about Sharp Accounting’s self-storage industry experience here. Sharp Accounting is proud to be an industry supplier and part of the Self-Storge Association of Australasia.

Ewen explains the importance of working with a self-storage specialist in the short video below: