The scheme seems to have run like this: people were encouraged to buy storage pods for sums of several thousand pounds, Each pod was registered as a separate property with the land registry. These were then leased back to a subsidiary company of Storefirst who rented them out as part of as self storage business. Owners receiving a guaranteed 8% per year in rental fees for the first two years. In my friends case this was paid for the two years but immediately this period was up the company invoked the break of the lease which was possible after the two years was up. There is now no income on the investment and he is left trying to find someone to rent the pod - a process which is entirely under the control of Storefirst. The company offer to buy back the pods, but this seems to be a process that takes ten years and makes the (big) assumption that the company is still trading at that point.
The scheme was promoted and sold through independent financial advisors with the help of a promotional video featuring Quentin Willson:
You can find a summary of the sales prospectus here (no mention of a two year break point).
The Self Storage Association has queried Storefirst's business strategy here (PDF file).
A very serious question arises over how Store First is funding the guaranteed returns to existing investors...
It may yet prove to be the case that the rental returns being paid to investors are in fact being funded from the sale proceeds of new units, and not the operation of the self-storage business.
If this is indeed the case, then the Store First business model would not appear to be sustainable.
Storefirst subsequently rebutted this in this article.
However, Storefirst are still selling new pods in spite of existing ones that re not being rented out. I would like to know the scale of this problem. How many people have had the leases broken after two years and what has happened to them?
The Financial Conduct Authority issued a warning to financial advisers in January over this and similar unregulated investment schemes which financial advisers were recommending pension transfers into.
It seems to me that if this was a conventional investment in a private company you would have been able to protect the investment through preference shares or other guarantees, but as these have been structured as property transactions it would make it very difficult to get compensation through a court. According to an article written by Tony Hetherington at This is Money:
So have FCA investigators taken an interest in Store First as well? Yes they have. But Whittaker has advice from a top barrister who says his sale of storage pods is not an illegal collective investment scheme. Investors do not have to let Store First manage their pods. They can find their own storage customers, and find their own buyer if they decide to sell their pod.
Whether or not the scheme is sensible, safe, and financially sound is debatable. Its boss has attracted the attention of investigators more than once, and its marketing claims do not all hold water.
To add further to my concerns, the principal shareholder in Storefirst appears to be a man called Toby Whittaker. Described as a "property millionaire" he seems to have had a number of businesses fail leaving investors out of pocket.
In 2010 he was robbed at knifepoint at his home. According to the Daily Mail:
The buy-to-let boom earned Mr Whittaker a fortune, but last year the firm's residential arm collapsed with debts of £100 million.
Hundreds of investors lost deposits of up to £20,000 on apartments whose construction has now been put off indefinitely.
Among them was Manchester United star Ryan Giggs, who had put down £20,000 on a flat in Clippers Quay in Salford.
Angry buyers exchanged messages on websites demanding to know how to get their money back.
Some claimed they had been asking for refunds for months before the firm went into administration but instead were told their deposits were being transferred to other projects.
One investor was reported to have staged a ten hour sit-in at the company's head office in Padiham, Lancashire, until bosses agreed to give him a refund.
Top legal firms are now representing scores of people seeking to get their money back from Mr Whittaker, whose other firms are still trading.
At the same time, police were investigating an alleged insurance fraud relating to another burglary at his home, and he is due to stand trial over the matter later this year.
He was at home in his secluded hilltop mansion near the Lancashire village of Read on Thursday evening when the masked gang staged their raid.
Despite a wall and six-foot electronic gates, they managed to evade security and burst in, armed with a crowbar and a Bowie hunting knife.
After forcing his 32-year-old wife and four children to cower under a table they beat up Mr Whittaker before ransacking the house for jewellery and fleeing in the family's £60,000 Audi Q7 4x4 car.
Lancashire Police confirmed detectives were investigating Mr Whittaker's business dealings as a possible motive for the raid.
As I said at the start of this article, I have no personal involvement in this scheme other than having been asked to help someone else extricate himself from it.
Have you invested money in Storefirst Limited?
Has your lease been broken after two years?
Have you tried to resell or sell back the pod?
Please leave a comment and I will see what comes of this.