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Alpha return for Asia’s first self-storage fund

Palmer Capital’s exit from the Big Orange Self Storage (BOSS) Partnership is expected to deliver a 24 percent-plus internal rate of return to limited partners.

Palmer Capital has fully exited the assets and operating business of the Big Orange Self Storage (BOSS) Partnership for a total of $136 million, netting underlying investors an expected IRR of more than 24 percent, the company has revealed.

London-based Palmer inherited the management of the self-storage fund as part of its takeover of Invista in 2012, when BOSS employed 30 staff and owned five properties. The valuation at the time was $96 million.

However, under Palmer Capital’s management, occupancy levels at the properties have been driven up from 72 percent to more than 78 percent. In addition, BOSS’ market share of the Hong Kong and Singapore self-storage sectors have risen from 3.7 percent and 12 percent to 4.2 percent and 14 percent, respectively.

When Palmer took over the fund – Asia’s first commingled self-storage fund when it launched in 2009 – the asserts consisted of the Sha Tin, Woodlands, Bukit Batok, Hougang and Tamanies facilities – all but one being in Singapore. After a period of management, it went about a sales program earlier this year, which has led to the sale of Sha Tin to a local Chinese investor for HK$498 million ($64 million), a 29 percent premium to a valuation by Cushman & Wakefield in September 2012; and the sale of the BOSS operating business and remaining four Singapore assets to an Asian trade buyer for SG$90.5 million ($71.5 million), a 20.3 percent premium to a December 2012 valuation. Twenty-six staff have been transferred to the Singapore buyer, and the remainder to the Hong Kong buyer.

“The divestment reflects a successful conclusion to a fund that has had management issues prior to Palmer Capital assuming control. The total return for the investors is expected to provide an overall IRR in excess of 24 percent, following a portfolio divestment in excess of 20 percent over the open market valuations as provided by Cushman & Wakefield,” said the company.

The BOSS Partnership was launched four years ago as a joint venture by Invista International Fund and Oakhill, a US investor, who originally acquired an asset from Babcock & Brown. In June 2012, Palmer took over Invista, which had £749 million (€927 million; $1.2 billion) of assets, including a pan-European opportunistic fund and an Asian core-plus vehicle.

IREOF, the European fund, was launched in October 2007 to capitalize on mispricing and distress in the UK and Continental Europe, with Invista managing to raise £56 million at first closing.

IREIF, the Asia version, was launched to focus on the mature Asia-Pacific real estate markets of Hong Kong, Japan and Singapore. It was Invista’s initial step in developing an Asia-Pacific platform and was designed to diversify its investors’ exposure.