InfraRed NF, the joint venture platform set up between the global investment manager InfraRed Capital Partners and the Nan Fung Group, made a $28 million investment in China Mini Storage, a self-storage operator in China last month. For the partnership, there are a few reasons why the investment is compelling.
1. Tech-savvy
2. Cost reduction
According to Hans Kang, chief investment officer at InfraRed NF, the unique operating model is also cost-effective. The use of WeChat and other technologies helps to achieve a lower operating cost as compared to a traditional self-storage facility in Hong Kong, although Kang declined to specify.
3. In the basement
InfraRed NF backed China Mini Storage via its $360 million InfraRed NF China Real Estate Fund II, which targets value-added and mezzanine investments in Greater China. InfraRed is structuring its investments in the self-storage sector as a value-added play whereby it would purchase unutilized basement
space and convert it into storage units. The choice of basement space is a strategic advantage because not many managers are looking to buy this space.
4. Better than retail
Stuart Jackson, chief executive for InfraRed NF, told PERE his firm is targeting double-digit net operating income yields from this self-storage investment. This is double what could be achieved from repositioning the basement into retail outlets, for instance.
5. Future potential
With rising property prices in tier 1 Chinese cities, the sizes of residential apartments are being squeezed, leaving little room for storage. According to Jackson, this lack of space will drive growth in the sector. Over time, InfraRed plans to grow its self-storage platform to more than one million square feet across Shanghai, Beijing, Guangzhou and Shenzhen.
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