This year InfraRed NF, a Hong Kong based private equity real estate fund, has celebrated a decade of business in mainland China with investments totalling US$1.4bn. The joint venture between InfraRed and property developer Nan Fung Group has been focusing on value-add investing in China’s first-tier cities and mezzanine financing.
Stuart Jackson, Chief Executive Officer of InfraRed NF, points out that the firm’s preference for the first-tier cities is based on the relative maturity of the market and robust demand for all sectors, which provides sufficient liquidity to exit value-add investments. On the other hand, residential in Tier 2/3 cities provide attractive opportunities for mezzanine lending activities.
Most recently, the firm has entered the self-storage market, investing c.US$28m into China Mini Storage (“CMS”), one of the largest self-storage operators in China. Currently, CMS operates 12 self-storage facilities in core areas of Beijing and Shanghai as well as around 20 lockers in Beijing.
Hans Kang, Chief Investment Officer of InfraRed NF, says that that CMS stood out by its operating model, which incorporates sophisticated IT infrastructure that enables online booking and payments. One of the advantages of this model is higher operational margins compared to the competitors and the potential for a quick expansion across tier-one cities.
The funds from the investment will be used for the expansion of the storage facilities, further enhancement of the IT systems and a wider marketing campaign.
Mr. Kang added that rapid urbanisation, climbing property prices and the growth of e-commerce market have created a huge demand for mini-storage.
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