Las Vegas-based Crystal View Capital is making a bigger move into the self-storage industry with its latest private equity fund, Crystal View Capital Fund II. The $35 million fund is focused exclusively on buying self-storage and manufactured home properties across the Western U.S. To date, 60 percent of its growing portfolio is comprised of self-storage assets.
Crystal View Capital is hoping to build on the success it found with its first fund, which was recognized by Preqin as one of the top performing value-add private equity funds in 2018. Although Fund I invested across different property types, a large portion of the portfolio, about 35 percent to 40 percent, was concentrated in self-storage assets.
“Those properties produced a strong cash flow, which has allowed us to achieve a 63 percent IRR,” says Matthew Ricciardella, principal and managing partner of Crystal View Capital.
That performance has helped spur more investor interest in Fund II. So far, the fund has raised $11.2 million of its target capital raise and has been busy putting that capital to work. Since its launch nearly 18 months ago, Fund II has acquired five self-storage assets. In addition, it has about $14 million in acquisitions that it expects to close on within the next 60 days that include three self-storage properties.
Finding off market deals
Crystal View is one of many new entrants working to grow portfolios in a very competitive self-storage sector that is continuing to attract new institutional and private equity capital. One way that Fund II has been able to maneuver in that crowded market is by focusing predominantly on acquiring off-market properties.
Crystal View has an in-house team of five sales people that are making between 100 and 300 calls a day to reach out to self-storage property owners direct to cultivate relationships, adds Ricciardella.
“Sometimes it takes years, but if the returns are there – it’s all worth it,” he says.
Turning things around
Specific to self-storage, the fund is looking for Class B quality assets in secondary markets that are owned and managed by a single operator where there are some existing issues, such as below market rents, unusually high operating expenses or deferred maintenance that might be impacting occupancy. Crystal View looks to identify and solve those inefficiencies in a relatively short period of time to stabilize the asset.
The aim is to step in and breathe new life into a property, and ultimately raise property values in the process, says Ricciardella. From there, the fund strategy is to monetize the asset, either with a sale or refinance that allows fund managers to pull capital out to realize the gains and reinvest in a new opportunity, he adds.
Ideal investment properties are those that are producing enough income to support on-site management with a minimum cash flow of about $25,000 per month, which generally includes properties that range in size from 40,000 to 120,000 square feet. In some cases, Crystal View will bring in new management or leverage existing management staff to turn around under-performing assets.