Savills IM’s Jeffrey: Samsung alliance is a ‘game changer’

The Korean insurer’s $1bn commitment will initially be allocated to three of the firm’s Asian and European real estate funds.

According to Alex Jeffrey, the global chief executive of Savills Investment Management, the alliance between London-headquartered Savills IM and Korean insurer Samsung gives the manager “the best of both worlds” – a deep balance sheet and autonomy.

Following Samsung Life’s acquisition of a 25 percent stake in Savills IM in May, the insurer will commit to the firm’s flagship Asia-Pacific Income and Growth Fund, Japan Residential Fund II and European Real Estate Senior Debt V as part of its intended $1 billion commitment to Savills IM over the next four years.

With a strong ambition to grow in the Asia-Pacific region and to rebalance its business in this direction, the capital commitment from Samsung Life will help to increase the firm’s regional AUM from less than 10 percent now to one-third of its total AUM within the next five years, according to Jeffrey.

Under the agreement, Samsung Life has the option to increase its interest in Savills IM by up to a further 10 percent, depending upon the quantum and timing of the capital allocated to Savills IM’s investment products – the maximum being achievable if at least $2 billion of capital is committed.

The majority of the capital from Samsung will go to the firm’s new products, according to Jeffrey. “As you can imagine, one of the constraints on growth for a GP like us is marketing blind pool funds to clients,” he explained. Aside from the three existing funds, Savills IM also expects to launch a mix of European and Asia equity and debt products over the course of next year. The vehicles will likely focus on specific sectors, such as logistics and residential debt.

“It’s a game changer,” Jeffrey said of the deal. “We believe this transaction is unprecedented. It’s the first time a GP has gained support of a major financial institution in this way, in such a large volume, without ceding control.”

For Savills IM, the alliance will provide financial firepower from both Samsung and its Korean clients while allowing the firm to maintain its operational and investment independence, according to Jeffrey. As Savills IM is planning to grow in Asia-Pacific, Samsung SRA can also help to identify and manage local investments. “It is a combination that’s very hard to match,” Jeffrey added.

For Samsung, the transaction will enable the investor to diversify its business away from life insurance. Taking an equity stake in a real estate business like Savills IM gives Samsung and its extensive network of Korean clients the ability to invest more internationally, particularly in Asia and Europe. “We’re giving them a ready-made suite of products that is marketable to their clients and with the view to boosting their growth prospects,” Jeffrey said.

Savills IM and Samsung’s relationship dates back to 2017, but the dialogue for the alliance did not kick off until October 2019, shortly after Jeffrey came on board to become the chief executive officer of the business. The transaction took a year-and-a-half to complete, given the disruption caused by covid-19.

This is the first time that Savills IM has sold a stake in the business to a third party. The firm was partly owned by management when it was set up in the early 2000s and then became fully owned by Savills.

Jeffrey added that the firm had been approached numerous times over the years by potential joint venture partners or buyers, but it had never engaged in serious discussions until Samsung Life: “They offered a unique combination of characteristics where we would able to achieve significant financial support for new product launches without ceding control. That would have been hard to achieve with anyone else.”

He told PERE that maintaining autonomy was critical for Savills IM, as the firm’s existing investors wanted to ensure that the investment decisions would continue to be made by the same people and in the same governance structure.

“There was no question about autonomy being compromised, which was always important to us to preserve our relationship with other investors,” Jeffrey noted.

Apart from normal minority protections, the insurer will get a seat on the management board of the company, where it will have the ability to provide input.