Savills IM to launch second Japan fund as part of Asia drive

Savills Investment Management is looking to launch a second Japan fund as it expands in Asia.

Chief executive Justin O’Connor told IPE Real Estate that the firm will follow-up on its Greater Tokyo Office fund.

“I see that as a particular opportunity in Japan,” he said. “It is the second largest investable institutional market outside the US.”

The Greater Tokyo Office Fund raised $120m (€107m) in a first close. By November, it is expected to have raised around $250m, O’Connor said.

He also said the firm is also opening offices in Sydney and Shanghai as part of its Asia Pacific expansion. Launching funds in Australia is also on the cards.

The firm, aiming to build out an Australian platform over the next six to 18 months, has recruited Jennifer Johnstone-Kaiser, who spent the last 15 years acting as a consultant for Australian super funds.

Savills IM currently has jointly-owned assets in Australia worth about AUD200m (€129m).

Johnstone-Kaiser said 30 large super funds account for AUD70-AUD80bn in real estate holdings, and a few of the largest, such as AustralianSuper and Australia’s sovereign wealth fund, the Future Fund, are big enough to mandate global managers to make offshore investments.

With strong inflows of super contributions, the funds expect to double in size every five years, she said.

“We think the best opportunities will come from small super funds,” Johnstone-Kaiser said. “There are about 100 small funds, and collectively they have an allocation of AUD110bn to real estate.

“The physical market size of Australia’s real estate market is 2% to 3% of the global market, so there is a lot of capital chasing very finite opportunities – it makes sense to go offshore,” she told IPE Real Estate.

Savills IM could, she said, set up a pan-European fund or create clubs and joint ventures.

Savills IM currently manages around $20bn in real estate assets, mostly in Europe.

It currently runs two funds out of Singapore, one of them a vehicle handling the Asian investments of Spezialfonds as a regulated German entity. The other is a mandate from a Nordic insurance firm investing across Asia.

O’Connor said the firm’s acquisition of Merchant Capital in Japan, and followed by the SEB Asian platform, based in Singapore, provide a launch pad into Asia.

“We see more money is coming into Asia because, firstly, there is more investor appetite and, secondly, the markets are repricing so that it makes sense to start to invest,” O’Connor said.

He added that assets are likely to come on the market in China in “special situations”.

O’Connor said Savills IM is on track with its pan-Asia core plus fund, which will seek to raise between $300m and $500m (€268m to €447m) to acquire assets with a gross value of around $1bn.

Asia, he said, offers “fantastic opportunities” because barriers of entry are low and the investment management industry is “at a young stage of growth”.

“We will be reasonably aggressive in growing our business in Asia,” he said, adding that while it is difficult to put a time frame, his aspiration is for Savills IM to become one of the top 10 managers in terms of assets under management in Asia.

After Asia Pacific, Savills IM will look to establish in the US either by acquisition or organic growth, he added.