Savills and China Minsheng launch global property JV
Savills Investment Management has unveiled a joint venture with China Minsheng Investment Capital (CMIC) to develop a series of high-yielding global property funds to sate demand from expectant mainland investors.
UK-based Savills IM claimed the venture, called CMISIM and only signed at the start of this week, was the first of its kind between an international property manager and a private Chinese investment company.
The head of Savills IM said the firm was compelled to form the partnership because doing it alone would have been too difficult.
The venture is now preparing an initial fund focused on Europe with a targeted net return of 15%. CMIC has agreed to provide £30 million ($46.8 million) of seed capital as a cornerstone investor.
Justin O’Connor, chief executive of Savills IM, said that the fund would not open to additional investors until after the summer and that there was not a target size for the fund yet. The priority would be to utilise the seed capital to establish a track record.
He said that Asian investors, in particular, want to see a manager demonstrate an ability to invest funds quickly before committing capital.
Once a track record for the first fund is established, O’Connor anticipated that fundraising for a second fund would start later this year. He declined to give details on fees.
CMIC additionally will invest £20 million as a limited partner in Savills IM’s existing Prime London Residential Development Fund II, launched last year.
O’Connor explained that that investment would give CMIC access to deal flow, so that the new fund could invest in deals alongside the existing prime London fund.
The European fund will make early-stage co-investments alongside property developers in off-market transactions. Investing at the development stage should help the fund achieve its 15% targeted net return.
O’Connor confirmed that the Greater China team, led by Jin Guo, had been looking for a joint venture partner as a way to access mainland Chinese capital and fill a gap in overseas real estate funds.
He described CMIC as a conduit for Chinese capital to invest overseas in the wake of “directional support from the [Chinese] government” for increased overseas investment in the form of the One Belt, One Road initiative.
The plan was to market the funds to “as wide an audience as possible” in mainland China – ranging from high-net-worth individuals to corporates – said O’Connor.
CMIC was set up in July 2014 to make strategic investments in the financial sector. It is a subsidiary of China Minsheng Investment Corporation, which was founded last May by 59 private companies in China with registered capital of Rmb50 billion ($8.05 billion).
The formation of the JV this week follows Savills IM’s acquisition of SEB Asset Management, which will more than double its global AUM to €17 billion ($19.1 billion) once it is approved over the next couple of months.
That deal will see Savills IM’s Asia AUM rise to $2.3 billion, including around $200 million from the June 5 first close of its Greater Tokyo office fund, which is targeting a $300 million final close.
O’Connor said that the flexibility of its deal with CMI could see funds established by the joint venture investing in funds such as Savills IM’s Greater Tokyo office fund.