* Plans to raise yuan fund, pan-Asia foreign currency fund this yr
* Expects a shopping mall deal in smaller Chinese city soon
* Seeks JVs, asset management license in China
By Clare Jim
HONG KONG, May 28 (Reuters) - Savills Investment Management is looking to raise a yuan fund in 2018, as part of its efforts to grow in China and double its assets under management (AUM) in Asia over the next few years, the CEO of the real estate investment firm said.
It plans to tap into the growing popularity of real estate equity products in China amid tougher scrutiny over debt products and is already seeking joint-venture partners for different projects, CEO Justin O’Connor added.
Savills, which expects to sign a shopping mall deal in a small Chinese city this year, will turn to local investors for the yuan fund, O’Connor added, without providing an estimate for how much he sees the fund raising.
“Foreign investors probably won’t follow us into tier-3 and 4 cities, (which they) haven’t heard of, while a domestic investor would say, I know that city, I grew up there,” he said.
O’Connor will be moving to Hong Kong from London this year, in line with Savills’ Asia focus. The firm expects to gets its asset management license in China within a few months.
Savills also plans to raise a pan-Asia fund this year, aiming for at least $1 billion in AUM and high single-digit returns. It will focus on the developed market and offices.
Savills currently has $2 billion in AUM in Asia, with Japan accounting for more than half. It hopes to double this to $5 billion in the next few years, helped by growth in China.
“There’s enormous opportunity to work with RMB capital to invest in China ... It’s going to be very difficult to find opportunities necessary to match the return profile of China investors, so we’ll be looking very much to the third and fourth-tier cities,” O’Connor said.
Savills, which has 16.6 billion euro ($19.38 billion) AUM globally, will focus on revamping out-dated malls in smaller Chinese cities to recapture traffic at a time when malls are facing increasing headwinds from e-commerce.
It is also looking to work with local asset management firms to meet demand for equity investment products, O’Connor said.
Many domestic asset management firms invest in real estate financing, where the investor acts as a lender to the property development. In equity investments, the investor holds a stake in a specific property and share profit from income.
“A lot of domestic asset management companies don’t have the experience (in equity) ... that allows for far more opportunities for us to JV with asset management companies on the distribution side,” O’Connor said. ($1 = 0.8565 euros) (Editing by Himani Sarkar)