Samsung Life, the largest life insurance company in South Korea, is entering into a strategic partnership with a subsidiary of Savills in a deal that will give the asset management arm of the real estate adviser $1bn in firepower for its funds and increase its momentum with Asian investors.
Under the terms of the deal, which was announced on Thursday, Samsung Life will take an initial 25 per cent stake in Savills Investment Management for £64m, giving the transaction an enterprise value of £256m.
The South Korean group will commit $1bn of capital to seed and co-invest in real estate equity and debt strategies across Europe and Asia, and help Savills Investment Management capture additional capital from investors in South Korea and the wider Asia-Pacific region.
The deal marks the latest example of Asian buyers pouring money into European property and infrastructure. In 2018, the real estate arm of Samsung Life bought a London office building, 200 Aldersgate, for an estimated price of up to £320m. The following year Germany’s Aquila Capital entered into a partnership with the infrastructure arm of Japan’s Daiwa Securities, while in December Singapore asset manager Sun Venture agreed to pay £552m to the UK’s Land Securities for two buildings in the City of London.
Young-muk Jeon, chief executive of Samsung Life, said that the deal would “help us expand our real estate investment network globally . . . and accelerate Savills Investment Management’s growth over the long term”.
Savills Investment Management recorded a pre-tax profit of £14.9m last year. It has €21.2bn in assets under management and oversaw €2.5bn of transactions last year, according to its website, making it a fraction of the size of the world’s biggest real estate investors like Blackstone and Nuveen, and the property arms of groups such as Axa and M&G.
“The whole idea is that investment managers like Savills Investment Management take time to build up funds by attracting third-party capital,” said Chris Millington, analyst at Numis. “The magic ingredient is finding a group with a big balance sheet you have a relationship with who can seed and scale funds.”
He added: “Once you reach scale it allows more inflows from other third parties because they’re not such a large portion of the mix.”
Samsung Life is an important strategic asset for the powerful Lee family which controls the broader Samsung group of companies, because it has a crucial shareholding stake in Samsung Electronics, South Korea’s biggest company and the family’s crown jewel.
However the future of the insurance unit has been questioned as the family faces the potential threat of carving off non-core assets over the next five years, owing to the cost of paying off a 60 per cent inheritance tax bill on the roughly $20bn fortune of the late Samsung patriarch Lee Kun-hee who died last year.
Alex Jeffrey, chief executive of Savills Investment Management said that the transaction “will significantly enhance and accelerate our ability to provide attractive investment products for all our investment clients.”
Samsung Life was advised by Fenchurch Advisory and EY.
Additional reporting by Edward White in Seoul