The real-estate division of Samsung Asset Management is looking to forge partnerships in the US, UK and other developed economies where distressed asset sales are expected to take place this year, says Young Chai, senior managing director in Seoul.
“The global economy may throw up an opportunity,” he says. It would be difficult for Samsung to underwrite an overseas asset, but it can bring its Korean investor base to the scene.
The firm’s real-estate funds business began in 2009, although many of its senior investors and operational experts have worked at Samsung Life Insurance, which has been investing in real estate for 40 years.
So far it has launched three funds with a total asset size of $800 million and net AUM of $500 million. These have been club deals, with Samsung first identifying local assets and then building funds around those, so the vehicles have been fully invested from the start.
In Korea, it invests in core and core-plus buildings to provide a stable return for local institutional clients. It favours centrally located, well-leased office buildings whose yields can safely beat government bonds. Its funds are targeting an internal rate of return of 8-10% over five years. In 2011 it also launched a small infrastructure fund.
If the firm goes overseas, it will limit investments to core assets.
Chai says the first phase of business was about establishing Samsung locally. Today it is the fifth largest real-estate fund manager, in terms of hard assets. The next step is to bring Korean clients to international opportunities.
The third phase of business development will be to market Korean assets to international investors, but that requires more time to build a track record, as well as improve functions such as reporting and client service. However, the firm has already begun to identify possible investors abroad.