Friday, February 24, 2012

Interview: Mr. Robert McKellar, CEO- Asia Pacific, Savills Asia Pacific Ltd.

The Savills Group, established in 1855, advises on allmatters of commercial, residential and leisure properties. It provides a comprehensive range of advisory and professional property services to developers, owners, tenants and investors alike. These include consultancy services, facilities management, space planning, corporate real estate services, property management, leasing, valuation and sales in all key segments of commercial, residential, industrial, retail, investment and hotel property. The company which is listed on the London Stock Exchange, has an international network of more than 200 offices and associates throughout the Americas, the UK, continental Europe, Asia Pacific, Africa and the Middle East, offering a broad range of specialist advisory, management and transactional services to clients all over the world. In Asia Pacific, it has over 44 regional offices comprising 20,000 staff. This regional market includes Australia, China, Hong Kong, Japan, Korea, Macau, Taiwan, Thailand, Singapore, Vietnam, with associate offices in Malaysia, Indonesia and New Zealand. As noted by Mr. Robert McKellar, Chief Executive Officer- Asia Pacific, Savills Asia Pacific Ltd., the company offers a unique combination of sector knowledge and entrepreneurial flair, giving clients access to real estate expertise of the highest caliber. “We choose to focus on a defined set of clients, offering a premium service to organizations and individuals with whom we share a common goal. Last year our revenue was approximately $500 million. We sold $9.2 billion worth of real estate in 2011, guided over 21000 valuations for $320 billion,managed over 111 million sq. m. of real estate property and leased over 2.4 million sq. m. for commercial, industrial and retail,” he noted Savills is synonymous with a high quality service offering and a premium brand, taking a long term view of real estate and investing in strategic relationships, he said. Mr. McKellar was appointed CEO, in March 2005 and is responsible for overseeing Savills’ regional operations across the Asia Pacific region. He relocated to Seoul in July 2009 to be able to focus more on North East Asia, while continuing to oversee the company’s operations across the region. At the same time, Savills increased its management team in the region, and delegated responsibilities for businesses in China and South East Asia to several core individuals reporting to him. Mr. McKellar joined the group in December 1988 as Financial Controller and then Managing and Financial Director for Savills Commercial Ltd., before being appointed Finance Director for Savills Plc in July 2000. Prior to working for Savills he worked for BP Minerals Ltd. and Babcock Power in London,and British Steel Corporation in Scotland. “There are several reasons why I chose to relocate to Seoul, as Asia Pacific CEO. Logistically, it is easier to travel to Shanghai, Beijing, Tokyo and Singapore. Our focus is North East Asia and it made sense to be based in part of the region. I see no reason why regional CEOs should be based in Singapore and Hong Kong all the time. Moreover, I travel all the time anyway, so I could be anywhere,” he said. He also noted that Korea is the third largest economy in Asia and is still a very big and attractive real estate market. “I think it is good for any CEO in Asia Pacific to spend time in Seoul. Because, then you begin to understand the market here and it is a good experience. Spending time in a market like Korea should be an opportunity anyone would welcome. We know it is much more difficult here than Hong Kong and Singapore. We all know it, but that adds to the value. Other reason is that Korean are big investors overseas, so why not spend time here and talk to the institutional investors.” This, despite the fact that Korea is not the biggest market for Savills. Looking at its split in terms of profile, the company is very heavily geared towards Hong Kong, China, Macau and Taiwan which account for 75 percent of its business in Asia Pacific. Other big markets are Singapore and Australia. “Korea and Japan are smaller. They are more mature, and more difficult to do business in. The emerging markets like China and Vietnam are easier for us to get a position there. More mature markets like Korea and Japan are difficult because of historical barriers to entry. Having said that, I must add that the opportunities in Korea are tempting.” In Korea, Savills has around 140 staff doing property management, investment sales, leasing, valuation, project management and closed asset property management. “Performance in 2011 was OK, it wasn’t great. We were profitable last year, the same as 2010 and the global economic slump did not really affect us because property management, asset management are consistent businesses. As regards investment sales, we roughly did two last year and two the year before. Leasing was quite good, but generally speaking it was OK...much the same as 2010.” “This year the company has got a few deals, a few investment transactions it is working on, and hope to transact soon. In fact last year would have been much better, if they had managed to complete one or two deals that slipped into 2012.” “We also reduced our costs. This year will be better, although not as good as Hong Kong or Singapore, but certainly better than 2011.” Speaking on the advantages that Savills enjoys vis-a-vis local competitors, he noted that being international players they can bring in international clients into the market and also can take the Korean clients overseas. Many Korean institutional investors are investing in London, since it is a very attractive capital market for overseas investors, and Savills can offer the ability to acquire real estate in Europe and other overseas markets. One of its strengths is internationalization, compared to local competitors. “We have some systems and applications and procedures which are international that help us to manage real estate in places like Korea and offer overseas sales that local players cannot offer.” For that matter, Savills is one of the advisors to the biggest institutional players in Korea, the National Pension Service, which has over $300 billion in assets. NPS aims to boost overseas investments to about 20 percent of its assets by 2016, up from 12.9 percent. “We are lucky to be able to advise some of the large institutions in Korea. Increasingly, we are seeing that capital flows are going from east to west...not just the Koreans, but the Chinese and Singaporeans too. This will continue to happen. Especially in big cities like London.” As regards the opportunities for investment arising from the eurozone sovereign debt crisis, McKellar noted that a lot of assets are going cheap. “However, most of the overseas investors tend to want to go to London as the prime focus since it is a liquid market, and a very big institutional market. Other markets in Europe tend to be less attractive. Even the other European investors are buying real estate in London because of the problems they perceive in the eurozone. There will be opportunities in eurozone if you are brave.” “While places like France and Germany continue to be attractive, most investors are focusing on London and the Scandinavian countries where there is less volatility. Europe will come back. The great thing about real estate is that it goes in cycles. The key is buying it near the bottom of the cycle. It’s all about timing,” he said. He picked as for the potential markets that will do well this year, besides London, “Australia is another market which has tremendous opportunity. It is a very transparent market, and the economy is strong with net immigration. In terms of risk, Indonesia may be stable, but real estate investments in Jakarta will give very good returns. Hong Kong and Singapore on the other hand continue to be volatile.” “I would consider Korea to deliver high returns, as long as you can access the product. Unfortunately, the real estate market is tightly held by the conglomerates. Many German funds want to come here, but are unable to proceed further.” In terms of product mix, he noted that despite global economic conditions, Asia Pacific’s retail sector will continue to grow off the back of continued consumer demand. “The retail fundamentals remain solid in the region, with sustained consumer spending in Hong Kong, Shanghai and Beijing. China has been the most significant growth driver for 2011 which has consequently led to higher retail rents in Chinese cities.” He also noted that the Asian market has become a prime target and pertinent region for retailers resulting in an increase in investment sales and retail constructions. This will continue, especially as new opportunities arise in countries like Vietnam and India. Referring to the challenges that a company like Savills faces in the Asia Pacific region, Mr. McKellar said that being a listed company, there are many compliance constraints which the local competitors, especially in China take advantage of. “The Asian way of doing business strongly relies on relationships, whereas the western model is different. Having to adjust to this is quite a challenge. Moreover, regulations in Asia tend to change very quickly and are unpredictable.” “We however still consider the region to be an exciting place to do business. We are expanding this year, to move into Malaysia, Indonesia and New Zealand. We are also keen on India, especially the retail sector.”


Interesting Facts said...

I also think that why regional CEOs should be based in Singapore and Hong Kong all the time. Its complicated.