AXA Real Estate raises €209m in Italy for European fund

AXA Real Estate Investment Managers has closed the Caesar Fund, the first office pan European investment vehicle dedicated solely to Italian institutional investors.

The vehicle, which announced an initial close in March 2012, beat its fundraising target by securing a total of €209 mln largely from third-party capital.

Caesar is the first pan-European vehicle for Italian investors to successfully complete its fundraising activities in the last 12 months. The close comes as several other fund managers are preparing similar moves.

In the past six months, a joint venture of CBREGI and Fabrica, Germany's IVG Immobilien and Beni Stabili as well as Henderson Global Investors and Investire Immobiliare sgr have announced plans to tap into Italian institutional investors’ appetite for real estate abroad.

Giorgio Pieralli, managing director of AXA REIM SGR, and fund manager of the Caesar Fund, believes that Italy offers a major fundraising opportunity now that local institutions are forced to move away from treasury bonds, their historic investment target. ‘Italian pension funds have just 2% of their portfolios allocated to real estate abroad. This gives an idea of the market potential,’ Pieralli said. ‘To have exceeded our target during an extremely tough capital-raising enviroment is a good sign of where the Italian market stands today.’

The vehicle has raised funds from 13 Italian institutional investors, largely life insurance companies and main pension funds including new-generation schemes such as EuroFer, the pension fund for railway sector workers.

Each party committed between €3 mln and €45 mln, Pieralli said, including AXA Insurance companies which represent less than 20% of the total commitment.

With leverage, the regulated closed-end fund has the capacity to invest €420 mln in well-let core office buildings. The fund aims to provide an annual average net dividend distribution of over 5.5% on capital invested, once the investment phase is completed, and a 9% Internal Rate of Return net of fees.

Caesar will seek investments in eurozone countries and the UK and will have a particular focus on investments in France, Germany and UK for the first 12 months, while maintaining a watching brief on opportunities in Benelux.

Pieralli said the fund will have a specific focus not only on prime cities but also the best secondary locations able to offer good returns and stable values. ‘We are looking, amongst others, at Stuttgart and Hanover in Germany, Lyon and Marseille in France, and Bristol, Glasgow and Edinburgh in the UK. These are all cities which provide a higher return combined with a moderate level of risk.’ The fund has already completed its first investment in Stuttgart and is currently working on a good pipeline of new investments, he added.

No single investment will exceed 15% of the fund's target portfolio value and no single tenant will contribute more than 20% of the fund’s revenue.

AXA Real Estate plans to complete the investment phase of the fund in the next 24 months after which, under the Italian law for regulated funds, it will have the option to reopen the Caesar fund for further subscriptions.

The Caesar Fund is the second regulated product managed by the AXA REIM SGR team, the first being Core Italian Properties Fund, which also has a core risk profile and is reserved for Italian institutional investors. In contrast to the Caesar fund, CIPF is fully invested exclusively in Italian office, retail as well as logistics properties.