AXA Real Estate plans to increase its focus on development as a way of diversifying its strategy in a market where core investments are thin on the ground, CEO Pierre Vaquier told PropertyEU in an interview.

AXA Real Estate plans to increase its focus on development as a way of diversifying its strategy in a market where core investments are thin on the ground, CEO Pierre Vaquier told PropertyEU in an interview.

Vaquier said AXA Group had a strong desire to diversify its EUR 21 bn real estate portfolio ahead of the introduction of new capital requirements under Solvency II. ‘AXA doesn’t want to have all its eggs in the same basket. The only way to make opportunistic investments is by developing them yourself. We don’t see the banks making any moves at the moment to re-price their assets which are under water.’

Six of the seven assets in the portfolio recently sold to giant pension fund manager Norges Bank Investment Management (NBIM) were developed or redeveloped by the insurer’s property arm. In the past decade, the development team has completed more than 250 projects with a combined value in excess of EUR 8 bn, including more than 15 major corporate headquarters.

AXA Real Estate has also launched three development funds, the third of which is expected to close by this autumn. After completing a second closing in January 2011, Development Venture III vehicle is targeting a final close of up to EUR 600 mln. With leverage, the fund will have a spending power of EUR 1.3 bn in development projects across Europe. The fund is targeting a gross IRR of 25% at a project level and will invest in green- and brownfield sites, existing properties which require extensive redevelopment and development joint ventures.

Laurent Vouin, head of AXA Real Estate’s opportunistic funds, told PropertyEU that AXA Real Estate’s development fund is targeting a share of around 60% in French developments. ‘But we wanted a broader pan-European focus and will also be targeting other mature markets in the major German cities, Milan, Madrid and London. The challenge is to identify promising developments with a volume of at least EUR 100 mln.’

AXA Real Estate had EUR 39.4 bn of assets under management on March 2011.

The full interview with Pierre Vaquier and Laurent Vouin will be published in the September issue of PropertyEU Magazine. Click on the link below to subscribe