AXA Real Estate to underwrite ‘at least’ €2.5 bn in pan-European real estate loans in 2014

French asset manager AXA Real Estate Investment Managers is banking on co-writing ‘at least’ €2.5 bn in commercial real estate loans next year via its pan-European loan platform, Isabelle Scemama, global head of real assets finance at AXA Real Estate, told PropertyEU.

‘AXA’s target is €2.5 bn of commercial real estate loans this year and I think we’ll do more than that next year,’ Scemama said. According to Scemama, the loan platform, which counts Norge Bank Investment Management (NBIM) among its investors, will focus largely on the UK, Germany and France. Of the total, around 60% is likely to be refinancing, Scemama said.

AXA Real Estate and NBIM announced earlier this week that they were teaming up to underwrite large senior loans of up to €600 mln, with a primary focus on the UK, France and Germany. AXA Real Estate will manage the portfolio on behalf of both parties.

Lending platform
The partnership is the first of its kind for the asset manager, according to Scemama, who is based in Paris: ‘We’ve built up our debt platform to €7.5 bn over the past seven years, largely in markets such as the UK, Germany and France, which account for 85% of our portfolio. We offer a well-established platform for investors, such as Norges, and all of our investors are fully aligned,’ she said.

AXA Real Estate has a remit to invest in any asset class via the platform, although it has a strong focus on offices and retail in markets such as London and Paris. ‘We underwrite loans on a case by case basis - we've viewed more than €20 bn in opportunities so far this year,' Scemama said. Of the €7.5 bn loan portfolio, around 35% relates to loans underwritten on office assets, 30% is retail and the remaining 30% includes hotels, residential and logistics. ‘It is purely transaction driven; we don’t have a target allocation by asset class,’ Scemama added. Typically, LTVs are less than 60%, she said, although AXA Real Estate has no specific guidelines and can go higher.

Insurers
Insurers such as Allianz and now AXA have been swarming into the debt space this year, keen to plug the gap left by some traditional lenders. ‘What’s interesting is that we are now seeing insurers, such as Allianz and AXA, opening up a new channel - debt - whereby they are looking to finance the same kind of core products that they would normally buy,’ said Timo Tschammler, an international director and head of office and industrial at JLL in Frankfurt. ‘The lending sector in Germany is growing rapidly, probably as quickly as demand for actual product,’ he added.

And more partnerships like this are in the cards, according to Tschammler: ‘I think we’ll see more partnerships like this between big institutional investors with similar ‘fire power’, whereby both parties make substantial contributions. In addition to having a similar fire power, AXA and Norges have similar investment criteria. This makes them an investment powerhouse, creating a marriage of gentle giants,’ he said.

For NBIM, manager of the Norwegian Government Global Pension Fund, the partnership with AXA also marks its first debt partnership investing in new and existing loans, NBIM’s chief investment officer for real estate, Karsten Kallevig, told PropertyEU. ‘We only got into real estate three years ago and it’s the only unlisted sector we cover. For us, from a risk-rated basis, it seems like the right time to get active on the debt side,’ he added.

Supply-demand
Also fuelling NBIM’s interest is the demand/supply imbalance on the loan side, added Kallevig, who is based in Oslo: ‘The lending market has become interesting to us because we’ve seen a lot of deals whereby the financing has actually looked more attractive from a lender’s perspective than from a buyer’s perspective,’ he said. The partnership is not targeting small of loans of less than €20 mln because ‘there are plenty of other lenders who will lend on those’, Kallevig said.

NBIM doesn’t have a set target in terms of how many senior loans it would like to invest in next year as part of the platform but ‘€1 bn doesn’t sound scary at all’, Kallevig said.

The latest partnership between AXA and NBIM is a natural progression from their relationship on the acquisitions side, which has seen them team up on deals in both France and Germany. Last year, the duo acquired two mixed-use properties: ‘Welle’ in Frankfurt and ‘Neues Kranzler’ in Berlin from RBS for a combined total of €748 mln, marking the Norwegian sovereign wealth fund manager’s first real estate investment in Germany. JLL advised RBS. The deal was the third time in 15 months that the duo had invested in European offices together.

Today, the Norwegian Government Pension Fund Global has around $800 bn of AUM, of which around $40 bn is invested in real estate globally. ‘Allocating some of that to the loan business makes sense,’ Kallevig said. ‘Both AXA and NBIM are long-term investors with big real estate portfolios, so we have a different outlook to some other investors. For example, it is much more important to us to have a less-prime asset in a fantastic location than to have a great quality asset in a terrible location.’

So far this year, AXA Real Estate has already underwritten €1.8 bn in commercial real estate loans, bringing it closer to its target for the year of €2.5 bn. Of this, around 45% relates to assets in the UK.

AXA Real Estate Investment Managers, which is a wholly-owned subsidiary of AXA Investment Managers, had over €46 bn of assets under management as of end-June 2013, up from €17 bn 12 years ago. It has over 160 third-party institutional clients spread across the world, in addition to managing funds for 10 AXA insurance companies.

See also in the links below the related news article and the Top Investors dossier with an overview of recent developments at AXA Real Estate, transactions and a company profile