AXA targets €1b for property debt fund

LONDON: AXA Real Estate said it was aiming for €1 billion (RM4.08 billion) in a debt fund after raising an initial €350 million, as it aims to take advantage of a shortage in bank loans to the commercial property sector.

The Commercial Real Estate Senior 1, which will provide senior loans directly or as part of bank syndicates, has obtained investments from parent AXA Group's companies and a mix of other European insurers, AXA said on Tuesday, Jan 4.

AXA Real Estate also has an additional €1.15 billion in existing commitments from clients to invest in debt, it said in a statement.

"I am very excited by the fact that this increases our total underwriting capacity to some €1.5 billion at a time when most banks have a very limited capacity to act," said Isabelle Scemama, head of debt at AXA REIM SGP, an AXA Real Estate unit.

AXA Real Estate's global chief investment officer Dennis Lopez told the Reuters in June 2010 that the company was launching the new debt fund to take advantage of a shortage in real estate financing in Europe.

"We see a clear opportunity to grow this market and believe that it eventually will follow the US example where around 20% of real estate transactions are underwritten by long term investors such as insurance companies," said Scemama, who also advises the new debt fund.

An estimated US$245 billion (RM749.7 billion) of global commercial property debts may face refinancing problems between 2011-2013, a DTZ report has said and industry experts expect insurers like AXA to help fill the void.

AXA Real Estate said already it has invested about €1 billion in real estate debt since mid-2009 and expects the fund to offer returns "significantly above those of more traditional credit products, but with an attractive risk premium".

The debt fund, which plans to focus on investments backed by good quality income-producing properties, will primarily target euro-denominated investments, but also seek exposure to sterling and Nordic currencies, it said.

AXA Real Estate will also consider investing across the whole capital structure — from senior loans to equity, including mezzanine debt, preferred equity and distressed debt structures — on a case-by-case basis, the company added. — Reuters
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