AXA Investment Managers – Real Assets has deployed more than half of the €1.5 billion of capital raised for its 10th property debt fund, CRE Senior 10, which it closed in September 2017.
Almost 60 percent of CRE Senior 10 – circa €900 million – has already been deployed, with €500 million invested since the final close.
Around 10 percent of the €900 million has been invested in the US, through mortgage loans and bonds. CRE Senior 10 is AXA IM – Real Assets’ first debt fund to have an initial mandate in the region, with an allocation to the US of up to 25 percent.
As the vehicle gets closer to full deployment, the largest, non-bank lender in European real estate is considering options for a follow-up vehicle, Timothé Rauly, head of funds group at AXA IM – Real Assets, told Real Estate Capital.
“Following the success of our past debt funds, we are exploring the possibility of replicating the strategy of CRE 10, but it is still very early stages,” Rauly said.
AXA is aiming to maintain, rather than grow, its real estate debt portfolio; likely to be a defining factor when it targets a fresh fundraising. While it raised €1.5 billion for its 10th debt fund, the firm had previously raised €2.9 billion for its predecessor vehicle in 2015. In line with its aim to maintain its book, AXA’s deployment has reduced year-on-year; in 2015, it invested €4.5 billion in real estate debt, down to €3 billion in 2016, with around €2.5 billion expected for 2017.
Aside from its investments in the US, the remaining capital has been deployed in Europe across a range of different property types, with a particular focus on alternatives. “While alternative asset classes can be riskier than traditional assets, there is far less competition,” Rauly noted.
“Recent deals have included two student accommodation investments in the UK, as well as a cinema investment in Germany,” Rauly added, noting that the firm also continues to provide financing for traditional office and retail assets through the fund.
To date the fund is achieving a return of around 200 basis points over three-month Euribor, with loan-to-values typically between 40 percent and 60 percent.
The fund’s strategy has seen AXA IM – Real Assets lend against both “stabilized” core assets, Rauly said, but also against value-add and transitional assets which offer the opportunity to capture higher margins.
“We are willing to take asset management risk, but we make sure that we are covered by long lease maturities when we lend against those assets,” Rauly explained. “At the same time, I don’t think providing development debt makes sense for us at the moment, given the risk/return profile.”