AXA IM Alts targets up to 20% Asia RE allocation

French insurer AXA’s investment arm, AXA IM Alts, expects to mark a few investment milestones in Asia-Pacific in 2021.

Laurent Jacquemin, head of Asia-Pacific at AXA IM Alts, told PERE that the firm hopes to increase its 6 percent allocation in Asia-Pacific to 15 to 20 percent of its global real estate portfolio in the next five years.

“We want to also diversify our geographical footprint. We want to enter the South Korean market in the short term. We are also likely to be more active in China having just made an indirect investment in the logistics sector,” said Jacquemin. With €7 billion of assets under management in the region, AXA IM Alts has invested €3 billion in Japan and €4 billion in Australia.

It is understood that the firm has already made its first investment in China via a logistics fund and is also reviewing a direct logistics investment in South Korea.

Jacquemin also told PERE that the firm has recently opted for more strategic deals globally. “Rather than buying single assets, we have targeted portfolios often together with the operating platforms. This is because we feel that if you have a platform together with the asset portfolio, then you can scale up, gain better efficiencies and achieve superior return outcomes,” he explained.

As the firm continues to expand its presence in Asia-Pacific, Jacquemin emphasized the importance of incorporating ESG standards into AXA IM Alts’ investments as more investors are going to discriminate in favor of investments with environmental credentials in the region.

Last month, the firm made its first logistics investment in Australia via the acquisition of a strategic stake in Sydney’s Moorebank Logistics Precinct. According to Kumar Kalyanakumar, head of Australia, AXA IM Alts, the investment represents the insurer’s commitment to ESG in the region.

AXA IM Alts expects generate up to 60 megawatts of green power from solar panels on the roofs of most warehouses it develops, according to Kalyanakumar. “Ultimately, the whole precinct can be energy self-sufficient and the energy will be distributed to each of the tenants and also the intermodal terminal at Moorebank,” he added. “We have the potential to make the precinct the first carbon neutral logistics precinct in Australia.”

In Japan, the firm is also developing a large, mixed-use complex of office and hotels in Sapporo. With a timeline to complete construction by 2025, the manager aims to undertake a net-zero carbon development despite the higher construction costs, according to Jacquemin.

Apart from the environmental credentials, Kalyanakumar pointed out that there is a shift towards the “social” part of the equation following the pandemic. “It is about how you engage with tenants, how you make sure the employees of the tenants are happy, how you provide facilities and services that the tenants really want,” he explained.

Going forward, he foresees that there will be an emerging pricing differential between buildings that have and have not incorporated ESG standards. “The difference is reflective of the buildings’ ability to attract and retain tenants based on energy credentials. Post-pandemic demands of tenants have changed even further,” Kalyanakumar said. In addition to more stringent hygiene standards, other needs such as flexible working space and concierge services have become even more critical for attracting and retaining tenants, he added.