AXA plans €1.5bn follow-on debt fund

A final close of the fund could come in around six months’ time, PERE's sister publication reported.

The investment management arm of French insurance firm AXA is raising follow-on capital for its real estate lending strategy, PERE's sister publication, Real Estate Capital, reported Friday.

AXA Investment Managers – Real Assets is aiming to raise up to €1.5 billion for its latest in a series of debt funds targeting the European property sector. A final close of the fund could come in around six months’ time.

In recent years, AXA has established itself as the largest non-bank lender to the real estate sector in Europe. Its most recent co-mingled property debt fund – Commercial Real Estate Senior 9 (CRE9) – closed in August 2015. The firm had targeted €2.5 billion for CRE9 but eventually closed it at €2.9 billion. Also in 2015, AXA agreed a £350 million (€498 million) separate account from a UK pension fund.

It is understood that around 75 percent of the circa €3.2 billion of capital raised for its property lending strategy last year has already been deployed.

The smaller volume targeted for the latest fund, in comparison to CRE9, is understood to reflect a more cautious approach to lending in line with current market conditions, although AXA remains a major lender to the sector and also deploys capital from several segregated account mandates.

AXA provides senior and whole loan financings through its real estate debt platform. It completed €4.5 billion of real estate loans last year and is targeting €3-4.5 billion this year.

The company’s real estate lending strategy has become increasingly diversified this year as it targets the best relative value across its markets. In addition to its core markets of the UK, France, Spain and Germany, AXA has also stepped up its activity in the US. Alongside offices, retail, logistics, hotels and residential property, the firm is also increasingly considering lending to alternative sectors such as student accommodation.

The lending platform, which is led by head of funds group Isabelle Scemama, typically lends to a 55 percent loan-to-value ratio, but can go to 70 percent, usually lending for five year terms.

Speaking to Real Estate Capital recently for the Top 40 European Lenders edition, published this month, Scemama said: “What we do to differentiate ourselves is to focus on the complex and large deals. We strongly believe that size is critical in this market – it allows us to drive terms and conditions.”

Following last year’s capital raising, AXA’s European debt platform stood at €11.3 billion. The CRE9 fund received commitments from 18 institutional investors from the UK, the Netherlands, France, Germany, Ireland, Sweden, Denmark, Belgium and Switzerland. As well as existing insurance and pension fund clients, a few new investors participated in the fund. The fund was AXA’s first to be structured to allow for capital to be recycled back into it following loan maturity.

AXA first entered the European real estate debt space in 2005, becoming the first non-bank lender to do so.