In trying to break into the American real estate market, foreign investment managers are often faced with two options for establishing a presence: organically grow a platform from the ground up or take over an existing player for an immediate impact. Olivier Thoral, AXA Real Estate’s head of US investments
However, Paris-based fund manager AXA Real Estate may have found a third way: creating new business lines through joint ventures with established GPs.
After appointing Olivier Thoral, AXA Real Estate’s former head of European opportunistic investing, to lead its expansion into the US last summer, the firm is exploring the idea of creating two joint ventures with third-party private equity real estate fund managers focused on US value-added and debt investments.
According to Thoral, the JVs would work as separate entities, each with their own team, organisational structure, asset management, and financial and reporting functions, but they would be controlled by AXA Real Estate and its JV partner at the management level. The JVs also would raise equity as separate entities in their own right.
Thoral said the move was driven by the group’s desire to develop a deal footprint in the US, as well as to raise capital from North American institutional investors. “AXA Real Estate has become a global fund management platform without having any commitments from US investors,” said Thoral. “And as the biggest capital base in the world, we need to spend time with them to understand their objectives and be successful with them.” 
As the biggest capital base in the world, we need to spend time with [US institutional investors] to understand their objectives and be successful with them.
One of the joint ventures will focus on value-added investments initially in major gateway cities and predominantly in the office, multifamily and hotel sectors, although the possibility of investments in a “couple of alternative real estate asset classes” exists. In regards to the debt strategy, that joint venture is expected to target senior and mezzanine loan originations and acquisitions. Thoral declined to comment on the timing of the ventures, but he said an announcement is expected in the first half of 2011.
“The US is a very exciting market for us. It is the largest real estate market in the world and has been through some severe times,” Thoral said. “Even though we are seeing a big focus on core assets in the prime cities, there are still opportunities for deals needing good asset management. The same is true for refinancing; there is a large equity gap when it comes to refinancing commercial real estate mortgages in the US.”
Thoral has spent the past 11 years at AXA Real Estate, serving as head of European opportunistic investing as well as the firm’s global head of corporate finance. In relocating to New York in September, Thoral said the firm – which had €39 billion of assets under management as of September 2010 – was reluctant to grow an organisation from scratch “owing to the sophistication of the market” and the importance given by LPs to a firm’s track record. By developing JVs with other fund managers, he noted that AXA Real Estate’s own operations in the US would remain “very lean”.
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