AXA Real Estate has a different approach to investing in and managing alternative real estate assets, in a strategy that has evolved over 10 years.
Its first specialist fund in this area was Alternative Property Income Venture (APIV), managed by Dan Bowden, a closed-ended, £500m vehicle launched in 2007, which is fully invested and has started some selective sales to enhance distributions and further reduce APIV’s low level of debt.
AXA also invests in more opportunity-driven deals for separate account clients and has assets across Europe. Last year the investment manager pulled everything together into an alternatives and special situations business unit, now headed by Riccardo Dallolio.
The unit’s largest transaction this year was investing €157m in the NH Grand Hotel Krasnapolsky in central Amsterdam on behalf of a European and an Asian client, in a deal that involves a phased €38m refurbishment. At the other end of the risk spectrum, in January, AXA’s open-ended UK Long Lease Property Fund was launched with an initial £125m of equity and managed by John Osborn.
Its first £38m of acquisitions were a Waitrose store in Sevenoaks and a Tesco supermarket in Mickleover, Derby. Dallolio says AXA’s alternative property operation looks for asset classes that “have the right characteristics to become liquid and tradeable”, and in this respect, it sees the US as a good lead indicator of potential for the sub-sector – alternative REITs account for more than twice the market capitalisation of office REITs there.
“We don’t focus on niche alternative sectors because the exit strategy is never secure and we’d only be able to sell when the market is hot,” he says. Bowden adds: “Hospitals are perfect for our capital. It’s very much about the opportunity first, rather than shoe-horning capital in.”