AXA REIM seeks €1.5bn to ramp up real estate lending and debt buying

AXA Real Estate Investment Managers is raising another €1bn-€1.5bn of capital to buy debt and make real estate loans. The insurance group’s fund management business has already spent about €1bn of its €1.7bn of its investment capacity for European debt.

But Isabelle Scemama, head of commercial real estate loans and corporate finance, said: “We are raising a significant amount of capital from the AXA Group and three or four third-party clients, and should reach €3bn in the coming weeks.”

Scemama said that after a period of buying secondary CMBS in 2008, AXA switched focus last year to new senior lending, or participations in larger deals targeting European countries where local AXA Real Estate teams can give a view on underlying assets and risks.

These are mainly France, the UK, Netherlands, Germany, Spain and the Nordic countries. “We are comfortable that the market offers good spreads and well-structured products, but the vintage is key,” Scemama said.

“We want to put new vintage loans in the portfolio. “We like to be in club deals at an early stage and be involved in the structuring and underwriting. Our target return per deal is 230-300bps over Euribor.”

She said AXA CRE Loans’ larger debt investment clients often preferred to have loans on their balance sheets, with AXA managing the assets. The group also has pools of capital from smaller investors.

According to Scemama, as an asset class for insurance companies, property debt is “quite favourable from a regulatory and accounting point of view.

“Insurance companies have the capacity to bring something different to the market for borrowers. Banks today are in the market to lend for three to five years, but we like long-term financing and can go up to 10 years or even longer.

“We do large-capacity, fixed-rate or floating loans and can execute them in two or three weeks, which is a key issue for a borrower.” AXA CRE Loans is still interested in investing in secondary debt and has reviewed about €20bn of loans on the secondary market.

Scemama said the company had bid on parts of those portfolios, but had not been successful “because the bid-offer spread is still quite large and banks aren’t prepared to sell at a discount, and generally they were packaged with financing”.

The ins and outs of AXA REIM’s debt buying campaign

AXA REIM has done 39 debt acquisition deals since it started buying real estate debt in 2005 for AXA Insurance. It put such deals on hold in 2006-2007 because it was not comfortable with the state of the market, by which time the group had spent only half its initial €1bn allocation.

It resumed buying in 2008, mainly acquiring CMBS, which then offered good spreads, and paused again when the market was not active, from late 2008 and up to mid 2009. Since September 2009, Scemama’s team have been active again in the senior lending market.

That month, it took a  participation in the club deal that provided debt for the €1.2bn, BBVA Spanish sale-and-leaseback portfolio. It later took part in a €300m, 52% loan-to-value senior refinancing for a pan-European ProLogis portfolio, arranged by Goldman Sachs.