FINANCE: AXA Real Estate is seeking to build Europe’s biggest senior debt fund as more investors switch from government bonds to real estate.
This week the fund manager raised €1.5bn (£1.1bn) from seven existing institutional investors in the Commercial Real Estate Senior 9 fund, two new investors and two AXA insurance companies.
The investment marks a first close for the fund, which has a final target of €2.5bn, and brings AXA’s total debt commitments to €10bn.
Isabelle Scemama, head of fund groups at AXA Real Estate and chief executive of AXA REIM, said that as long as returns remained consistent the debt platform would continue to seek new investors.
“I predict that we will grow but we have no precise target. Our objective was to get to €10bn. Whether we will be at €15bn and when is difficult to say,” said Scemama. “We will continue to monitor the fund’s growth, looking at what we can deliver and raise the capital to match that.”
Scemama said the popularity of the debt platform came as investors chased yield and moved away from traditional asset classes such as government bonds, which were delivering negative returns.
“We are capable of delivering a premium more than 100bps higher to what they would get for similar risk on the bond market,” said Scemama.
Chris Bates, head of real estate debt at Cornerstone Real Estate Advisers Europe, agreed. “Real estate lending has become a more mainstream asset class,” he said. “You are seeing appetite at the senior debt level increasing away from mezzanine, as with the AXA debt fund, as people see that in the current environment it can provide good risk-adjusted returns.”
AXA entered the real estate debt market in 2005 and has to date invested 75% of the €10bn raised.
