AXA Real Estate to raise Europe’s largest property debt fund

The firm is more than half way to its €2.5 billion target for Fund 9, which will invest in commercial real estate senior debt.

AXA Real Estate has raised €1.5 billion of a planned €2.5 billon real estate debt fund, which will be the largest CRE senior debt vehicle in Europe, Real Estate Capital, PDI's sister title reported.

The asset manager has raised €1.5 billon from 11 institutional investors for Commercial Real Estate Senior 9. It expects to hold a further closing in the next few weeks with capital from predominantly German investors, and to take CRE Senior 9 at final closing to €2.5 billon.

For the first time for its debt platform, AXA Real Estate has structured a specific feeder fund for German investors which will issue rated notes, loans not securities, enabling regulated German insurance companies and pension funds to access pan-European CRE debt and AXA to enlarge its investor base.

Isabelle Scemama, head of fund groups and of debt investing, said AXA had had German institutions investing in its debt strategy before, but not in a fund.

“Germany is probably one of the toughest countries in terms of regulations. This fund comes at the right time because the debt market there is more competitive and returns are very low.

“That means it’s critical for investors to diversify their allocations outside Germany and our feeder is a compliant route for them”.

Scemama said last year AXA was getting average returns of 280bps over Euribor, on loans which are all investment grade, and of five-seven years duration.

In another innovation in the the new fund, investors will be able to recycle capital back into the fund once loans have matured, allowing them to retain their investment.

Of the 11 investors who committed capital to CRE Senior 9’s first closing, two were AXA insurance companies and nine were third-party clients, from the UK, the Netherlands, France and Switzerland.

Last year, investors committed a total of €3.7bn to AXA Real Estate for debt investing, taking the total platform to €10billon.

As well as the first closing for CRE Senior 9, that €3.7 billon of capital included new separate mandates from a Dutch insurance company, of €250 million, and a five-strong club of Danish pension funds which committed €485 million.

Norges BIM is also a significant client.

Scemama says the 24-strong CRE debt team reviewed about €36 billon of loans on the primary and secondary markets last year and invested in €3.6 billon of deals.

She said the size of AXA’s latest senior debt fund showed “how real asset finance has now become an accepted asset class, with a specific allocation from most institutional investors.

“The point is underlined by both the increased number of investors committing to this fund raise and the growth in the size of their allocations, as well as the fact that there was demand for a product which allowed capital to be recycled”.