AXA Real Estate Investment Managers (AXA Real Estate), the leading real estate portfolio and asset manager in Europe, with over 42 billion of assets under management as at June 2012, announces that it has created a new business unit to manage and grow the c. 750 million of Alternative real estate assets it manages on behalf of clients, while consolidating its expertise in this sector.
AXA Real Estate has over a decade of experience of investing in and managing alternative real estate assets and aims to increase its current portfolio of 78 assets under management in seven countries to over 1.5 billion over the next three years. AXA Real Estate expects to achieve this through new third party mandates and by launching a second pooled investment vehicle.
The new Alternative Real Estate Business Line, which will be headed by Dan Bowden, the Fund Manager for AXA Real Estate's first alternative real estate fund 'APIV', has been established in response to increasing investor demand for products targeting assets such as healthcare, student accommodation and more diverse assets such as police stations.
AXA Real Estate believes that growing investor demand for alternative real estate is due to the qualities of these assets and their long term, often indexed-linked and government or government-backed leases, which are typically for terms of 25 years.
This is demonstrated by the increasing liquidity in the market for alternative real estate assets, where transaction volumes of 1.5 billion and 2.6 billion were recorded in 2010 and 2011 respectively, surpassing the 1.3 million seen in the 2007 boom market.
AXA Real Estate believes that the returns available from this asset class stem from structural changes in demographics, regulations and government spending. This has led to the development of a successful 'needs versus wants' alternative real estate investment strategy, whereby AXA Real Estate's has targeted sectors in which occupational demand and income growth stems from non-discretionary factors.
For example, aged care, where occupational demand is driven by Europe's aging population, or in student accommodation where a demographic bulge has led to increasing demand for university places, a demand which has been further enhanced by a weak youth employment market.
Further support to the strategy is derived from governments who, under growing financial pressures, are increasingly reliant upon the private real estate sector to provide for the social infrastructure needs of the population. Through a mixture of both supportive demand and supply characteristics an asset class has developed with the aim to offer investors both more secure income than is typically available from more traditional real estate assets, as well as capital growth.
Daniel Bowden, Fund Manager at AXA Real Estate, commented: "We have detected a clear shift from sophisticated investors into alternative real estate, attracted by the capital resilience, highly visible income returns which are often indexed linked income flows and the continuing occupational demand. In response to this demand, we have launched our Alternative Real Estate Business Line to provide clients with an established framework and single point of entry to our a unique and specialist, pan-European management platform and access to these potentially attractive investment dynamics.
"Our 'needs versus wants' investment strategy aims to achieve strong levels of income and capital growth outside of normal economic cycles as it is not predicated on wider macroeconomic growth to generate return. AXA Real Estate currently believes that alternative real estate has a real potential to grow as a product of institutional quality in Europe, following the US, where the combined alternatives REIT market capitalisation is three times larger than its US office REIT counterpart."
Source: FTI Consulting