AXA Real Estates debt program reaches €2.7 billion (EU)

AXA Real Estate Investment Managers announces that it has raised on behalf of its pan-European debt fund, Commercial Real Estate Senior 1 ('CRE1' or the 'Fund') an additional €180 million from a number of European insurance companies at second close.

CRE1 is advised by AXA Real Estate's regulated entity, AXA REIM SGP. CRE1 has now attracted total equity of €530 million, following the €350 million raised in January 2011. The Fund has already exceeded the minimum fundraising target and expects a final close before the summer 2011 with a number of potential investors from Europe currently at advanced stages of due diligence. AXA Real Estate's debt program now reaches €2.7 billion.

Since January 2011, AXA Real Estate on behalf of its clients has invested through eight different loans with a total value of €375 million. These are backed by various types of real estate assets including office, retail, and hotels that are located in the UK and continental Europe. The average all-in spread over swap rate stands at 275bps, above the 250bps Fund target. All these loans are senior exposures, secured by stable prime properties with an average LTV of below 60%, characterized with very strong cash flow streams. AXA Real Estate has now invested on behalf of its clients 25% of the equity it raised at the first closing of CRE1 and is currently working on a number of potential investments with a total value of over €500 million.

Isabelle Scemama, AXA REIM SGP's Head of CRE Finance, and advisor to CRE1: "CRE1 is currently the sole investment vehicle available on the market offering long term investors the possibility to enter the European commercial real estate senior loan market. This new allocation of €180 million of commitments that has been derived from European insurance companies underlines our belief that there is a clear demand from investors to gain access to the asset class.

"The fact that several other insurance companies have recently announced their intention to invest in senior real estate loans, either directly for their own account or via a fund route, further endorses our belief that the European market will evolve towards the US model, where about 30% of commercial real estate transactions are underwritten by insurance companies. This is a very positive step for real estate debt and the ongoing institutional demand for this risk/return characteristic will hopefully establish it as a mainstream asset class in a diversified portfolio.

"To have such a sizeable amount of equity to invest in the European commercial real estate senior loan market puts us in a strong and market leading position to take advantage of current market dynamics and progress many of the opportunities currently being explored. In our view, these types of investment offer better risk/return ratio than riskier debt investments, given the imbalance between supply and demand for the senior part of the capital structure. These attractive risk-adjusted returns, combined with the favorable regulatory treatment they receive, make senior real estate loans so attractive to insurers and pension funds."

Source: FD

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