AXA Real Estate has finally announced the purchase of an €800m portfolio of performing commercial real estate loans from Société Générale, as Europe’s largest new insurance property lender completes a third major capital raising which will increase its total capacity for senior debt investments to €7bn by the end of the year.
CoStar News first reported back in June that Société Générale had selected AXA Real Estate as the preferred bidder to buy as much as €1.2bn of performing property loans, as the French investment bank seeks to make a permanent retreat from property lending.
During negotiations, the final agreed performing loan portfolio acquired by AXA Real Estate shrunk to €800m, which was thought to be due to the inability to fairly re-price some ‘old vintage’ performing loans between both parties.
The transfer closed by the end of the second quarter, along with a further €500m in loan originations and syndication participations over the first six months of the year, taking the total transactions over the period to €1.3bn.
Of the €500m, 40% of the loans made in the first half were primary loans while 60% were secondary transactions, confirmed AXA Real Estate.
This significant volume of transactions has prompted AXA Real Estate to increase its investment target by €400m from the turn of the year to €2.4bn for the full year.
In its third major capital raising, AXA Real Estate has so far secured €1.4bn in new capital this year, aiming to increase this to €2bn by the end of the year.
In addition to targeting existing and new investors in its core markets of the UK and France, AXA Real Estate will now turn its investment focus to Germany, the Netherlands, the Nordics and Switzerland, where borrowers are similarly seeking funding away from traditional bank sources.
AXA Real Estate’s commercial real estate debt platform, established in 2005, is one of the largest and most active in Europe, with the lender able to provide up to €200m in single primary underwritings, allowing the financing of large prime assets in key markets.
Isabelle Scemama, AXA REIM SGP’s head of CRE finance, said: “Our strategic vision to be the first mover in the senior space is now being rewarded with repeat clients and new investors joining our platform. Our strategy is endorsed by the number of non-banking financial institutions which have either recently entered the market or expressed an interest in launching similar products.
“Furthermore, the retreat, and in some instances the withdrawal altogether, of traditional senior lenders in the property market has accelerated further throughout 2012, making the supply/demand imbalance more acute.”
Pricing senior debt for AXA Real Estate is entirely relative to risk, in comparison with yields available in other asset classes, plus an illiquidity and complexity premium.
But AXA Real Estate’s interest in senior debt lending, in fact, predates this golden era. See CoStar News’ profile on AXA Real Estate, published in April.