AXA Real Estate Launches Long-Lease UK Property Fund

AXA Real Estate Launches Long-Lease UK Property Fund
Written by:
Rachel McCormack
7th January 2013
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**AXA Launches Long-Lease Property Investment Fund to Target Key UK Market**

AXA Real Estate, the property arm of French insurer AXA (EPA:CS), has raised an initial £125 million for the launch of its UK Long-Lease Property Fund, which will invest in traditional long-lease properties such as supermarkets, distribution centres and offices,with a tilt also at alternative property classes – healthcare, social housing, student accommodation, hotels, leisure, automotive and ground leases.According to a The Financial Times report on 6 January 2013,the fund will target only buildings let for a minimum of 20 years to commercial tenants with high-quality covenants.

The UK Long-Lease Property Fund is the latest in a European series to be launched by AXA, which owns €43 billion of property assets across the continent. According to the company’s real estate investment managers, the new fund will offer lucrative investment opportunities in the sought-after UK property market.
Typically, Britain’s real estate market features longer leases than in other European countries. As well, UK rents are typically reviewed only on an upwards basis,at five-yearly intervals, negating the prospect of a rent reduction during the lease term. By contrast, in Spain, Germany and France annual indexation is used, which allows for downwards movement in rents. This perceived advantage of the UK leasehold market has recently become increasingly attractive to international investors. Over the past 12 months, property let long-term to high-quality tenants has become the most sought-after area of Britain’s real estate market, with property investors from the United States, Europe, Asia and the Middle East valuing income stability over the prospect of high returns.

**AXA to Grow UK Fund to Size of £1 bn Over Next Five Years**
Global Head of Business Development at AXA Real Estate, Deborah Shire, told The Financial Times that the low yields on offer in both the government and corporate bond markets meant that pension funds and other institutional investors were turning to alternative asset classes to hedge their liabilities.She said: “We believe that the stable long term and mostly inflation indexed income generated by long lease property offers an attractive alternative for investors, while at the same time providing diversification benefits to the rest of their fixed income and property portfolio.”

!m[French Insurer’s Real Estate Arm Seeks £1bn To Buy British, Sees Modest Share Price Hike](/uploads/story/1136/thumbs/pic1_inline.png)
Confident of the potential of its newly-launched UK fund, AXA is reportedly planning to increase the initial subscription of £125 million and to grow the long-lease fund significantly over the next five years. According to the FT, AXA Real Estate has already signalled to investors a target of £1 billion by 2018.
**AXA’s Share Price Advances**
Following the announcement of its real estate arm’s UK Long-Lease Property Fund launch, AXA’s stock climbed modestly at the Euro next Paris stock exchange.As at 7 January 2013, 09:40,the market price of €13.94 was eight cents up on Friday’s close.

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