PARIS—In an effort to both grow and consolidate its alternative real estate investments division, AXA Real Estate Investment Managers has created a new business unit focusing on the asset class. The new Alternative Real Estate Business Line was created to meet the growing investor demand for alternative assets, such as student housing, healthcare, police stations and other property types.
The locally based firm currently holds €750 million worth of non-traditional real estate in its portfolio, encompassing 78 assets in seven countries. The aim is those holdings to more than €1.5 billion over the next three years. The firm plans to accomplish this goal through new third-party mandates and by potentially launching a second pooled investment vehicle.
Heading up the new division will be Dan Bowden, who served as the Fund Manager for AXA Real Estate’s first alternative real estate fund, APIV. “We’ve detected a clear shift from sophisticated investors into alternative real estate, attracted by the capital resilience, highly visible income returns and the continuing occupational demand,” he says. The Alternative Real Estate Business Line will “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.”
The demand in the market for alternative real estate is growing; €1.5 billion worth of deals were completed in 2010 and 2011 saw €2.6 billion in transaction volume, according to DTZ and AXA Real Estate Research. Comparatively, 2007 saw €1.3 billion in deals.
And the long-term returns available from—and user demand for—alternative investments like student housing is particularly attractive to the company. That, and the fact that many times they have long-term leases, around 25 years, that are indexed-linked and signed with, or backed by, the government.
Student housing also fits into AXA’s “needs versus wants” investment strategy for alternative real estate, wherein the firm targets sectors whose demand and income growth stems from non-discretionary factors such as demographics regulations or government spending. In student housing, a demographic bulge and a weak employment environment for young adults has resulted in more youth attending universities.
This investment strategy, says Bowden, “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. 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 capitalization is three-times larger than its US office REIT counterpart.”