AXA Investment Management is preparing to launch opportunity funds on debt finance, distressed opportunities and long-term development opportunities. Alan Patterson, head of European research and strategy, said AXA has not yet determined the size of the funds but will start to raise capital in the first quarter of 2009.
The debt fund will be targeting debt that the firm believes will eventually be repaid at par or sold prior to that as it recovers. "We will be targeting debt that we do not expect to ultimately default, other than technical breaches," Patterson said. "It is possible to pick up AAA-rated CMBS at a 12-14% yield. It has to be said that anything below senior debt will be risky in this market."
The distressed assets fund's targets will include buying distressed debt where Axa believes that it will end up owning the property. "Debt can be treated as a way to get a property at a reasonably good price," Patterson said. The development fund, which is third in the pipeline, shows AXA's long-term time horizon for its investments. With the long prep and building period for most commercial properties, AXA hopes that the fund will be able to tap into a potential recovery over the next three to five years. "The difficulty will be getting the timing right," Patterson said.
In general, AXA expects to make some cautious acquisitions in the coming year. "The market will be incredibly tough," Patterson said. Patterson, who was working at a company that is now a part of CB Richard Ellis in the early 1990s, said that his experience during that downturn was invaluable. "I don't think an awful lot of people who were in the market now were there in the early 1990s. They have not seen the downside when rental values could drop by 20% to 30%," he said. --Samantha Rowan
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