Insatiable appetite

This was achieved after the group’s wholly-owned subsidiary AXA Real Estate Investment Managers (AXA REIM) acquired a 50 pct stake in Apollo-Rida’s Polish retail portfolio. The 28 retail properties had originally belonged to the Metro group before being sold to Apollo-Rida for USD 840 mln in 2004. Although AXA is at the moment refusing to confirm any association between themselves and the Apollo-Rida deal, unofficial market sources believe that the value of the transaction is somewhere in the region of EUR 600 mln. In an earlier deal, AXA bought a 49 pct share of Investkredit’s portfolio of Warsaw office buildings for a sum rumoured to be around EUR 145 mln.

Intrigued, ‘Eurobuild Poland’ spoke to John Verpeleti, the head of AXA REIM Central Europe KFT about why the group has decided to invest so much in Polish real estate and about what we might expect to see from AXA in the future.

John Verpeleti, the head of AXA REIM Central Europe KFT: The acquisitions we make are opportunity-led deals – we have no preferred weighting by country. If an attractive EUR 500 mln deal was on offer in Slovakia or Hungary, then that would arouse our interest too. However, Poland is one of our core target markets, or ‘tier 1’ markets. We classify markets into 3 or 4 tiers, depending on how mature, developed and risky they are.

 As your group is a newcomer to the region, could you tell us more about how the various divisions of the AXA group operating on the Polish market are structured and financed?

There are 80 funds within the AXA group, and 12 acting in this region, and these are both external and internal. Each fund is different, in terms of their targets and what they are allowed to do. We are the unit that presents and processes the various opportunities to see if they make sense. In all respects the funds are very different, with quite a variation between them.

 What is your strategy exactly, in terms of the real estate sectors you are interested in? Is it likely to change in the future?

Our strategy at the moment is to purchase income-producing stock. At the moment we have around EUR 800 mln of assets under management in the region and another EUR 100 mln in commitments. But our strategy is definitely going to change as we widen our geographical scope, as well as when we intensify our activities in different sectors. Presently retail properties dominate our acquisitions, but this is not the result of some conscious bias towards retail, but rather because of the offers that came along. We are interested in the logistics and office sectors, and maybe the residential too. As we move forward, the current favour shown towards retail will change.

 As an investor, you must have your eye fixed firmly on yields. What do you see happening in terms of yields in the next year or so in the different sectors in Poland? And how are your expectations for yields influencing your future strategy?

I think the last three months has seen some significant change in market sentiment generally in this region, but I am not sure this is a commonly held view yet. There is now a lot of evidence that the yield compression we have seen has stopped, or will not continue, and differentiation which should have been there in the first place is now occurring. If this view is wrong, and yield compression continues, we will review our strategy and seek out different ways of doing things in the region’s markets.

 So what can we expect next from AXA?

Our appetite is exceptional. In 2007, you can expect there to be more ‘big ticket’ purchases, together we some changes in what we do. We may for instance go into development, or look at markets further east, eg. Russia. We have now established our base, and so we are capable of servicing all the requirements of our investors and building on our growth. Our start, given that we are only 1 year old in the region, has been exceptional. We have a strong commitment to this region and absolute faith in it.