Norway’s Government Pension Fund Global, Oslo, formed a venture with AXA Real Estate Investment Managers to provide European commercial real estate debt as borrowers rush to refinance maturing loans.
Norges Bank Investment Management, which manages the investments of the 4.76 trillion Norwegian kroner ($794 billion) sovereign wealth fund, and AXA Real Estate, a unit of Europe’s second-largest insurer, will supply individual senior loans as large as €600 million ($814 million) mainly in the U.K., France and Germany, according to statements from NBIM and AXA on Tuesday.
The amount of property debt maturing in Europe through 2014 exceeds available funding by $50 billion after banks cut lending in the financial crisis, broker DTZ said in a June report. The shortage creates wider profit margins, attracting insurers, debt funds and sovereign wealth funds.
“We have the capability to maintain attractive margins here,” Isabelle Scemama, global head of real assets finance at AXA Real Estate, said in an interview. “We will continue to be selective and try not to compete with the German banks that are more aggressive.”
AXA and NBIM will focus on providing new loans and will also consider buying existing loan books, Ms. Scemama said. “The difference will come from the fact that we have new capacity to lend very big amounts on a deal-by-deal basis,” she said.
Insurers, pension providers and SWFs are investing in real estate, seeking margins that outperform 10-year government bonds. More than 50 lenders, including debt funds, started offering commercial property credit in the U.K. in the year through May, mainly for the best properties in London, according to broker Savills.
Banks and other lenders cut their commercial real estate lending in Europe after the 2008 financial crisis as they repaired balance sheets damaged by losses and tried to meet regulatory requirements.
Norway’s GPFG is seeking to increase the proportion of its holdings in real estate to 5%; its actual allocation was 0.9% as of June 30.