AXA Real Estate Investment Managers, a unit of Europe’s second-largest insurer, plans to develop office buildings in Australia after failing to acquire a second existing property in the country.
“It’s becoming more and more competitive,”Frank Khoo, head of Asia at Paris-based Axa SA (CS)’s property division, said in an interview in Sydney. “So one of the things we’re looking at is developing high-quality properties.” Axa Real Estate will consider developments without tenant pre-commitments in markets where demand is strong, he said.
Investor demand for Australian offices hit record highs in 2013, cutting yields on prime assets by 50 basis points in Sydney’s center and 70 points in downtown Melbourne since late 2009, CBRE Group Inc.’s first-quarter Australia Office Marketview report showed. Investors are moving to lower-quality assets to take advantage of higher yields and potential for price growth, it said.
Axa Real Estate in September partnered with local asset manager Eureka Funds Management on its first Australian purchase, the New South Wales state headquarters of Australia Post, about 3 kilometers (1.9 miles) south of Sydney’s center. The property is now valued at about A$175 million ($164 million), compared with the A$168 million the company paid, Khoo said.
The company is seeking to increase assets in Australia to as much as A$500 million by the end of the year, Khoo said. It plans to fund half of that investment increase with debt, he said. Its parent would commit about a third of the funds and the rest would come from third-party capital, he said.
Axa Real Estate is seeking buildings or land on the fringes of Sydney and Melbourne city centers. It’s also looking in secondary business districts in Sydney, including Parramatta, about 25 kilometers west of downtown Sydney, and North Sydney suburb, about 5 kilometers from the center.
AXA Real Estate has 48 billion euros ($65 billion) under management globally, according to its website. The company has $800 million in the Asia-Pacific region, Khoo said.
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