AXA Real Estate Investment Managers (AXA REIM) entered the Chinese real estate market last month, signing a memorandum of understanding with Ping An Trust, a subsidiary of giant domestic insurer Ping An, to co-invest in residential projects within large cities. The deal marked the manager’s first strategic partnership in the region. It was in the process of signing a similar agreement with a “household name” financial institution in Japan, and is seeking co-investment partners in Australia and India, Frank Khoo, AXA REIM’s global head of Asia, said.

With about €40 billion under management, AXA REIM is Europe’s largest property manager. Last year it appointed Khoo to spearhead its drive into Asia by forming alliances with domestic investors in the aforementioned countries. “Most global players have pan-Asia funds. We prefer country-specific funds and asset class-specific funds,” Khoo said. To develop such products, Khoo opted to partner with existing domestic managers rather than recruit and maintain dedicated teams in each market. In China, “the developers might not know AXA, but they definitely know Ping An,” he said – a reverse of the situation in Australia, where Ping An is best known, if at all, for briefly employing John Pearce as insurance CIO before his return here to head investments at UniSuper.

Entering the Chinese real estate market after the financial crisis had hit the property development operations of investment banks and other managers was opportune, because buyers generally held the balance of power, unlike the previous years in which sellers fetched inflated prices, Khoo said. It also meant the manager’s portfolio held no pre-crisis assets from the Asian market. “The more you did in 2006-07, essentially, you would have a lot of legacy issues.” In China, AXA REIM would pursue middle-to-upper range residential projects because they were subject to a one-year holding period upon completion, unlike retail properties, which must have stable tenants and provide consistent income to attract acquirers. “If you buy retail, you have to build it, get tenants and stabilise it before you can get out. “With a residential project, you can get out in a year.”

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