AEW Group of Europe sees window closing for UK property buys

[Naveed Yaseen]

LONDON (August 30 2009): AEW Europe, one of the region's largest property investors, sees the window of opportunity to make UK acquisitions closing, and plans to shift focus to the continent when prices fall further, its chief executive said. AEW Europe, which manages 17 billion euros ($24 billion) in assets, earlier this year was one of a few major buyers in the UK commercial property market, where prices are showing signs of bottoming after falling 45 percent from their mid-2007 peak.

"We are still actively looking at opportunities in the UK, but the window is closing," Christian Delaire, who was appointed CEO in March, told Reuters in an interview. The asset manager, a unit of Natixis Global Asset Management, has about 2 billion euros to invest across its funds, and is awaiting a further correction continental European commercial property prices before making its move, he said.

"We consider that the necessary yield moves have not taken place yet in the rest of Europe," Delaire, who was previously global head of fund management at AXA Real Estate Investment Managers, said. "In France and Germany for example, we have seen almost nothing in terms of impact from the crisis in the financial sector on rents and occupancy, but all these will happen and these will be reflected in falling values," he said.

AEW Europe, which in May paid 70 million pounds ($114 million) for a portfolio of industrial properties from struggling UK landlord Brixton, said while it has obtained loans for acquisitions, lending conditions remained difficult. "The fact is some loan conditions today don't make any sense. This means for some deals, it makes more sense for us to use all-equity, and to refinance when conditions are back to interesting levels," Delaire said.

Delaire said AEW Europe is aiming to diversify its client base further, in particular boosting the retail portion of its assets under management to 10 percent, from 5 percent.

The company has previously launched OPCI structures in France, which are the equivalent of the German open-ended property funds targeted at retail investors, and is planning to launch more. "When we go to our clients, we tell them it is good to be diversified sector-wise, country-wise, and I think it is the same for a company like us to be diversified in terms of client types," he said. The rest of AEW Europe's assets comprise 37 percent property funds, 31 percent individual separate accounts, and 27 percent in club deals for up to three investors.

Due to the turmoil in the market, AEW Europe is also eyeing opportunities to take over "broken" asset management portfolios for investors unhappy with their managers. "Investors might start feeling very uncomfortable with the asset manager making losses, or losing their teams. Some management contracts are structured such that these investors can look for a succession asset manager," Delaire said. He said the company will look at these "broken" funds or account sizes of 500 million euros and above to take over.

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