AXA Real Estate, MGPA AND Eurohypo to develop new £115 million city offices at 6 Bevis Marks

Innovative structure for major debt workout transaction includes speculative development finance

21 October 2011 - AXA Real Estate Investment Managers (“AXA Real Estate”), on behalf of its Real Estate Opportunities Fund II, a pan-European opportunity fund, MGPA and Eurohypo have combined to create a joint venture partnership* to develop 6 Bevis Marks, a major new 160,000 sq ft office development in the heart of the City of London. AXA Real Estate and MGPA have acquired the site on a 50:50 basis while Eurohypo, the lender to the previous owners of the site, will provide development finance towards the expected circa £115 million total development cost, with equity being provided by AXA Real Estate and MGPA.

With floor plates ranging in size from 6,000 sq ft to 13,000 sq ft, 6 Bevis Marks will be suitable for a broad range of clients either on a single or on a multi-let basis. The scheme will also benefit from its close proximity to the major transport hub of Liverpool Street, where a new Crossrail terminus will be added in 2017 to the existing rail, underground and bus stations.

Construction is expected to commence at the beginning of 2012 with City Offices Real Estate (CORE) acting as Development Manager and, on completion, the scheme will comprise 160,000 sq ft of Grade A office space, together with 12,000 sq ft of retail on the ground floor. The asset is expected to be delivered in the autumn of 2013 and is targeting a BREAAM ‘Excellent’ sustainability rating.

Following this, AXA Real Estate’s Real Estate Opportunities Fund II which invests in high potential real estate assets, debt and preferred equity has completed its investment phase. MGPA’s investment has been made on behalf of MGPA Europe Fund III, a private equity fund which holds office and retail real estate assets in five countries across Europe.

Charles Howard, Senior Fund Manager of Real Estate Opportunity Funds at AXA Real Estate, said: “The innovative structure of this joint venture and the opportunistic nature of the transaction demonstrate our ability to source and execute deals which we believe will create significant value for our clients. It also allows us to draw on AXA Real Estate’s extensive global development experience. Bevis Marks provides us with further exposure to the prime City office sector and we believe the fact that Eurohypo has provided speculative development finance reflects its confidence in this project. Having won the original tender for this scheme in the summer of 2010, we are now looking forward to working with our partners to get construction underway and subsequently deliver the asset at an opportune time in the cycle.”

Hamish MacDonald, Director for European Acquisitions at MGPA said: “MGPA is delighted to be forming this joint venture with AXA Real Estate and Eurohypo. 6 Bevis Marks is a high quality speculative investment which shows MGPA’s ability to find the best opportunities in local European markets and it reinforces our position as a leading player in prime City office developments. London is a major global hub which continues to attract capital from around the world and 6 Bevis Marks will be another ‘oven ready’ project for 2013, a time when we forecast a significant lack of new supply in the UK’s capital. We believe the investment represents attractive value and we look forward with our partners to delivering an outstanding asset onto the market.”

Dan Smith, Director at Eurohypo said: “We are delighted to be working with AXA Real Estate and MGPA to put in place this innovative restructuring solution that will allow the further development of a major City of London property. This transaction further demonstrates our desire to recover value from distress and is indicative of Eurohypo’s market leading positioning in the UK for deals of this kind, our detailed understanding of Real Estate and our confidence in the project. We expect this solution will go a long way to achieving a full recovery of the initial debt Eurohypo advanced six years ago.”

*Real Estate Opportunities Fund II, a pan-European opportunity fund advised by AXA Real Estate, has formed a joint venture with Europe Fund III, a fund advised by MGPA. This joint venture has then agreed a further joint venture with Eurohypo.

About AXA Real Estate

AXA Real Estate Investment Managers (AXA Real Estate), a wholly-owned subsidiary of AXA Investment Managers, is the largest real estate portfolio and asset manager in Europe (Source: INREV Survey 2010 published in June 2011), with over €40 billion of assets under management as at the end of June 2011. It currently has over 120 third party institutional clients spread across the world, in addition to managing funds for 10 AXA insurance companies.

With over 500 real estate professionals operating in 22 countries, AXA Real Estate’s competitive advantage stems from its global fund management expertise combined with extensive on-the-ground deal sourcing, asset management and development execution capabilities.

AXA Real Estate structures and actively manages or advises investment products, seeking wide ranging opportunities along the risk spectrum to deliver targeted returns commensurate with clients’ risk profiles, through a variety of investment strategies. These range from core to opportunistic, country-specific to geographically-diversified, sector-specific to multi-sector, with the capacity to invest at all levels of the capital structure.

About MGPA

MGPA is an independently managed private equity real estate investment advisory company focused on real estate investment in Europe and Asia. Through its network of offices in Europe and Asia, we currently manage approximately US$11 billion in assets throughout these two regions. Our managed investments include development and redevelopment projects, joint-ventures and real estate operating companies in the office, retail, industrial, residential and hotel sectors. For further information please visit www.mgpa.com.

About Eurohypo

Eurohypo is Europe’s largest commercial real estate bank and is a member of Germany's second largest listed bank-the Commerzbank Group. It is headquartered in Germany and represented in 10 countries worldwide with offices in major cities including London, Paris and New York. Eurohypo’s local expertise and understanding of the real estate markets gives it the ability to tailor products which suit the specific needs of each transaction.