AXA Real Estate Investment Managers in Paris has hedged part of its property portfolio by entering a swap on the Investment Property Databank French Offices Annual Index. Merrill Lynch is the counterparty to the deal and while AXA and Merrill officials declined to give details of the size and terms of the swap, AXA pays the annual returns of the index over three years and receives a spread over three-month EURIBOR.
Laurent Lavergne, head of corporate finance at AXA REIM, said the incentive for entering the swap was two-fold. Firstly, it wanted to hedge part of its portfolio, and secondly, it is hoping to kick start a market in French property swaps. "We have seen how it has developed on the U.K. side," he said, noting since the first U.K. property swap was done on the IPD index two years ago (DW, 7/30/04) this has now become a standard and helped develop two-way interest in property swaps. Thu-Uyen Nguyen, managing director in structured credit trading at Merrill in London, said although there are other French property indices, the IPD was chosen because of the success of its U.K. index.
AXA chose Merrill because it offered the best terms and was also able to more closely tailor the swap to the manager's needs than other dealers, said Lavergne. Nguyen said the firm is looking at offering similar swaps on German, Scandinavian and Swedish property. Merrill has also had interest from Switzerland, Spain, Italy and Ireland. "We expect more transactions to come," she summed up.
