Natixis-Backed Firm Delays $1 Billion Office Sale on Virus

(Bloomberg) --

Coronavirus-fueled market turmoil has led AEW SA, a real estate investment manager backed by Natixis SA, to push back a planned 900 million-euro ($1 billion) European property sale.

The fund manager is trying to assess the impact of the outbreak on real estate markets before moving ahead, according to four people with knowledge of the matter. AEW had already appointed Savills Plc to market the office properties in its Europe Value Investors Fund and was set to kick off the sales drive this week at a major property event in Cannes, said three of the people.

That event, known as MIPIM, was postponed until June on virus concerns. AEW has yet to make a decision when it will now start marketing the assets held by one of its funds, said the people, who asked not to be identified because the process is private. The properties are located in countries including France, Germany, the Netherlands and Spain, which have all seen the number of coronavirus cases rise in recent days.

Spokespeople for AEW and Savills declined to comment.

Real estate investors are struggling to gauge the impact of the coronavirus. Commercial property values typically take months to adjust to market conditions, reflecting the time it takes to buy and sell large buildings. That can mean there is little evidence of substantial short-term price movements in periods of significant uncertainty.

Steady Income

The steady income provided by long leases can be an attractive safe haven in periods of market turmoil. But if the outbreak triggers a global recession, that could drive down rents and property values. Before the spread of the virus began to escalate in western Europe, large portfolios of commercial properties were trading at near-record prices, as investors sought higher returns in the face of negative interest rates.

“The virus has demonstrated that equity markets are volatile,” Isabelle Scemama, chief executive officer of AXA SA’s investment management real estate unit, said in an interview. “Private markets are slower to react because we don’t have this liquidity.”

Some deals are still getting done in Europe where investors are confident that asset prices won’t decline and the ability to physically inspect properties is less likely to be impacted by travel restrictions. German fund manager Union Investment completed a deal to buy an additional stake in Watermark Place, the London headquarters of Nomura Holdings Inc., according to a statement on Tuesday.

AEW began raising the Europe Value Investors fund in 2014 and went on to buy about 18 office properties in western Europe, the people said. Its so-called manage-to-core strategy focuses on buying buildings that required investment, they added.

To contact the reporter on this story: Jack Sidders in London at jsidders@bloomberg.net

To contact the editors responsible for this story: Shelley Robinson at ssmith118@bloomberg.net, Patrick Henry, Chris Bourke

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