Germany’s Aareal Bank has bought a 20 percent stake in the London-based loan servicing firm Mount Street in a bid to support its real estate syndication activities.
The acquisition of the stake comes as Mount Street’s founding partners, Ravi Joseph and Paul Lloyd, completed a management buy-out of the firm’s seed investor. Alongside Aareal’s investment, Joseph and Lloyd have bought the equity stake of Greenfield Partners, a US private equity real estate firm which provided the principal seed capital for Mount Street at its launch in 2013.
As part of Aareal’s investment into the firm, a strategic partnership has been established through which Mount Street will provide servicing and credit management functions to support the bank’s syndication activities with other banks and insurance companies. Mount Street is aiming to expand its relationships in the banking and finance sectors through the arrangement.
In tandem, Aareal will examine the use at group level of the credit management software which Mount Street has developed alongside Gresham Technologies and which it is already using.
“Many European banks seek to restructure, exit non-core businesses and optimise the profit margins in their core businesses,” commented Lloyd, “the intersection of technology and business process optimisation can drive changes in banking business models”
The investment into Mount Street forms part of Aareal’s strategic plan to 2020., explained Hermann Merkens, chairman of the management board: “We continue to expand our business along the commercial property finance value chain. At the same time, we secure our access to innovative technologies and a rapidly growing market.”
The agreement with Aareal comes soon after Mount Street won a €29 billion wind-down mandate through the acquisition of the portfolio manager of defunct German bank WestLB’s legacy loan-book. The firm bought the portfolio management subsidiary of Erste Abwicklungsanstalt (EAA), the ‘bad bank’ which was formed in 2009 to manage the assets of the former WestLB.
The portfolio transfer and management contract was the largest of its kind completed in Europe and brings the volume of debt which Mount Street manages to around €55 billion. The portfolio included NPLs, ABS notes, leveraged credit and asset and structured finance.
Mount Street has offices in London, Frankfurt and Athens and recently set up a base in Amsterdam. The firm specialises in loan servicing, due diligence, underwriting and work-out of both performing and non-performing debt.