Deutsche Hypo leads €960m DIC refinancing

A club of three German banks, led by Deutsche Hypo, has provided a €960 million loan to refinance a commercial property portfolio owned by German real estate investor DIC Asset AG.

Deutsche Hypo was joined in the deal by Berlin Hyp and HSH Nordbank to refinance the portfolio of mainly offices located throughout Germany’s North Rhine-Westphalia and Hesse regions.

In its largest ever financing deal, Deutsche Hypo has provided a €510 million share of the refinancing, with Berlin Hyp contributing €250 million and HSH Nordbank providing €200 million. Deutsche Hypo plans to syndicate its share of the debt.

The loan has been written for a seven-year term and takes out existing finance provided by a consortium of banks.

“This is the largest financing in the history of Deutsche Hypo. It is planned that we will syndicate part of the provided financing volume to other bank partners,” said Andreas Pohl, chairman of the board of managing directors of Deutsche Hypo.

DIC said that the early refinancing of its debt has allowed it to reduce its financing costs by 170 basis points to 1.7 percent, with the amortisation rate down from 3 percent to around 1 percent per year. It added that its existing financing arrangements are expected to be almost entirely repaid in January 2017.

“The new credit arrangement gives DIC Asset AG a high degree of planning security and already takes into account the transaction volumes planned with regards to the continuous optimisation of the commercial portfolio in the years to come,” the company said.

The firm has incurred early termination penalties of around €59 million, leading it to predict a negative consolidated post-tax income of around €35 million for the 2016 financial year.

“This financial transaction, which is quite significant for us, significantly strengthens our future profitability and the cash flow from our commercial real estate portfolio. The new financing structure and the funds it releases will enable us to expand the company’s planned growth and to accelerate it further in 2017,” said Sonja Wärntges, CFO at DIC Asset AG.