German bank LBBW is planning to open a new office in Toronto in early 2018, as part of the expansion of its real estate finance business into the North American market.
The bank is also planning to increase its property finance activities in France, particularly in Paris, on the back of sponsor demand, Thorsten Schönenberger of LBBW’s board of managing directors told Real Estate Capital.
“Our expansion is organic, it isn’t driven by the lack of business opportunities in the existing markets. Instead, we want to back our sponsors in the markets [in which] they are being active,” Schönenberger said.
In recent years, LBBW has concentrated its real estate financing business on Germany, the US and the UK markets.
With the new office in Toronto, LBBW is aiming to increase its existing Canadian loan book of around €300 million by the same amount in newly originated loans every year.
“As a neighbouring country to the US, the Canadian market shares the same language, transparency, market participants and equity volatility. It’s also a very stable market, with stable margins,” Schönenberger noted.
The target for Paris is to write around €300 million at an early stage. “In the longer term, we should be able to do half a billion on a yearly basis. Paris is a single market but it is huge: we want to become a regular market participant instead of an opportunistic occasional lender,” he said.
At this stage, the bank is understood to be considering opening a Paris office, although no formal decision has been made.
LBBW is a conservative lender, typically choosing to back well-known sponsors with senior debt on institutional-grade properties. For the Canadian and French markets, the bank will follow its lending strategy, focusing on core assets and prime locations. “We will focus on quality in the first place, although loans don’t have to be large just for the sake of it,” Schönenberger said.
Despite “high competition” among real estate lenders, the bank remains focused on Germany, its core market, along with the US and the UK. In the first half of the year, LBBW wrote €3.4 billion of new loans, with the aim of generating new business in the range of €6 billion to €7 billion by year-end.