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Pbb backs Madrid offices in competitive Spanish market

The German bank has refinanced a portfolio of six assets for Tristan with a €170m loan along with local lender Caixabank.

Germany’s pbb Deutsche Pfandbriefbank has continued its lending drive in the Spanish market through a €170 million loan provided in a club deal with Caixabank to refinance an office portfolio owned by Tristan Capital Partners.

The portfolio, bought last year by the London-based private equity firm from Spanish SOCIMI Colonial, consists of six assets located in office sub-markets of Madrid, comprising 77,000 square metres of grade A office space, which is 80 percent occupied. Real Estate Capital understands Tristan originally bought the portfolio in an all-cash deal and has refinanced while implementing a business plan for rental growth.

“We have provided a medium-term loan to back Tristan, which has been an existing client for pbb for a long time,” Norbert Müller, the bank’s head of real estate finance, Continental Europe West, told Real Estate Capital, declining to provide the terms of the loan.

Pbb is among the German banks seeking to increase their presence in Spain, an increasingly competitive real estate finance market. Unlike several German lenders, pbb did not pull back from Spain during the financial crisis, which impacted the property market from 2009 to 2013.

“We are one of the few international lenders that, despite the difficult years, maintained a team in Madrid, backing assets selectively,” Müller said, adding that last year, new business volumes in Spain were in the low-triple-digit million area, marking a strong increase over the relatively low volumes in 2016 and 2017.

“The Spanish market became very competitive over the last 24 months, especially in the last 18 months,” he said. “This has tightened loan margins, although there’s still a premium over Germany or France.”

Over the last year, competition among lenders in Spain has driven down margins for prime offices, falling to between 120 and 150 basis points, down from 150 to 170 basis points a year earlier, according to market sources.

Despite this margin compression, pbb remains “definitely interested” in financing assets in Spain, particularly offices in Madrid and Barcelona, but also logistics and residential, Müller said. In April last year, the bank provided a €95 million long-term senior loan to GreenOak to refinance Las Mercedes Business Park in Madrid.

International senior lenders have shown increasing interest in financing Spanish assets as the country’s real estate market benefits from a recovering economy – in Q4 2018, Spain’s GDP was up 0.7 percent from the previous quarter, in contrast to the slowdown in major eurozone countries. In 2017, for instance, conservative German bank Deutsche Hypo re-entered Spain, a market it pulled back from in 2013, while Allianz Real Estate signed its first Spanish office financing deal with a €155 million loan.