Commerzbank is exploring the sale of the €5bn Spanish division of Hypothekenbank Frankfurt, formerly Eurohypo. The German lender has appointed Lazard to look at the options for a sale of the business, which has €3.3bn of performing loans and €1.7bn of non-performing loans. The move comes a few months after Eurohypo’s £4bn UK business was sold to Wells Fargo and Lone Star at a blended single-digit discount. Wells Fargo bought £2.7bn of performing loans and took on the staff, while the £1.3bn balance of mainly non-performing loans went to Lone Star.
Commerzbank, which withdrew from property lending 18 months ago, has since said that it won’t take losses on the written-down value of Hypothekenbank’s legacy loans. But a source suggested that Germany’s second-largest bank may have been encouraged by the success of the UK book’s sale and the huge rise in interest in opportunities in Spain this year from private equity investors, which perceive the market to be at or near the bottom.
Commerzbank’s decision to accelerate disposal of a second chunk of its international book may be part of a wider trend of German banks finally starting to clean up their balance sheets both at home and abroad. An Ernst & Young report on German and Austrian loan portfolio markets anticipates very active trading by German banks in their home market in the near future as they seek to improve their bottom line and as a result of strong interest in German assets from investors.
With German real estate prices improving, banks’ expected pricing for loan portfolio sales is coming closer to investors’. Lloyds’ sale of Project Chamonix to Marathon Asset Management earlier this year shows that the bid/ask spread has narrowed, according to the firm’s Loan portfolio transaction markets: Germany and Austria update.
Ernst & Young predicts German sell off
In its German loan market report, Ernst & Young says it expects FMS Wertmanagement and Erste Abwicklungsanstalt (EAA), the external non-core resolution agencies of Hypo Real Estate and West LB respectively, to become more active in selling non-core and non-performing assets.
EAA has received bids from potential buyers of West LB’s former property lending subsidiary WestImmo. Real Estate Capital reported in October that Pimco and Aareal Bank were tipped as front-runners to buy the €15.2bn book.
FMS is in talks with Patrizia to sell a €1bn office portfolio, known as Leo I, comprising 18 buildings let to the state government of Hesse, including the finance ministry and the Frankfurt police HQ. It would be Germany’s largest commercial property deal of 2013.