Aareal Bank is expecting a “very challenging” 2012, with lacklustre economic growth in Europe and pressure on real estate prices.
The bank’s chiefs predicted that they will carry out less real estate business in this year’s “volatile and uncertain environment”, at €4.5bn-€5.5bn, compared with €8bn of property lending last year.
Last year, Aareal’s structured property finance arm originated €3bn of new business, with renewals making up the remainder. Nearly three-quarters of this was in Europe, most of it outside Germany.
The bank now operates in 20 countries and has a €24bn loanbook. The division generated €119m of Aareal’s €133m profit last year.
The bank is focused on safe, low-risk lending, targeting loans that can be refinanced via the pfandbrief market and the bulk of its debt portfolio carries loan-to-value ratios below 60%.
However, it still selectively funds development, mostly in Europe, and these loans account for 5% of its portfolio.
The bank provided a €72m development loan for Helical Bar’s Europa Centralna retail park, the largest in Poland.
Aareal also helped Hercules Property Unit Trust to refinance its securitised debt by providing a £350m facility and participated in the €219m financing of the O’Parinor shopping centre in Paris for Korea’s National Pension Service.
Aareal strengthened its capital base last year by raising €270m with a rights issue. The bank now has a core tier-one ratio of 11.3%.