German group favours home market first, as other insurers look to lend
Allianz has entered the lending market and is working on its first commercial property senior loan. The German firm is the latest of several insurance groups that are new entrants to lending this cycle. They include MetLife, which is originating UK deals, and Axa, which is participating in UK and continental loans.
Helmut Mühlhofer, Allianz Real Estate’s head of debt and capital markets, said: “We could lend a large amount over the next couple of years if we find the right deals. That is the most important thing to us, whereas banks are more focused on their client relationships.
“For us it is an investing exercise; we need to benchmark ourselves over fixed-income opportunities, long-term.” Allianz is working on a loan for an office investment in Germany and Mühlhofer said the initial deals would all be in the domestic market.
“For now we are looking at Germany only because it is our home market, though we are aware the margins are better in the UK and France,” he said.
“First we need to put some loans on the balance sheet here.”
He said the group would look at offices, shopping centres, inner-city retail or logistics, “as we would in the direct market” and was seeking participations between €50m and €150m. “Ideally we want fixed-rate loans, around 60% loan to value, and long-term, between seven and 10 years or maybe beyond.”
Mühlhofer has extensive lending experience. He joined Allianz from Aareal Bank two years ago when the group started looking at opportunities created by Europe’s refinancing gap. He has been developing the debt investing strategy for the past couple of months.
The move is in response to a desire by the group’s investors to supplement pfandbrief and other fixed income investments, including bonds, partly for better yields and partly because German mortgage bond issues have declined.
Mühlhofer said Allianz was seeking a premium to other fixed incomes “because it is fairly labour-intensive to originate and analyse deals and bring them to a close, as they are fairly illiquid investments and we look to hold assets on our balance sheet.
“Five-year loans are probably lower yielding, but on a 10-year loan we can probably get a 4.5-5% overall yield.” As well as originating its own loans, Allianz will work with banks as a co-lender and will look for staff in Germany with experience in originating and structuring debt.
“As the business grows, the team will need to grow, but we won’t set up a huge distribution network like the banks.” The group has ruled out investing in debt funds for now.