Aareal Bank has picked up new lending and refinancings over the third quarter closing €1.32bn which takes total for the nine months to the end of September to €2.98bn, with the German pfandbrief bank confirming it plans to close up to €2.5bn in the final quarter of the year.
But the €1.32bn total for the third quarter is less than half the €2.99bn closed over the same quarter last year, as is Aareal’s €2.98bn nine-month tally compared to 2011’s €6.2bn for the equivalent three quarters.
The average gross margins on Aareal’s third quarter property loans was 250 basis points or slightly above, while its total loan book has a blended 67% LTV.
Aareal’s deal flow this year includes:
- a €162.5m slice of a €650m senior debt facility refinancing Stadium Group and the Canadian Pension Plan Investment Board’s joint venture €1.3bn Centro shopping centre in Oberhausen along with Allianz Real Estate and Heleba Landesbank Hessen-Thüringen;
- a share of the €400m four-bank refinancing of CeGeREAL’s matured Opera France One FCC CMBS, secured by three prime Paris offices;
- a share of the three-bank club deal financing Brookfield Office Properties acquisition of 99 Bishopsgate with £150m five-year senior loan, alongside Wells Fargo and Santander.
The slowdown in property financing by Aareal was trailed back at the bank’s annual result in February, in which a “continued volatile and uncertain environment” had prompted a more cautious approach to lending.
Aareal confirmed this morning that the bank will close at the upper end of its €4.5bn to €5.5bn annual property lending target.
Dr Wolf Schumacher, chairman of the Management Board of Aareal Bank Group, wrote in today’s published interim results: “As things currently stand, we believe there is a good chance that we will reach the upper end of this range.”
CoStar News understands that an increased pick-up in UK deals forms a significant part of Aareal Bank’s fourth quarter pipeline.
Schumacher added: “Recent developments in Europe aimed at managing the [Eurozone debt] crisis are a cause for a certain degree of confidence – and the first signs of a cautious easing are discernible on the markets.
“We continue to see attractive opportunities in the markets we cover. Our deal pipeline is well-stocked for the remainder of the financial year and beyond.”
Aareal’s pipeline streched across deals in France, Germany, Poland, UK as well as the US.
“Our international orientation allows us to use attractive market opportunities on three continents. It has also reduced our dependency on individual markets and regional business cycle fluctuations.
“As far as the the property type is concerned, in future too we will be financing office and logistics properties, shopping centres and hotels. In doing so, we will continue to focus on investment financing backed by first-class collateral, eligible for inclusion in the cover assets pool and with moderate loan-to-value ratios,” the bank added.
Aareal posted third-quarter consolidated operating profit of €42m, compared with €47m in Q3 last year, while last quarter’s consolidated net income was down €2m on 2011 to €22m. The bank continues to forecast allowance for credit losses in a range of €110m to €140m, unchanged from last year.
To fund its lending, Aareal raised more than €500m in long-term funds in the third quarter on the capital markets –with pfandbriefe accounting for around €200m and unsecured refinancing for approx €300m – taking the total long-term funding raised in the first nine months of 2012 to €3.9bn.
Aareal Bank’s Tier 1 capital ratio was 16.8% as at the end of September, comfortably complying with capital and liquidity requirements under Basel III.
“Given the still-unresolved sovereign debt crisis, Aareal Bank anticipates continued volatility on the financial and capital markets and therefore expects the risks in the financial system to persist during the remainder of the financial year 2012 as well,” the banks said in a statement this morning.
“Economic development will also continue to face significant risks and uncertainty. The uncertain political framework and cumulative effects of forthcoming changes to the regulatory environment – which have not yet been clarified – also present further challenges for the banking sector.