Deutsche Pfandbriefbank (PBB), the European commercial real estate lender, has picked up the pace of new lending over the third quarter closing €1.4bn worth of loans, taking the German government-owned bank’s nine-month tally to €2.6bn in 2012.
The third quarter pick-up in new deals includes:
- the closure of €285m senior loan to finance Deutsche Wohnen’s acquisition of the 23,500 BauBeCon portfolio;
- around €100m provided to CeGeREAL as part of a four-bank €400m refinance of a matured Opera France One FCC CMBS; and
- a €41.5m share of a €83m senior loan to finance Tristan Capital Partners’ acquisition of a 12-strong German logistic warehouse portfolio valued at €138m.
PBB said new business momentum gained in the third quarter is expected to accelerate further in fourth quarter, owing to an average 120-day time-lag between take-up of deal into pipeline and closing.
At the turn of the year, PBB forecast it would lend at similar level to the €8bn lent by the combined real estate finance (REF) and public investment finance (PIF) divisions in 2011, for which REF accounted for €6.3bn.
While at a combined €2.9bn for REF and PIF over the nine months to date, PBB is still more than €5bn below the aggregate target, the fourth quarter is expected to be the bank’s most prolific quarter this year.
The fourth quarter already picked up a visible pipeline, including an agreement to close PBB’s biggest European financing deal of the year – the refinancing of Swedish investor AB Sagax’s €505m five-year revolving credit facility, extending an existing PBB facility for two industrial and warehouse portfolios.
David Mindus, CEO of Sagax said of the €505m PBB senior debt agreement: “The facility is the backbone of Sagax capital. By extending both equity and fixed interest, we get the best possible position to continue to develop the business.”
In addition, PBB closed a five-year £75m senior loan last Friday with the £150m Metric Income Plus Limited Partnership, a joint venture retail park fund between Metric Property Investments, which has just completed a merger with London & Stamford, and the Universities Superannuation Scheme (USS).
PBB has closed 50 deals so far this year – at lower average LTVs and higher margins than in the previous two full calendar years, which reflects the supply and demand circumstances contriving to increase the profitability of senior debt lending.
Over the nine months to the end of September, PBB’s average new lending LTV was 55% – down from 64% and 65% LTVs for 2010 and 2011, respectively – while the average gross margin was above 240 basis points, up from circa 200 bps and circa 205 pbs for 2010 and 2011, respectively.
The geographic split of the deals closed over the first three quarters was €900m, or 36%, in Germany, followed by a higher than typical average weighting to UK deals, at 24%, or €600m. In 2011, PBB lent €1bn, or £842m worth of UK deals, reflecting 16% of the year’s book.
PBB posted its most profitable quarter this year at a pre-tax profit of €49m, compared to €43m in the third quarter last year, taking to 2012 nine-month pre-tax profit to €100m, compared to €163m for the same three quarters last year. PBB is now within its target set at the time of its annual results for a full year pre-tax profit of between € 100m and €140m.
PBB said the improvement in profitability over the quarter reflected a marked increase in net commission income, which benefited from back-end fees upon final loan maturity, and exit fees in connections with loan restructurings. Moreover, the bank was able to release € 7m in provisions for losses on loans and advances.
Manuela Better, CEO of Deutsche Pfandbriefbank, said: “The results clearly show the expected positive development. In fact, the third-quarter performance has exceeded our own projections. We expect our new business to grow further in the fourth quarter.”
New business gained momentum during the third quarter: Including extensions for more than one year, pbb Deutsche Pfandbriefbank originated approximately € 1.4 billion in new business, thus matching the volumes achieved throughout the first six months (H1 2012: € 1.5 billion).
PBB has €1.2bn in problem real estate loans as at the end of the third quarter, of which €360m, or 30% of the total, relate to UK property lending.
The bank raised long-term funds totalling €5.7bn at an average term of six years, separate to money-market funds and ECB repo transactions. PBB also placed a €500m senior unsecured benchmark bond in September, which was increased by €250m shortly afterwards.
Operating revenues increased to €130m, while net interest income declined slightly, to €72m, reflecting the lower basis of interest-bearing assets and an increased level of the liquidity buffer.