Wells Fargo and Lone Star have entered exclusive negotiations to acquire Eurohypo’s £4bn UK commercial property loan book from Commerzbank, in a development which sees the exit of rival bidders Starwood and PIMCO.
Commerzbank held a meeting at its Frankfurt headquarters yesterday at which the decision was taken, CoStar News understands. This led to Starwood and PIMCO’s joint bid, as well as separate bids by Blackstone and Apollo, being rejected.
CoStar News understands that Wells Fargo has always been the frontrunner to buy the performing component of the Eurohypo UK property loan book, at around £3bn, and was invited in the “data room” ahead of the rest of the bidders.
Wells Fargo then invited Lone Star to partner on its bid which in turn would seek to acquire the circa £1bn of nominally-valued sub and non-performing loans, as Commerzbank stated a preference for selling the entire UK loan book or none at all.
In addition, Wells Fargo is thought to be the most optimal buyer of the performing loan book as it is most likely to find value in the London origination platform itself, as well as in senior members of the London team.
To ensure competitive pricing, the process was opened up further resulting in the PIMCO and Starwood Capital partnership, similarly split in interest for the performing and non-performing pools, respectively.
Underbidders also included Blackstone, which pitched just for the impaired book, while Apollo also bid, but it is not clear whether this was for the entire book, or just the impaired loan portfolio.
Last Wednesday, CoStar News revealed details of the bids submitted to Commerzbank.
CoStar News understands that the total £4bn Eurohypo UK property loan book is approximately comprised of 70 loans, around three-quarters, or circa £3bn, of the outstanding loan book is performing, and one-quarter, or roughly £1bn, is impaired to a varying extent.
The weighted average unexpired loan term is around three years.
Pricing for the performing book is expected to come in at between 90 and 95 pence in the pound, or between a five to 10% discount, while expectations on pricing for the impaired book could vary widely depending on the inclusion, or exclusion, of very large single loan concentrations which carry deeper discounts than the rest of the portfolio.
Eurohypo was renamed Hypothekenbank Frankfurt at the end of August last year as part of Commerzbank’s migration of the subsidiary to its non-core rundown division.
Barclays Capital is running the sales process.
All parties declined to comment.