Ares Real Estate Group, the international real estate equity and debt investor, has emerged as the third finalist vying to acquire Deutsche Postbank’s circa €1.9bn predominantly UK commercial real estate loan book, codenamed Project Tower, CoStar News understands.
CoStar News revealed last Tuesday that Citigroup and JPMorgan had also progressed to the second round for the 60-plus granular UK commercial real estate loan portfolio.
Ares Management is the parent company which completed the acquisition of AREA Property Partners five weeks ago, establishing an enlarged US, European and Indian real estate footprint of $8bn in committed capital under management including US REIT Ares Commercial Real Estate Corporation.
Since the closure of the AREA Property Partners acquisition, and the merger of the two companies’ real estate teams and assets, Ares Real Estate Group has made no secret of its increased ambitions in European real estate debt and is understood to be seeking to employ an overall head of European real estate lending.
Ares’ interest in the predominantly performing property loan book of Postbank’s London branch – comprised of €1.6bn UK property loans and around €300m in German and French loans – is likely to be to gain a footprint in the UK property lending market, akin to Wells Fargo’s acquisition of Eurohypo’s £2.7bn performing UK loans, which finally closed last Friday.
By contrast, Citigroup and JPMorgan are thought to be interested in the loan portfolio acquisition through a blend of multiple investment strategies including: buying-and-holding the loans to amass revenue; a possible partial future securitisation exit; and refinancing maturing loans to secure a margin step-up and seek profitable exits through loan sales and syndications.
CoStar News understands that the first round included bids from AXA Real Estate, Royal Bank of Canada, Goldman Sachs and Bank of America Merrill Lynch.
All parties declined to comment.
Deutsche Bank, which owns 93.7% of Postbank, accelerated the sale process in the last two months for the predominantly performing UK commercial property loan book and the lending platform after Germany’s largest bank assigned Postbank’s London property lending subsidiary to its Non-Core Operations Unit (NCOU) last November.
The New York office of Deutsche Bank is running the sale of Project Tower.
Less than 10% of the loans are thought to be impaired, with the majority of the performing book investment loans, two-thirds secured by London and South East properties, with the balance regional UK and the Continent.
The average margin across Postbank’s loan book is between 225 and 240 basis points, CoStar News understands, while the weighted average unexpired loan term is around 2.4 years.
Private equity funds were restricted from entering the sale process.
While Ares declined to comment, in the press release confirming its acquisition of AREA Property Partners – dated 1 July – John Bartling, global co-head of Ares Real Estate Group, said the merged real estate division “is now better positioned to meet the real estate investing requirements of our large investor base, just as we have done the corporate asset classes of private equity, private debt, and tradable debt”.
“The Ares Real Estate Group, much like the rest of Ares’ investment platform, can now offer sponsors and investors the ability to find opportunities up and down the capital structure and across a broad geography within our real estate platform,” continued Bartling in the prepared statement.