GE Capital Real Estate has won the race to buy Deutsche Postbank’s circa £1.3bn pool of UK performing commercial property loans, in a deal which accelerates the ambitions of the General Electric subsidiary to rebuild a senior commercial mortgage lending business, CoStar News can reveal.
Deutsche Bank, which owns 93.7% of Postbank and has managed the loan book sale process, known as Project Tower, has agreed to sell just under 50 loans to GE Capital, leaving a balance of less than 10 non-performing and sub-performing loans left to sell, with an unpaid balance of around £250m.
GE Capital entered the process to bid on Project Tower in August, and was one of three bidding consortiums when final round bids were submitted 12 September.
Ares Real Estate Group and Citigroup partnered to carve up the loan portfolio, with Ares pitching on the sub-performing and non-performing loans, as well as some performing loans, while Citigroup was seeking to finance Ares’ loan portfolio acquisition and additionally pitch for some performing loans separately.
JPMorgan pitched across the entire Postbank loan book, with backbids by Renshaw Bay on some loans.
Pricing between GE Capital, Ares and Citigroup and JPMorgan was tight on the performing loans, at a low single-digit discount.
While no decision has been taken yet as to the sale of the circa £250m sub and non-performing loan pool, Ares Real Estate Group is thought to be the most likely buyer after JPMorgan chose to withdraw from the process last week.
Deutsche Bank had stipulated that the senior lending platform itself and Postbank’s UK branch staff were included as part of any sale, although GE Capital is expected to have negotiated this point to some extent, and is instead likely to selectively look to integrate Postbank personnel.
For GE Capital, which has considerable renewed ambitions as a UK senior lender, the win is a major coup, after not entering the bidding process for Eurohypo’s £4bn UK commercial property loan book, which traded to Wells Fargo and Lone Star in July.
Postbank’s UK loan book has an average unexpired loan term of just under 2.5 years, providing GE Capital with fast-track access to borrowers with imminent and near term refinancing requirements, to aid its own senior lending growth ambitions.
In the last six weeks, GE Capital real estate senior debt team in the UK has closed two senior loans, a £72.5m five-year senior loan financing, co-incidentally, for Ares Real Estate Group’s £115m acquisition of 10 Fleet Place in the City of London, and a £130m five-year senior loan to finance Blackstone’s St Enoch shopping centre in Glasgow.
A list of Postbank’s recent UK senior loans is provided below.
The Postbank loan deal is one of GE Capital’s largest buyside portfolio acquisitions in recent years and the first major deal under Ellen Brunsberg, since succeeding Ilaria del Beato as UK managing director in April.
Brunsberg, who joined GE Capital in its capital markets division in August 2011, previously spent 17 years with Morgan Stanley and founded its European securitisation platform, ELoC, which has proved to be one of Europe’s most robust CMBS conduit programs, according to recent Deutsche Bank research.
Deutsche Bank accelerated plans to dispose of the commercial property loan book of Postbank’s UK branch just before the summer, after assigning the lending subsidiary to its Non-Core Operations Unit (NCOU) in November 2012.
The decision to sell off Postbank’s property lending loan book and platform was part of Deutsche Bank’s wider efforts to reduce its risk-weighted assets (RWAs) and increase its Tier 1 capital ratio.
First round of bids were submitted by Bank of America Merrill Lynch, AXA Real Estate, Royal Bank of Canada, Goldman Sachs and M&G Investments, in addition to finalists Citigroup and JPMorgan emerged as leading biddersat the end of July, with Ares’ interest emerging a week later.
All parties declined to comment.
Postbank’s recent UK senior lending deals
- In April, Postbank called in LPA receivers at Savills over developer HDG Mansur’s £255m Finzels Reach scheme – a part-completed, mixed-use regeneration project – after failing to make loan repayment on a development loan. Kevin Mersh and Julian Clarke at Savills have been appointed.
- In January, Postbank and HSBC extended two development loans, together worth £104m, to finance the construction of the residential schemes at Arthouse and 1 Canal Reach by Argent
- In April 2012, Postbank extended a five-year £42.75m senior loan to the iQ Property Partnership Fund, a Quintain Estates and The Wellcome Trust joint venture fund, secured by three UK student accommodation buildings at a margin between 275bps and 300bps over three-month LIBOR.
- In July 2012, Postbank financed two regional office acquisitions, Marlow International and Unilever House, with a five-year £61.7m senior debt facility shared equally with DekaBank. Margin is thought to be around 275 bps.
- Also in July 2012, Postbank provides a share of a £60m three-year loan to finance £109m acquisition of CAA House and 1 Kemble Street by Mike Hussey’s Almacantar with Crédit Agricole CIB.
- Back in December 2011, Postbank provided senior debt to finance UK retail park acquisitions by a joint venture fund established by Brockton Capital and Pradera.