GE Capital Real Estate has this evening confirmed it has signed a definitive agreement with Deutsche Postbank AG to acquire a £1.4bn ($2.1bn) UK commercial property loan portfolio, known as Project Tower.
CoStar News reported that GE Capital had fought off the joint Citigroup and ARES bid at the beginning of October, and was also the first news service to report the UK performing loan portfolio was up for sale back in May.
Initially, Citigroup and ARES emerged as joint bidders against JPMorgan, but GE Capital entered the process at the end of August and were informed of their win on 1 October.
GE Capital is expected to close Project Tower with Deutsche Bank, which owns 93.7% of Postbank and has managed the loan book sale process out of its New York office, before the year end.
Project Tower is comprised of 55 performing UK commercial property loans, many with near-term loan expirations that provide GE with access to both a new customer base and the potential for refinancing or for new loan activity.
Speaking to CoStar News, Ellen Brunsberg, managing director of GE Capital Real Estate UK, said: “This high quality loan origination strategically makes sense for GE Capital as a loan portfolio acquisition, and we will look to get to know our new borrowers to understand their future financing needs, as well as exploring whether they would benefit from any broader GE Capital services.”
GE Capital has closed six UK financings in 2013, which Brunsberg said near a total of $1bn, plus the $2.1bn Project Tower loan portfolio, takes GE’s UK property loan book to around $3bn.
Brunsberg said the next goal is to reach a $5bn UK real estate loan book, which she said is achievable inside two years.
She added: “We are back and actively lending, and looking to grow our business, we want to provide financing solutions across performing, sub-performing and non-performing loan financings.”
Mark Begor, CEO of GE Capital Real Estate, said: “This transaction supports GE’s plans to grow our core commercial real estate lending business globally.
“It also demonstrates GE’s ability to underwrite portfolio deals and positions us as a lead provider in the market for the long term.”
The commercial real estate unit of GE Capital has been a lender for 40 years. Overall earnings for the business continue to improve as it exits its commercial real estate equity holdings to focus on its lending business.
Ellen Brunsberg, managing director of GE Capital Real Estate UK, added: “This transaction is a significant investment and an expansion opportunity for GE’s commercial real estate lending activities in Europe.
“We are fortunate to acquire a portfolio from Deutsche Postbank given their excellent reputation for real estate lending, and our similar approach to providing outstanding client service.”
Equity exposure is down 60% from its peak before the recession,following a strategy to reduce equity holdings in preference of senior lending
GE Capital Real Estate has 1300 employees globally, including 100 in the UK.
For GE Capital, which has considerable renewed ambitions as a UK senior lender, the Project Tower 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 three months, 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.
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.