A number of larger refinancing deals that have taken place recently in Germany may indicate an improvement in the overall lending climate.
Bonn-based asset manager IVG Immobilien was among the first German property companies to refinance when in October 2011 it expanded two loans with a total volume of about €2bn.
IVG extended its 2009 vintage syndicated loan, SynLoan II, which would have expired in the fourth quarter of 2012. The extension was carried out through the participation of the 12 German banks involved and its life has been extended until the third quarter of 2014.
This loan has a volume of €1.05bn and will be paid back through proceeds from the contractual sale of caverns to IVG cavern funds.
Furthermore, IVG has extended its €933m core funding, which originally would have matured in the third quarter of 2012, to December 2015.
Thomas Rothäusler, real estate analyst at Commerzbank in Frankfurt, believes that these loans could only be realised because they were funded 100% by German banks.
He says that German banks are cutting back lending to foreign companies and are focusing on local business. Rothäusler believes the increasing number of refinancing deals in the German property market implies that the “bank lending situation is improving”.
Anecdotal evidence
However, he adds that there is no statistical proof of this at the moment and that the observation is just “anecdotal”.
The observation is, however, supported by a few large deals that took place earlier this year. Augsburg-based asset manager Patrizia took over the LBBW residential portfolio for €1.44bn, TAG Immobilien acquired BayernLB’s DKB Immobilien for €160m, also taking on the portfolio’s bank debt of €800m.
The majority of high-value transactions took place in Germany’s residential property market. And there is more to come. Currently two large residential portfolios are on the market: BayernLB’s GBW contains 33,000 housing units in Bavaria worth around €1.5bn in total. So far no sale has been announced, but earlier this year BayernLB was in negotiations with southern Germany’s local authorities. State-owned TLG Immobilien is selling another portfolio comprising 12,000 commercial and residential units located in East Germany. The portfolio is valued at about €1.7bn.
More loans are due to mature soon, which will further test the market’s ability to cope. Gagfah Group is among those to watch. The listed Essen-based housing company has two CMBS loans with a total volume of €3.3bn that mature next year, according to equity research by Commerzbank.
One loan relates to Gagfah’s WOBA portfolio, recently a subject of media attention following rumours of a possible sale of the residential units. The portfolio contains 37,658 flats situated in east German city Dresden. The vacancy rate is 5.1% and the portfolio generates an average rent of €4.77 per m2 per month. WOBA is, according to Commerzbank, valued at €1.8bn or a 7.5% gross yield.
The portfolio is accompanied by a CMBS loan of €1.1bn, implying a LTV of 60%, which matures on 15 May 2013. Whether Gagfah decides to sell the whole portfolio or will refinance the loan remains to be seen.
Another loan which might be more difficult to handle is Gagfah’s €2.2bn facility which matures in August 2013 and has an estimated LTV of 65%, according to research by Commerzbank.
The bank is positive about refinancing options, saying: “It is widely assumed that Deutsche Bank, which holds the majority of the notes, will be supportive for refinancing initiatives.” The increasing number of refinancing and larger debt-backed deals moved Gagfah higher up the Commerzbank list.
Apart from non-distressed portfolios being handled by Germany’s property market, there are also distressed portfolios which could change hands soon. Frankfurt-based listed housing company Deutsche Wohnen recently acquired the BauBeCon Group from Barclays Bank for €1.24bn for instance.
This portfolio consists of 23,500 flats located in Berlin, Hanover, Braunschweig and Magdeburg.
Barclays obtained the portfolio at the end of 2011 after the funding attempts of previous owners RREEF and Prelios fell through. When RREEF and Prelios bought the 27,000-unit BauBeCon portfolio from Cerberus, the portfolio had been valued at €1.8bn, according to sources. Barclays’ latest valuations are said to have valued the portfolio at €800m.
Another distressed German property portfolio acquisition is that of Speymill Deutsche Immobilien, which was bought by Cerberus Capital Management.
As part of the deal, Cerberus worked with the company’s bank lenders to recapitalise the assets by restructuring the company’s €985m distressed loans. It also injected capital in the form of subordinated debt and equity that will primarily be used to pay down debt and improve the assets.
A lending consortium
A consortium of banks led by Netherlands-based NIBC Bank along with German banks HSH Nordbank and Norddeutsche Landesbank acted as lenders.
Commerzbank points to two more portfolio’s likely to come onto the market. Deutsche Grundvermoegen, which has been part of Prelios since 2007, has been in discussion for a possible sale this year. Prelios published a statement confirming speculation that German property group Bilfinger & Berger was bidding for Prelios’ German activities. Prelios said that B&B is only one among several bidders in a “competitive process for the possible sale of the German services platform”.
Besides Prelios, other stakeholders in the company include HSH Real Estate and shareholders of B&L Immobilien.
Last but not least, there is the Level One portfolio, of which a third has already been sold to Blackstone in 2011. This portfolio includes 14,000 flats and is owned by Austrian private investor Cevdet Caner and Credit Suisse.
