The sale of German lender WestImmo by the country's bad bank EAA is 'already at an advanced stage', with mortgage bank Aareal believed to be the sole remaining contender, an EAA spokesperson has told PropertyEU.
The sale of German lender WestImmo by the country's bad bank EAA is 'already at an advanced stage', with mortgage bank Aareal believed to be the sole remaining contender, an EAA spokesperson has told PropertyEU.
EAA (Erste Abwicklungsanstalt), which is tasked with winding down WestImmo's assets, ‘intends to sell WestImmo in its entirety, including its loan portfolio,’ to one bidder, the spokesperson said.
‘The sales process is already at an advanced stage,’ she said, declining to provide further details.
According to a Frankfurt-based analyst, Aareal Bank is believed to be the sole bidder left standing for WestImmo, the real estate lending arm of failed lender WestLB, with around €10.4 bn of loans on its balance sheet.
‘The advantage of buying WestImmo is that it is healthy with good assets left. I would expect the unit itself to sell at a discount of around 50% to book value,’ he said. The EAA put WestImmo’s equity capital at €575 mln as of June 2014. The agency is expected to make an announcement shortly regarding the sale.
Putting a price tag on a lender is complicated because one of the key issues is ‘how to value the liabilities of the bank’, according to Marcus Lemli, CEO of Savills in Germany. ‘It’s very hard,’ he said. However, if Aareal succeeds in acquiring WestImmo it will mark the lender’s second acquisition of a rival in the past two years, following its acquisition in 2013 of rival Corealcredit from US private equity group Lone Star for €342 mln.
The European Commission had originally asked for WestImmo to be sold by the end of 2011 as part of its conditions for parent company, WestLB's, bailout. The latest attempt to sell WestImmo comes more than three years after exclusive talks with private equity investor Apollo failed.
Aareal declined to comment.
WestImmo is not the only bank on the block in Germany. Pbb Deutsche Pfandbriefbank, formerly Hypo Real Estate, is widely expected to be privatised this year.
The German government nationalised Hypo Real Estate in the aftermath of Lehman Brothers' collapse and the real estate lender received a €10 bn capital injection as well as €145 bn in liquidity guarantees.
‘Capital markets are strong,’ said Lemli at Savills. ‘Pbb has done its homework and shown the market that it is lending again. It could be a logical time for an IPO. They’re in good shape for it.’ A spokesman for pbb declined to comment on its potential flotation.
It can be hard to value banks on the stock market, according to Jörg Schürmann, head of debt advisory at JLL in Frankfurt. ‘Some are still quoted below their equity book value. It’s a difficult play. Other than Aareal, there aren’t many listed real estate banks in Germany. That said, 29% of Aareal’s stock was just placed in the market, which suggests there is appetite out there for such stocks,’ he said.