ANALYSIS: Allianz lends big against €1.1b office package

After initially looking to buy, German insurer Allianz took part in the €630 mln financing with Aareal Bank of what it claims is the first cross-border, pan-European portfolio to be financed since the onset of the financial crisis in 2008.

If you can’t buy it, the next best thing is to finance it, was the thinking behind Allianz Real Estate’s involvement in the €630 mln financing together with Aareal Bank of a pan-European office portfolio bought in late 2014 by US REIT NorthStar.

The two German property stalwarts teamed up in July on what Allianz claims is the first cross-border, pan-European portfolio to be financed since the onset of the financial crisis in 2008.

Allianz provided €365 mln of the senior loan which was arranged and underwritten by Aareal. ‘This is a breakthrough for the European real estate market,’ Roland Fuchs, head of European real estate finance at Allianz Real Estate, told PropertyEU in an interview. ‘It is the first post-crisis example of a pan-European property financing with tranches in various currencies.’

The transaction is also one of the largest syndicated loans agreed between a bank and an institutional investor in Europe and one of the largest financings provided by a German insurance company in this market to date, Fuchs added.

Second bite
Interestingly, Allianz Real Estate had looked at the €1.1 bn real estate portfolio in 2014 with a view to buying it. The package, which was put on the market through Eastdil by German asset manager SEB Immobilien, was one of the first big-ticket pan-European real estate portfolios to be publicly marketed in years. But NorthStar ultimately ran off with the spoils. Before closing of the transaction around Christmas last year, Allianz was contacted by the US REIT to participate alongside Aareal Bank in the financing of the portfolio.

‘We already knew the assets very well and so we were able to quickly assess the quality of the package,’ Fuchs noted. ‘This is a typical example of our strategy to finance assets which we would otherwise buy.’

The portfolio comprises 11 office buildings, located in Brussels, Hamburg, Paris, London, Milan, Amsterdam, Rotterdam and Gothenburg. Known as SEB Europe Prime Office, the package provides a total of 186,000 m2 and has an occupancy rate of 93%.

The acquisition also fits in with Allianz Real Estate’s recent diversification push, Fuchs noted. ‘It is true that we started our European lending activity focusing on Germany and France but more recently the portfolio has become increasingly diversified as we prefer not to focus on just one or two countries. Investing into this high-volume, pan-European facility is in line with this growth and diversification strategy in the property sector.’

The deal gives the company’s debt platform access to new markets such as Italy, Sweden and the UK. Earlier this year Allianz Real Estate also entered the Spanish lending arena with the €134 mln financing of Merlin's Marineda shopping centre in the north-western coastal town of La Coruña. Earlier this year Allianz also granted its first financing in The Netherlands, Belgium and Austria.

Joint effort
The SEB Europe Prime Office Portfolio package was financed with a €530 mln seven-year loan initially underwritten in full by Aareal Bank and subsequently syndicated to Allianz Real Estate, in tandem with an extension of the loan by a further €100 mln to a total of €630 mln. The original loan reflected a loan to value of below 50%, rising to just under 60% following the loan increase to €630 mln.

NorthStar, which bought the assets for a yield of 5.9%, confirmed at the time of the acquisition that Cale Street Partners, a real estate finance platform set up by former Goldman Sachs executives Ed Siskind and Ramon Camina-Mendizabal with backing from the Kuwaiti Investment Authority, was to provide some equity and mezzanine financing for the deal.

The deal is the second senior debt transaction to be carried out jointly by Allianz and Aareal. In 2012, the two joined forces with lender Helaba to fund the acquisition of the Centro shopping centre in Oberhausen near Dusseldorf.

‘The financing to NorthStar was not a standard secondary purchase but it was a joint effort from the parties,’ Fuchs said. ‘The advantage for Aareal was that they could provide full underwriting, because they knew we were backing them on the deal. The advantage for us was that we were sure that the loan documentation would fit our specific needs, as insurers need a particular structure in the loan documentation and Aareal already knew what this was, which made working with them extremely efficient. It was a win-win situation for all parties.’

DEAL FACTFILE
BORROWER: NorthStar
FINANCIERS: Aareal Bank, Allianz Real Estate
LOAN SIZE: €630 mln, split between €365 mln Allianz and €265 mln Aareal
LOAN TO VALUE: 57%
LOAN TERM: Seven years
ASSETS: SEB Europe Prime Office Portfolio
PORTFOLIO VALUE: €1.1 bn

Virna Asara
Finance editor