ANALYSIS: Helaba goes solo on €347m German financing

German lender Helaba has sealed one of its largest financings this year with new partner Orion Capital Managers and says it will continue to look for similar big-ticket loans in the future.

Helaba has emerged as the sole lender on the €600 mln Odin office portfolio which was acquired by European private equity firm Orion Capital Partners at end-May. The lender has provided €347 mln in financing for just over half of the assets in one of its largest real estate financings this year. The operation is part of the bank’s strategy to increase its exposure to large-ticket loans with a view to syndicating them to asset-hungry financiers at a later stage.

‘We found an interesting opportunity to finance a major portfolio with a client which we estimate is one of the most experienced investors when it comes to portfolio transactions,’ Fritz Mueller, head of real estate finance –Germany North-West at Helaba, told PropertyEU.

Commenting on the size of the loan, Mueller said the amount exceeded the group’s normal limit. ‘Part of our strategy is to selectively underwrite big-ticket loans which we can syndicate through a specialised unit to other banks or even to insurance companies in case there is interest on their part.’

This is the first time Helaba has financed a transaction in Germany for Orion and the bank indicated it hoped to continue the relationship. ‘Germany is currently an investors’ darling and we expect to see an increasing number of commercial real estate portfolio transactions this year,’ added Mueller.

While the details of the financing were not disclosed, it is believed to be a five-year facility with a margin of less than 200 basis points above Euribor.

The financed portfolio consists of 11 properties spread over six German cities with a concentration in Hamburg and Berlin comprising 178,000 m2 of lettable space, of which 81% is currently let. The top 10 tenants with strong covenants - such as the Federal Institute for Real Estate Issues, Philips, or Reemtsma - account for 72% of the rental income and 57% of the lettable area.

Atypical acquisition for Orion
The acquisition is atypical for Orion, which has been focusing on the European retail sector in the past few years. It is believed to reflect the opportunistic nature of the London-based private equity firm, which has a tendency to buy ahead of the market. As such, Orion has recently been getting out of the rather expensive London office market while beginning to invest in Italian retail and seeking to benefit from strong investor demand for Spanish real estate with a number of major shopping centre sales in its Fund III.

In Germany, Orion recently bought the prominent Lilien Carré shopping centre in Wiesbaden out of insolvency for around €100 mln and is believed to be currently looking for more German offices.
'Orion deemed the quality of the Odin portfolio to be superior compared to other German office portfolios that are currently being marketed,’ said Aref Lahham, managing director and a founding partner of Orion, commenting on the transaction.

‘Many of the assets are located in the big seven cities and the portfolio is anchored by strong credit tenants. Orion’s business plan is to drive rental income by investing in the premises in order to increase occupancy levels and further institutionalise the assets.'

In total, Orion acquired 19 assets from the vendor, Credit Suisse Asset Management, but left eight properties out of the Helaba mortgage loan, probably with a view to disposing of them at an earlier stage.
The deal is earmarked for Orion’s Fund IV, which launched in December 2014 raising €1.3 bn of equity commitments. ‘We have been busy buying a lot of retail in different places across Europe for this fund,’ said Lahham.

Recent transactions include the purchase of a portfolio of three shopping centres in northeast Italy from Unicomm for a price understood to be around €200 mln and the joint purchase with Cerberus of a Spanish tourist resort in Cadiz from NH Hotels Group for €225 mln.

The Odin portfolio was divested by Credit Suisse as part of the liquidation of its open-ended funds, the €3.2 bn CS Euroreal and the smaller CS Property Dynamic. The portfolio was put on the market last summer through Brookfield Financial and includes a number of trophy assets including the German headquarters of electronics group Philips in Hamburg. Credit Suisse has until 30 April 2017 to liquidate CS Euroreal.

LIST OF MAJOR ASSETS IN THE ODIN PORTFOLIO (city, location, tenant)
Berlin, Shell-Haus, Reichpietschufer with tenant Bundesanstalt für Immobilienaufgaben
Berlin, Schellingstr., with tenant Pfitzer
Dortmund, Westfalen-Tower, Westfalendamm
Hamburg, Sandtorkai 74 – 77 with tenants McKinsey and Scholz & Friends
Hamburg, Bertand-Russel-Str. with tenant Reemtsma
Hamburg, Lübeckertordamm with tenant Philips

Virna Asara
Finance Editor