Commerzbank sells €2.9bn real estate loan portfolios

German lender Commerzbank has agreed to sell two former Eurohypo portfolios of commercial real estate loans with a face value of €2.9 bn to a consortium of JPMorgan and Lone Star and Oaktree.

Commerzbank said it is selling €2.2 bn of European loans to JPMorgan and Lone Star, and a German portfolio with a face value of €0.7 bn to Oaktree.

JP Morgan and Lone Star already scooped a €4.4 bn Commerzbank Spanish portfolio in May 2014 for a roughly 30% discount to face value.

Although financial details were not disclosed, Commerzbank said the packages are being sold for an overall discount of around 3%, adding that the transaction will generate a positive net capital effect of €105 mln in the third quarter of the year.

The portfolios sold account for approximately 17% of the €17.5 bn in total commercial real estate loans still held in the Non-Core Asset (NCA) segment as of end-March 2015, the bank added. The deal also reduces the volume of CRE non-performing loans by €1.3 bn.

The German portfolio primarily comprises non-performing loans. The sale reduces the bank's domestic CRE black book by approximately 40%.

The European portfolio encompasses 14 countries: Austria, Belgium, Czech Republic, Cyprus, Denmark, Finland, Hungary, Luxembourg, Netherlands, Rumania, Sweden, Switzerland, Slovakia and Turkey. The portfolio contains non-performing loans as well as other loans.

'In the future Commerzbank also intends to further reduce its portfolios in Commercial Real Estate and in Ship Finance in a value-preserving way,' Germany's second-largest lender said.

'Both transactions show that we are continuing to press ahead with our value-preserving run-down, and that we are significantly reducing both risk and complexity,' said Sascha Klaus, divisional board member for non-core real estate assets. 'In this respect we are taking advantage of market opportunities in order to achieve the best possible results through competitive bidding procedures.'

Commerzbank’s asset sales follow the disposal last year of a €4.4 bn Spanish commercial property loan portfolio.

The sale, codenamed Project Octopus, was one of the largest Continental European loan disposals last year. Buyer JP Morgan took control of the performing loans whilst co-investor Lone Star took on the sub- and non-performing loans.

The loan portfolio contained some of the best quality assets to come to market in the recent past. It included some 200 credit facilities, including loans backed by around 40 shopping centres owned by renowned companies such as Unibail-Rodamco, Robert de Balkany’s LSGI Group, Testa, and Doughty Hanson. The portfolio also included offices including Testa’s portfolio as well as hotels and high street units.