Deutsche sells distressed €1b loan package to Kildare

Deutsche Bank is selling distressed the remaining assets in its €1 bn Mars portfolio to Kildare Partners fund, UK trade publication Property Week has reported.

The remaining Mars package reportedly features 26 office buildings and Le Méridien hotels in Munich and Frankfurt, and includes outstanding debt. This is the first major acquisition of distressed property by Kildare which was set up by Ellis Short, former head of Lone Star Asia.

Deutsche Bank initiated insolvency proceedings for the Mars portfolio in July last year. The portfolio was acquired in 2007 by Amsterdam-listed Eurocastle Investment, a vehicle externally managed by US private equity firm Fortress, for €2.1 bn. It was acquired from DB Grundbesitz-Invest, an open-ended fund run by Deutsche Bank’s property fund arm DB Real Estate.

The portfolio initially included 56 assets in Frankfurt, Munich, Hamburg, Berlin and Düsseldorf and was funded using a €1 bn loan from Deutsche Bank and a €550 mln junior loan.

Following a restructuring in 2011, junior lender Arminius took control of a 75% stake of a reduced package of assets. The loan facility against the portfolio was extended to July 2014 with Eurocastle retaining the asset management portfolio. A year later Eurocastle sold its remaining 25% stake to Arminus which also took on the asset management.

The timing of the sale is related to looming bank stress tests prior to the ECB taking over European banking supervision later this year.

According to Property Week, Kildare has raised more than $2 bn for its Kildare Partners Fund I from predominantly North American investors and is targeting mainly non-performing loans portfolios.

Other loan packages it has acquired include a €100 mln package in March from Lloyds Banking Group secured against assets owned by companies controlled by Cork-based developer Michael O’Flynn. Last October it bought 2 Park Street in London’s West End for £52 mln from Danish pension fund Cording Danmerc.

Kildare is also believed to have been in the running for Nationwide’s €850 mln Project Adelaide, a portfolio of non-performing German loans which was acquired last week by Oaktree Capital Management.