Helaba eyes partnerships with Chinese pension funds

German lender Helaba is forecasting a bumper year for property loans next year as partnerships with Chinese institutional investors are on the cards.

'We have had talks with Chinese pension funds that we’re active with on the investment side regarding underwriting loans jointly in Europe. Next year, I think we could do some financing with them,' according to Michael Kröger, head of international real estate finance at Helaba.

So far this year, Helaba has underwritten around €7.5 bn in loans (including extensions of less than €1 bn), slightly up on the €7.1 bn it underwrote last year. According to Kröger, about 50% of business this year was in Germany, with the rest in markets such as France, the UK, Poland and Sweden, as well as around €1 bn in the US. 'Next year, our target will be between €7.5 bn and €8 bn, including extensions,' he said.

NEW CO-OPERATIONS
Also, next year, Kröger believes we will see increased co-operation on the lending front between traditional lenders and alternative lenders, such as insurers and debt funds: 'We have implemented a debt capital markets team for real estate in London and have started doing club deals with pension funds and insurers such as AXA. We expect to close a large club deal involving an insurer in another European market before Christmas or early next year. I expect us to do more of such deals next year. Insurers look closely at assets and the asset management and typically prefer loan terms of at least five years or, better still, between seven and 10 years, which we can match.'

In September, Helaba provided a loan of €87.5 mln for a commercial property portfolio in France together with French lender Crédit Agricole Corporate and Investment Bank, and French insurer Société Genérale. Helaba manages the consortium, acting as agent, co-arranger and hedge provider. The portfolio comprised 43 Cash&Carry stores spread geographically throughout France, representing around 50% of Metro Cash&Carry’s French distribution network. The stores are owned by an OPCI property fund managed by Amundi Real Estate and leased back to Metro Cash&Carry France.

Also, in April, Helaba participated in what was billed as the biggest financing deal to take place in Poland, when it refinanced the Metro Apollo Rida retail portfolio as part of a consortium. The €650 mln loan was provided by six banks. Areal provided €250 mln, with Helaba and Pbb Deutsche Pfandbrief bank each providing an additional €100 mln. Hypothekenbank Frankfurt underwrote an additional €89 mln, WBK provided €70 mln and Bank Polska Kasia Opieki provided €41 mln. The senior debt has a loan term of five years and the loan margin is thought to be around 300 bps over the three-month EURIBOR. Apollo Rida is a joint venture between AREA Property Partners and Rida Development and AXA Real Estate Investment Managers. The Metro Apollo Rida portfolio is currently valued at around €1.2 bn.

In addition, markets such as Germany, Poland and Sweden offer a lot of lending opportunities, according to Kröger, due to their strong fundamentals and strong manufacturing industries. ‘Poland, for example, continued to grow and be dynamic even during the financial crisis. The wealth is now trickling down to the population and consumer spending is increasing. Next year, we’d like to increase our lending activities in Poland and Sweden. We’re focusing on the retail sector, because of the growth in consumer spending in those markets, as well as offices and logistics,’ he said.

CHALLENGES
Going forward, the fragmentation that’s present in the European lending space today will continue, Kröger maintains. 'Competition will increase and, subsequently, margins will become even lower,' he added.

The biggest challenges ahead are regulation-related as well as the ongoing stress tests for the industry, he said. 'There seems to be wave after wave of it hitting the financial sector! It's questionable whether this helps to restore confidence because of the uncertainty it generates. That said, we're not talking about a break-up of the eurozone anymore, which is a massive plus and goes to show that confidence has been restored to some extent.'

Also, next year, we’ll see an even bigger move towards secondary assets, Kröger said, given that a lot of the core assets have been either sold or are simply not for sale. 'Investors will target secondary assets more in order to broaden their investment scope,' he said.

Sara Seddon Kilbinger
Correspondent Germany, Switzerland, Austria