pbb Deutsche Pfandbriefbank homes in on infrastructure

pbb Deutsche Pfandbriefbank is kicking off the new year with a renewed focus on new lending areas, such as infrastructure and residential assets.

Infrastructure, in particular, has caught the lender’s eye, particularly in the UK, after the Secretary of State for Communities and Local Government Eric Pickles gave the green light last November for councils to pump as much as £22 bn more of pension fund investments into infrastructure.

The plans underpin the government’s aim of finding alternative funding to support the building of more homes, roads and railways. Pickles’ proposal would potentially allow councils to double the amount they invest in infrastructure. Given the size of their combined pension pot - the Local Government Pension Scheme England and Wales is administered by 89 separate local funds that hold combined investment assets worth £150 bn - government-backed infrastructure assets could be given a sizeable boost.

‘The UK is becoming more attractive as councils can invest more in infrastructure. We are observing the development closely and looking for opportunities in financing the energy, healthcare, transport and education sectors there,’ Bernhard Scholz, member of the board at Deutsche Pfandbriefbank, told PropertyEU.

Pbb is very interested in lending on infrastructure, providing that the assets are government-backed so they can be refinanced via the Pfandbrief market, he added. ‘Because of the typical long-term cash flow, these assets are attractive to investors. Investments in modern infrastructure are an important element of further growth in Europe,’ he said.

Earlier this month, pbb announced that it had provided a €50 mln loan to the Department of Bouches-du-Rhône in France to finance the construction and renovation of schools and to develop road infrastructure.

And as part of the lender’s expansion drive, it announced this week that it would finance two residential deals. On 15 Jan, pbb announced that it had agreed to provide a €357 mln facility to subsidiaries of Hyresbostäder i Sverige II AB, which is owned by Boligutleie Holding II AS and Hyresfastigheter Holding II Blå AB. Both entities are managed by Obligo Investment Management AS. The facility is being used to finance seven residential portfolios - or 8,000 apartments - in Sweden, most of which are in the Greater Stockholm area, Norrköping and Linköping.

Also this week, pbb said that it would provide an undisclosed volume of financing for a commercial housing development project in Munich to commercial housing developer Wowobau Wohnungsbaugesellschaft. Wowobau plans to develop the site over the next two years, with the construction of around 115 residential units totalling about 10,500 m2, as well as underground parking spaces. The company intends to sell the flats individually, with an expected aggregate sales volume of around €46 mln.

‘Interest in participating in the acquisition of large-scale resi remains high from both equity investors and debt providers,’ Cornelius von Loebbecke, an executive director in J.P. Morgan Asset Management’s global real estate assets group in Frankfurt, told PropertyEU.

However, pbb likely missed its target of generating EUR 8 bn in new business last year. The lender declined to provide lending figures for last year. According to Scholz, new targets for this year have yet to be set, although he expects lending volumes to be ‘substantial’. Around half of pbb’s business is still in Germany, with the UK, France and Scandinavia making up the bulk of the rest. Last year, it raised long-term funds totalling €5.7 bn, excluding money-market funds and ECB repo transactions, by the end of the third quarter (fourth quarter figures have not yet been published). According to one Frankfurt-based analyst, who asked not to be identified, while typical LTVs are still in the region of 60%, outside the covered bond market it can get ‘very expensive’. ‘Liquidity is also far more constrained,’ he added, noting that funding spreads have come down by 25bps to 30 bps over the past year.

Pbb also returned to the market for unsecured issues during the third quarter of 2012: placing a €500 mln senior unsecured benchmark bond in September, which was increased by €250 mln shortly afterwards. Also this week (17 January), it issued a senior unsecured EUR 500 mln benchmark bond. It has a coupon of 2% and a 3.5 year tenor maturing on 19 July 2016. The issue attracted more than 150 investors, including a ‘significant number’ of international investors, according to pbb.