Silver Tower Frankfurt
Silver Tower Frankfurt
The much-hyped story of insurers and pension funds stepping in to provide commercial real estate financing, in the wake of traditional lenders back-pedalling out of the market, has an appeal for all investors – but has been slow in making a real market impact, so far. The recent agreement between Deutsche Hypo and Bayerischer Versorgungskammer (BVK) will go some way to redressing that, at least in Germany, and may be a harbinger of similar deals to come.
The Hanover-based Deutsche Hypo, a subsidiary of landesbank Nord/LB, is forming a joint venture with Bavarian pension fund Bayerischer Versorgungskammer (BVK) to provide new finance for commercial real estate in Germany. The joint venture will principally finance office and retail properties, along with selected residential portfolios, with an initial target volume set at €500m.
The agreement is highly significant, in that it is the first time that a German Pfandbrief-issuing bank is tying itself in with a German pension fund to finance commercial property. BVK is a significant real estate investor in its own right, and only recently acquired an office property in Prague for €38m. One of its member institutions, the medical occupational pension fund Bayerische Ärzteversorgung, gave a €500m global mandate to LaSalle Investment Management as recently as August (in a deal we reported on in these pages) to scour the world for suitable investment opportunities.
Now Deutsche Hypo has a similar mandate for sourcing real estate financing opportunities for BVK. The Bavarian pension fund has already jointly financed one big project previously – with €190m for the Silberturm (Silver Tower) near Frankfurt’s railway station, previously the headquarters of the now defunct Dresdner Bank and now occupied by German railway Deutsche Bahn, in which Deutsche Hypo was a co-financier.
The joint venture envisages BVK financing at least half of the assets acquired for financing by Deutsche Hypo, but with a minimum investment per project of at least €40m. Deutsche Hypo will handle asset management and loan servicing for a fee to be charged to the joint venture. Target assets are German ‘core’ office and commercial properties, with some residential portfolios.
Deutsche Hypo’s CEO Andreas Pohl said that the joint venture, which will run for an indefinite period, represents a pilot project for parent bank Nord/LB. “After being the first German bank to team up with non-bank lenders in 2011, we have signed this framework agreement with Bayerische Versorgungskammer which is also a novelty in the market. Deutsche Hypo is positioning itself as a provider of innovative financing solutions. This will enable us to offer significantly higher volumes as a financing partner for our clients.” he said.
Dr. Hinrich Holm, board member at Nord/LB itself, commented on how the new joint venture should help lighten the bank’s balance sheet. “We have a great many high-value assets in our business, along with a lot of structuring know-how, both of which we want to use to greater effect to offer attractive products to our investors. This deal with BVK is an example of what we can do, and we see it leading to many more structured products from Nord/LB”, he said.
Andre Heimrich, board member and head of investment at BVK, commented: “Mortgage loans are a safe asset class which provides a very good opportunity to continue to diversify our portfolio.”
Deutsche Hypo, an active issuer of German mortgage Pfandbrief covered bonds, provided €1.7bn in debt finance for commercial properties in this year’s first half, up from €1.3bn in the same period last year. BVK, Germany’s largest public-law pension and social benefits plan, manages an investment volume of €55bn.