Aareal completes takeover of profitable WestImmo
Wiesbaden based property lender Aareal Bank has finalised the acquisition of all the shares in Westdeutsche Immobilienbank (WestImmo) from EEA, the workout bank of former owner WestLB for €350m, in the process gaining a €4.3bn performing European commercial property loan book. Aareal funded the takeover out of its own cash reserves.
In February of this year, Aareal succeeded in a long drawn-out bidding process, that had been halted at several stages due to the “inadequacy of the bids”, and “severe market deterioration”, according to WestLB. Among many underbidders along the way were Lone Star, Apollo Global Management (with whom exclusive talks were ultimately broken off), ING Real Estate and fund management group PIMCO, whose parent Allianz itself has a burgeoning German property loan book.
Despite being forbidden to generate new business while the sales process for itself was ongoing, WestImmo delivered 2014 net profits of a record €64m. the Mainz-based bank owns total assets of around €8.1 bn. Its €4.3bn commercial property portfolio is widely diversified - both geographically and in terms of the type of financed properties. Germany accounts for one-third of the assets, while Western Europe represents another 38% and North America takes a 9% share. It has been hiving off its non-strategic assets to refocus on its core business for the past three years.
In a press statement, Aareal said: “The acquisition of WestImmo is a targeted investment into Aareal Bank's core business segment of Structured Property Financing. This transaction creates added value for Aareal Bank from the very beginning, partly with the negative goodwill of approximately € 150 million recorded upon closing the deal; in addition to this one-off effect, the transaction will make a positive contribution to Aareal Bank Group’s consolidated operating profit.
“Aareal Bank aims to integrate WestImmo swiftly into the Group. The technical integration is intended to take place by the end of the year. Discussions will shortly take place with the competent bodies about the future strategic focus of the new subsidiary, which apart from renewals is no longer active on the market itself on account of EU requirements since 2012.
“These discussions will for instance cover the possible inclusion of WestImmo in Aareal Bank’s new business activities and the settlement of existing overlaps in the location network. Operations in Mainz will be maintained for at least three years. Strategic options are being examined for the private customer business of WestImmo concentrated in Münster, which is not part of Aareal Bank Group’s core business.
“Overall, Aareal Bank assumes that a significant number of jobs at WestImmo will be kept at least in the medium term, regardless of the extensive integration planned. A control and profit transfer agreement will be concluded in the near future as part of the forthcoming integration of WestImmo.”
Separately the bank said at its AGM during the month that it had raised first quarter new business to €1.8bn from €1.6bn, confirming its full-year profit guidance of €400m-€430m, including the negative goodwill from the WestImmo acquisition. During the first quarter, Aareal said it raised fresh long-term funds of €900m, including €700m of mortgage Pfandbriefe and €200m of unsecured financing. At the meeting shareholders approved the payment of a dividend of €1.20 per share for the 2014 full year, up from €0.75 the previous