Commerzbank shrinks loan book, Commerz Real focus outside Europe
Commerzbank, Germany’s second largest bank, is continuing to slash its commercial property loan book, selling off €16bn of loan exposure last year to stand at a current €20bn. The bank plans to reduce this further to €11bn through 2016.
The bank is still working through the loan book previously managed by now-defunct unit Eurohypo, previously one of Europe’s most active lenders until being brought down in the financial crisis. Last year Commerzbank sold off €5.1bn of these legacy loans, while the rest matured or were redeemed early.
Among the loan books being sold wholesale were the bank’s Japanese and Spanish exposure, along with a Portuguese NPL portfolio. About half of the remaining €20bn loan book is secured against assets in Germany, while of its loan book, €12.3bn were classified as low-risk, €3.8bn as medium risk, and €600m as high risk.
Meanwhile, Commerzbank’s fully-owned fund subsidiary Commerz Real, headquartered down the road from Frankfurt in Wiesbaden, also took advantage of high investor demand for core asset to lighten up on its own assets under management. These fell last year from €34bn in 2013 to €32bn in 2014 following a number of large disposals. The division offers funds in the sectors of real estate, aircraft, regenerative energy and ships.
Last year’s transaction volume was €2.5bn, which included the mega-sale of the Leo I portfolio of Hessen municipal and government offices to a fund managed by Augsburg-based Patrizia Immobilien. The bank has also been scrupulously differentiating its products into ‘investment’ and ‘financing’ products in line with new German regulations governing open-ended funds, and now categorises its portfolio among €20bn in investment products and €12bn that would be attributable to financing products.
According to CEO Andreas Muschter in the fund manager’s recent statement, “We are confident that we will continue the successes of the past year seamlessly into 2015. With our investment products we purposefully have gone through the re-regulation process. At the same time, we increased our net funds inflow for our open-ended real estate fund hausInvest.”
At €9.6bn, the flagship hausInvest open-ended fund registered net cash inflow of €304m last year, up from €204m in 2013 - generating an annual return of 2.5%. A key investment for the fund was the €128m Neue Direktion Köln project in Cologne, due for completion in 2016 and which will be the headquarters of EASA, the European Aviation Safety Agency, for the next 20 years a t least.
Commerz Real has intensified sourcing activities for properties and projects, but said the main focus of expansion will be outside Europe. The firm established a subsidiary in Hong Kong last year to scout for investment opportunities in Asia, and re-entered the US market with the hausInvest fund, which it described as a key strategic step.