Corealcredit figures boost Aareal Bank’s bottom line
Wiesbaden-based real estate financier Aareal Bank has seen an immediate impact on its bottom line following the acquisition last year of the restructured Corealcredit Bank from US private equity group Lone Star. The MDAX-listed Aareal saw its gross profits rise in the second quarter of this year by 44% to €65m, in line with expectations, and its net profit up 60% on a year ago to €34m.
Aareal Bank, which has traditionally had a strong exposure to foreign borrowers, also upped its new business lending from €1.6bn in the first quarter to €2.6bn in the second quarter. According to long-time bank chairman Wolf Schumacher, the bank is “well on course” to meet its lending targets despite growing competition as previously reticent competitors get back into the market. Full year operating profits are now expected to come in at €400m, up from previously forecast €380m, while full year lending should be close to €9bn – slightly down on last year’s €10.5bn.Aareal closed on the €342m acquisition of Corealcredit Bank, the former labour union-owned AHBR Bank, in March of this year, so the full effect of the takeover is only now being reflected in Aareal’s figures. The highly-conservative bank said it was holding off on the issue of a scheduled hybrid bond of €300m, destined to pay down the last remaining injections of silent reserves from the state bank bailout fund during the financial crisis, and Schumacher said it might even be able to repay these without recourse to the proposed bond. Servicing the interest on these reserves hampers the bank’s dividend payout, he said, hence the need to repay them as soon as possible.
Aareal’s core capital ratio is currently a comfortable 12.5% with the state’s €300m, but would be 12.2% without, said Schumacher, adding that the bank was targeting a 10.75% ratio, to be topped up by further equity-raising measures such as the hybrid bond. He also hinted at the bank’s interest in buying further loan portfolios or complete takeover, while refusing to be drawn on the level of the bank’s interest in buying Westimmo, for which it has re-entered the bidding fray (see elsewhere in this issue).
The bank is also now starting to prune its Corealcredit Bank subsidiary after the first couple of quarters integrating it into its main structure. According to various reports, up to 30% of the jobs at Frankfurt-based Corealcredit are expected to be axed, or 35-40 of the 160 staff remaining.
Meanwhile, Aareal has been active in a lot of prominent European financing deals this year. Earlier this month, the UK’s Brockton Capital financed its UK retail parks portfolio with a new loan of around €190m, provided by Aareal Bank on a five-year facility held against a portfolio of eight parks. The parks are valued at about €300m, implying a loan-to-value of 63%.
The deal will see existing arrangements across different assets in the portfolio paid back, including facilities with Santander and GE Capital, which inherited its position following its purchase of Deutsche Postbank’s £1.4bn UK commercial property loan book in November last year. Aareal was the existing lender on two assets in the portfolio.
The new financing includes a tranche for capital expenditure that will be used to carry out asset management across the portfolio as well as allow the sponsor to make new acquisitions. The portfolio is a joint venture between Brockton Capital’s second £500m fund, which was raised in 2010, and its asset manager Pradera.
Other recent Aareal deals include a £300m refinancing of the Hilton London Metropole and the Hilton Birmingham Metropole for Tonstate Group in the UK in July; a €228m loan to Aerium alongside pbb Deutsche Pfandbriefbank to refinance a portfolio of 23 mainly Parisian properties provided in the same month; and the provision in February of a €72m four-year facility for Helical Bar for its Europa Cenralna retail park in Gliwice, Poland.