Hatfield Philips wins servicing mandate on €200m German loan portfolio

London-based Hatfield Philips International (HPI) gained the mandate for the servicing and workout of a big German loan portfolio, one of only a few such portfolios sold so far this year. The portfolio was sold by a German financial institution in a competitive bidding process.

The portfolio consists of more than 240 loans (performing and non-performing) with a total unpaid principal balance of about €200m, secured by more than 210 real estate assets located across Germany.

HPI was probably in pole position to win the mandate, having already done the due diligence advisory and underwriting services on the portfolio.

According to Wilhelm Hammel, head of NPL Advisory for HPI, "We are very happy to have supported one of our key partners in successfully acquiring one of the few loan portfolios that have come out of a German bank this year. This is the second significant German loan portfolio servicing and workout mandate that we have been awarded in the last 6 months."

In December 2015, HPI won the mandate for the workout a German NPL portfolio of more than 20 loans with a total unpaid principal balance in excess of €250m, secured by more than 20 commercial real estate assets located across Germany. Again, the mandate followed HPI first providing acquisition due diligence advisory services to an international investor, before getting the full servicing and workout mandate.

HPI, which is the European subsidiary of US-based LNR Property (and ultimately of New York listed REIT Starwood Property Trust), has provided acquisition DD advisory and underwriting services on deals across 32 jurisdictions with more than €80bn of unpaid principal balance since 2011.

Meanwhile, fast growing Leipzig-headquartered Publity AG also recently won a five-year servicing contract for about €1.1bn of non-performing loans from major German banks. The portfolio is made up of more than 1,100 separate real estate loans, with an average debt of €1m each. Publity will take over the processing and liquidation of the portfolios from an international investor.

The recently-listed Publity started off in the NPL sector, and has since parlayed that into being a major investor in German office property, with domestic and international investors buying into its specialist funds.

The company's CEO, Thomas Olek, commented: "The NPL market has tremendous potential which we will exploit in future along with co-investments in German office real estate. This segment will continue to increase our growth and revenues in the years to come. We plan to take over the management of further NPL portfolios so we can profit from our long-standing expertise and strong connections in the banking and real estate industry."

Another big German lender is also preparing to shed up to €3.2bn of non-performing as part of its bailout programme during the financial crisis as dictated by the EU. The Kiel and Hamburg-based HSH Nordbank has engaged investment bank UBS to find buyers for the loans, originally extend to shipping and aircraft companies and for real estate and renewable energy projects.

HSH Nordbank is shedding a further €5bn of NPLs to its owners – the states of Hamburg and Schleswig Holstein – before selling the €3.2bn package, as part of an agreement to free HSH Nordbank of €8.2bn in non-performing assets and then to privatise itself by 2018.

Separately, the privately-held pan-European asset manager and advisory company CR Investment Management has just sold a large portfolio of non-performing loans secured against the well-known Amelia portfolio of mainly German commercial office property. The buyer is European Principal Finance Fund II (EPF), a fund of US private equity group Apollo Global Management, which invests in both performing and non-performing commercial and residential loans, along with unsecured consumer loans.

The Amelia portfolio was one of the biggest portfolios assembled out of the financial crisis, when it was valued at €600m. CR was mandated to sell the portfolio in July 2015, when the portfolio held 55 diferent assets with 550,000 sqm of gross lettable space. As asset manager CR sold off a number of assets in the portfolio, so the deal with Apollo consists of the non-performing loans on 41 properties out of the original portfolio. CR will remain as the asset manager of the loan portolio.

According to Jacob Lyons, a principal at CR Investment Management, “The transaction was an advantageous one for both the sellers and the buyer. The lending syndicate exited via a single transaction and far earlier than expected, while Apollo gained exposure to a portfolio of high-quality assets.” CR, with ten offices across Europe, has advised on more than €30bn of workouts and acquisitions since its founding in 2004.