Helaba exceeds lending targets, but warns on lower 2015

Frankfurt-based Helaba surpassed even its own expectations for new real estate lending in 2014 with new medium and long-term property underwriting reaching nearly €10bn, against a background of growing competition among lenders and further pressure on margins. Nonetheless, Helaba board member with responsibility for real estate Jürgen Fenk gave a strong indication that new lending this year is likely to be down on last year’s figure.

Including the signing of €2bn of short-term business, last year’s total lending was €11.8bn, an increase on the €10.6bn written in 2013. Fenk told a press conference in Frankfurt that the market was seeing a lot more competition, particularly in Germany, which saw margins dropping again by up to 40 basis points over the year. However the bank remained competitive by not focusing purely on core properties, but also on more lucrative project developments and assets in good locations in secondary cities, where it has a strong competitive edge and local knowledge.

Helaba now has a total loan book of €32.4bn, a figure which remained fairly constant, despite the increased new business, due to redemptions from, among others, German open-ended funds in liquidation.

Fenk commented on the amount of equity that investors are now bringing in with them to deals, particularly for the bigger-ticket deals. This strongly differentiates the current situation from previous market cycle peaks, where LTV ratios were much higher. This might not hold true through 2015, he cautioned, with many lower quality tickets looking for more financing in a competitive market. Banks, including his own, would indeed now consider underwriting single ticket loans of up to €300m, whereas €100m might have been taxing two years ago.

Of Helaba’s lending in 2014, 56% was for German property, and overall the focus was on office and retail. Outside of Germany, the bank is looking to beef up in the Nordic markets and selectively in Spain, but only with existing partners. Despite Turkey’s recent prominence (as guest of honour with over 230 exhibitors at the recent MIPIM, for example), markets such as it and Italy are not markets for Helaba, said Fenk.

Syndication will also be stepped up this year after last year’s more than €1bn in volume, although for the year as a whole Fenk suggested the total new lending figure was more likely to be around €8bn. “The most important is the risk profile and the margin – we imagine we’ll be turning down quite a few financing options this year”, he commented.