PIMCO, ING named as potential buyers of WestImmo

Westdeutsche Immobilienbank (WestiImmo), the previous real estate lending division of the mothballed WestLB is said to be in talks with at least two possible buyers to sell its lending business out of the clutches of the German state, which absorbed the bank as part of the dissolution of landesbank WestLB two years ago.

WestLB was compelled by the European Commission to divest itself of its lending subsidiary under the terms of its original €5.4bn state bailout package at the height of the financial crisis.

According to the usually well-informed James Wallace over at CoStar Finance, among those evaluating a bid are PIMCO, itself part of German insurer Allianz, and ING Real Estate Finance. Westimmo had been the object of a protracted bidding process in 2014 with prices then being quoted of about €400m, in which Apollo Global Management ultimately withdrew after WestLB complained of “severe market deterioration” leading to unacceptable price offers.

There were also unclarified liability risks at the time for WestLB and its shareholders which led to them scuppering the sale, which was all taking place against the background of the sovereign debt crisis and fears about the break-up of the Eurozone.

A further potential suitor, Wiesbaden-based Aareal Bank, has now withdrawn from the bidding after it itself bought Corealcredit bank from US private equity investor Lone Star just before Christmas.

WestImmo, which was spun into WestLB’s bad bank Erste Abwicklungsanstalt (EAA), is only interested in selling itself as a whole business, much as Commerzbank is and has been selling its UK and Spanish loan portfolios. Likely buyers, therefore, will have to be those with access to affordable long-term money markets, such as the big banks and insurers, rather than private equity funds which are more tuned in to the shorter-term sources of funding.

EEA absorbed WestImmo’s then €15.9bn property loan book in September 2012, and after a succession of loan sales, maturities and enforcements, had €11.9bn on its books a year later. Under its restricted trading conditions, WestImmo may still renew loans with existing customers and make further minimal top-ups in line with its restructuring plans. It posted revenue of €72m in the year to June 2013, for a pre-tax return on equity of 4.5%.