Aareal lends €530m to NorthStar for European portfolio

In one of the biggest single loans since before the onset of the financial crisis, the Wiesbaden-based property lender Aareal Bank has provided a €530m senior financing facility to the US REIT NorthStar Realty Finance Corp. to enable it to buy a €1.1bn pan-European office portfolio from SEB Asset Management.

The Frankfurt-based SEB AM is currently being sold by its Swedish parent to Cordea Savills, the investment arm of the UK listed Savills brokerage group, and is in the throes of winding down its giant open-ended fund SEB ImmoInvest which is in liquidation.

Aareal said it acted as arranger, agent and sole underwriter for the seven year senior loan for the REIT, a subsidiary of New York-headquartered NorthStar Asset Management Group Inc., which started its fast-track expansion into the European market in December 2014. The bank said it might look to syndicate part of the loan to other lenders, “as with any other loan”, in due course. The interest rate was thought to be 1.8%.

The office portfolio is comprised of eleven office buildings in seven of Europe's major markets - Brussels, Paris, Hamburg, Milan, Amsterdam, Rotterdam, Gothenburg and London with 186,000 sqm gross lettable area. All the properties are multi-let to blue-chip tenants.

The portfolio was the US group’s first foray into continental Europe, but it has since been bundling together a collection of other assets to list as a €1.9bn portfolio of European properties in the form of a US REIT, similar to way in which the Canadian group Dream Realty has created a REIT made up entirely of German property assets.

NorthStar has now also bought a 15% stake in pan-European group Aerium, which manages about €6.1bn of real estate assets across 12 countries and is currently raising capital for its seventeenth fund, a Pan-European Value-add Fund. To pay for the European portfolio, NorthStar issued 60m new shares in March, with Deutsche Bank taking 40m of the shares for its own distribution. The REIT said it was also considering a second parallel listing on a European stock market.

It also recently bought the Trias pan-European portfolio for €450m from three independent assets managers including the UK’s Internos Global Investors, who managed it for German insurer Provinzial NordWest, part of the German savings banks (Sparkassen) network.

 This is a 37-property portfolio located in eight countries, with assets in Paris, London, Frankfurt, Berlin, Madrid, Lisbon and Glasgow. It encompasses 30 offices, four retail and one industrial property, and two hotels, with a total gross lettable area of 259,000 sqm.

Jan Brügelmann of PwC, which advised Internos on the sale, commented, “At present, large international investors are looking for pan-European portfolios with a good mix of properties that provide not only stable cash-flow, but also potential for capital growth.” From NorthStar’s CEO David Hamamoto could recently be heard that his group had already received offers for certain assets in the SEB portfolio that were 30% above the price that he had paid for them.