German banks hitting targets, but definite cooling on UK lending

German lenders Helaba, Berlin Hyp and pbb Deutsche Pfandbriefbank have jointly underwritten an investment facility totaling €230m to refinance Warsaw Spire Tower.

The asset is owned by Vienna and Warsaw-listed property group Immofinanz, which bought it this summer from Ghelamco Group and Madison International Realty for €386m. The financing deal closed in September 2019. The property is located in the Rondy Daszyńskiego area of the city, with amenities such as Plac Europejski, an extensive public space at the foot of the tower.

Helaba, Berlin Hyp and pbb are acting as joint lead arrangers providing equal portions of the funding, with Helaba acting as facility and security agent of the transaction.

The 220 metre-high office building contains about 71,600 sqm of rental space, with some 65,000 sqm of offices over 49 floors and the remainder used mostly for retail purposes. It was completed by local developer Ghelamco in 2016, with Madison taking a 50% stake two years later, in a deal valuing the tower at €350m.

In a separate deal, the Munich-headquartered pbb lent €78m to Fleming Properties to buy an office property in Helsinki, Finland. Fleming, a company set up by independent investment bank Pareto Securities, bought the asset for €130m. The building, dating from the 1920s, comprises 41,000 m2 across two buildings and an underground car park, and is currently being refurbishment. The property is occupied on a long lease by SOK, the central organisation of S Group, a leading retail and service company in Finland.

Meanwhile, on the London financing market, a new survey shows how German lenders have noticeably cooled on their lending against property in the UK since the vote to leave the European Union in 2016.

The author, Nicole Lux, carried out the survey on behalf of the Cass Business School, and the results show the extent to which German lenders, long major providers of finance to investors in office and logistics properties, have trimmed back their exposure to the market in the light of Brexit uncertainty.

This year, German lenders accounted for 8% of new loans in the first half (January to June 2019), down from 12% a year ago and 16.7% in the first half of 2016, just prior to the Brexit vote. According to Lux’s survey, German banks issued 1.8 billion pounds of loans secured by commercial real estate in the first half, down from 2.6 billion pounds in the year-earlier period.

But while overall loan issuance was up 4% in the first half to 23.3bn pounds, 62% of those loans were related to refinancing, the survey found.

Although it took a while for the UK commercial property market to exhibit nervousness about the likely future of the country outside the EU, that uncertainty has come home to roost this year after the UK repeatedly missed deadlines for its official exit date. This has seriously affected transaction volumes, with sellers waiting to sell until they see some clarity ahead. The fall in sterling and the wide discount on UK asset compared to other European countries means that demand for UK (particularly London) quality assets remains buoyant, but sellers have been taking cover. German bankers have clearly been instructed by their head office to hold back.

Heavy write-downs in the value of shopping malls, and the uncertainty surrounding the future of WeWork is also obviously weighing on the market, as the flexible office provider has become the largest office tenant in London after the UK government.