JLL get Hatfield Philips mandate to sell €300m+ German retail portfolio

It’s been a busy but very fruitful period for special real estate loan servicer Hatfield Philips (HPI). Following on from a complex restructuring process related to its Talisman 6 CMBS, which we reported on in an earlier issue of REFIRE, Hatfield Philips has now mandated property adviser JLL to market 127 German retail properties held by the well-known Treveria Silo E portfolio, the so-called ‘Orange Loan’.

Several weeks ago the company announced that it had implemented a workout strategy and restructuring of the €225m ‘Apple’ Whole Loan in the Talisman-6 Finance Plc CMBS. That loan, originated in 2005 by ABN AMRO, was granted to a group of German companies to buy commercial properties throughout Germany. HPI’s solution involved a complicated transfer of shares from the original German borrowers to two Irish-based holding companies, and an agreement for a final settlement of German intercompany loans, generating enough from the settlement to exceed the cost of the restructuring.

Now, out of the same Talisman-6 CMBS, comes Hatfield Philips’ final drive to sell off the remaining 142-strong German retail portfolio, with a new sales process called Project Sunrise.

With about 15 of the assets already earmarked for individual sale, which should raise just under €8m, JLL will be selling a portfolio of 127 commercial properties, with the sales process due to kick off in September. HPI expects to raise between €300m and €380m from the whole 142-asset portfolio, which has been primed for sale over recent months by asset manager Corpus Sireo, working with Berlin’s Acrest Property Group and IC Immobilien Gruppe to stabilise the portfolio.

Recent valuations of the portfolio are now more than two years old, with the most recent – from BNP Paribas in May 2012 – valuing the assets at€395m. However, these are no longer considered realistic valuations. The vacancy rate is high at 28.05%, the WALT is 3.77 years, and the annual rent roll is €24.5m, generated by mainly city centre retail properties in A and B locations across Germany. Among the assets are the Gloria Galleria on the Ku’damm in Berlin (the largest single asset, perhaps worth up to €95m according to some estimates), department stores in Brühl, Koblenz and Euskirchen, and shopping centres in Solingen and Wilhelmshaven.

The UK-listed Treveria, which was set up specifically to invest in German retail properties, went into default on the €360.4m Orange Loan in October 2012, with HPI refusing to extend the debt for a second 12-month period. There followed a court battle in 2013, in which the insolvent Treveria unsuccessfully tried to subordinate the Orange Loan claims behind other higher_ranking claims, pleading a recent German decision based on a principle of “equitable subordination”

HPI’s CEO Blair Lewis said in a statement, “After careful consideration, we firmly believe now is the appropriate time to market the portfolio given its intrinsic value and attractive lease profile. This, combined with the strength of the market, should result in significant investor interest. We look forward to the sales process and maximising proceeds to noteholders.”

Over at JLL, Peter Birchinger, head of portfolio investment Germany said, “Due to the excellent market conditions and the highly attractive nature of the portfolio, we expect high demand from both national and international investors.”

Hatfield Philips, founded in 1997, has over €15bn under management as a primary and special servicer. It is a subsidiary of US-based LNR Property, which was itself acquired in April last year by Starwood Property Trust, the largest commercial mortgage REIT in the US.