German lending market is a mixed bag in 1H

German real estate lending volumes were a mixed bag in the 1H of 2017, in a sign that the market is becoming increasingly difficult to call.

The challenging market environment, which is ‘shaped by persistently low interest rates, fierce competition in commercial real estate financing and ever-stricter regulatory requirements’, according to Berlin Hyp, is becoming increasingly tough to navigate. Subsequently, whereas some lenders saw a sharp upswing in new business in the 1H, others did significantly less than in the same period last year.

One lender ahead of the curve is Deutsche Hypo: it increased new business in the IH by 17.4% to €2.12b. The German market continues to be its main focus, accounting for 62.1% of loans, compared to 60.6% last year. The majority of Deutsche Hypo's new business outside Germany is in the Benelux region, at €358m, up from just €85m last year. In June, it issued its first benchmark mortgage Pfandbrief of the year. The €500m issue has a term of eight years.

Berlin Hyp, for its part, underwrote €3.1b of new loans, including long-term extensions in the 1H, up slightly from €2.9b the previous year. It also placed two benchmark mortgage Pfandbriefe – in February and in June - with a total volume of €1b. In August, it teamed up with Deutsche Postbank to provide €92m in financing for the acquisition of a pan-European car park portfolio for Bouwfonds’ European Real Estate Parking Fund III (BEREPF III).

Pbb Pfandbriefbank’s new business, including renewals, in the 1H remained flat at €4.5b. In August, it provided an investment facility of €66m to the open-ended fund ČS ne-movitostni fond, the biggest real estate fund on the Czech market, managed by REICO. The fund will use the proceeds to purchase the newly-built Proximo I office building in Warsaw from developer and vendor Hines.

Over at Helaba, new real estate business fell by 14% in the 1H to €4.2b. The net interest income was broadly the same as the previous year, despite lower portfolio margins and a slightly weaker credit portfolio. In August, Helaba acquired an office in Frankfurt Offenbach's Kaiserlei district from a Luxembourg-based fund managed by Invesco Real Estate, with the intention of moving its administrative HQ into the building. Helaba is believed to have paid around €53m for the 27,500 sqm building, according to market sources.

New loans were also down at Aareal Bank, with new business falling by 15% to €3.8b. Interestingly, while 56% of new business was generated in Europe, Germany accounted for a paltry 1%. North America accounted for the remaining 44%. In July, Aareal provided a CAD716m million facility for a Canadian hotel portfolio to Hong Kong’s Leadon International Investments, with the intention of syndicating part of the loan to one or more strategic partners. The portfolio comprised 22 hotels in prime locations with an aggregate of 6,119 rooms across Canada, including major hubs such as Vancouver, Toronto and Montreal.