Every strike brings me closer to the next home run. –Babe Ruth
By EYK HENNING
Nov. 12, 2014 9:05 a.m. ET
German Bank Seeking to Capitalize on Buoyant U.S. Commercial Real-Estate Market
FRANKFURT— Deutsche Bank AG is close to selling most of a $2 billion portfolio of commercial real-estate loans to U.S. private-equity firm TPG, people familiar with the matter said.
The deal is driven by an upswing in the U.S. commercial real-estate market, which will allow Deutsche Bank to post a profit on the sale, these people said.
The transaction is subject to regulatory approval but could be signed as soon as this month, these people said. Deutsche Bank, Germany’s largest lender, will retain a minority stake in the portfolio.
The assets to be sold include mortgages for shopping malls and office buildings originated by Deutsche Bank and outstanding debt that it bought on the market.
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The sale comes amid Deutsche Bank’s effort to reduce assets on its balance sheet to mitigate effects of increasingly strict banking rules. The German lender aims by the end of next year to shed €250 billion ($313 billion) in assets, weighted by their risk. At the end of September it had already disposed of nearly €200 billion in assets, or roughly 80% of its target.
The U.S. commercial real-estate market has surged recently. Banks issued $28 billion in commercial mortgage-backed securities, or CMBS, in the third quarter, the highest quarterly level since the housing crisis hit in 2007, according to data from Commercial Mortgage Alert. Deutsche Bank is poised to sweep the four major league tables for underwriters and lenders of these securities. The bank said in May it would continue investing in strengthening its U.S. commercial real estate financing business.
Booming demand for commercial real estate securities is increasingly attracting private-equity firms, who are amassing funds from investors looking to bet on rising commercial-property prices around the world. TPG is pushing a step further by snapping up commercial real-estate brokers that link buyers to sellers and landlords to renters.
A venture led by TPG last week completed a $1.05 billion acquisition of Chicago-based DTZ, a real estate services firm with 209 offices in 52 countries and more than $1.9 billion in annual revenue. TPG plans to merge DTZ with Cassidy Turley, a Washington, D.C., firm, which the venture is set to buy before the end of the year, in a deal valued at up to $600 million.
“Cassidy Turley is a leading real estate services business in the U.S. and will complement DTZ’s existing very strong businesses in Asia and Europe as well as DTZ’s existing U.S. businesses,” Ben Gray, Managing Partner Asia at TPG said in September.
The commercial real-estate industry has seen a flurry of acquisitions in recent years, partly in response to globalization. As companies have opened offices throughout the world, they increasingly have preferred real-estate firms that can help them solve their space needs in numerous locations.
Deutsche Bank’s portfolio being sold is held by its special situation group, which is headed by Jonathan Pollack, the bank’s global head of commercial real estate and head of risk for structured finance. Mr. Pollack, a leading figure in commercial real estate financing, previously helped start the bank’s European commercial real-estate business and ran the European commercial mortgage-backed securities trading desk.
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