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In the year under review, the business area further reinforced its real estate activities
abroad, in line with the target portfolio. Here, the key focus was providing both Ger-
man and internationally operating real estate companies with support in foreign mar-
kets. The foreign entities also made a major contribution to the success of the business
area, thanks to targeted regional market development.
All in all, there was a perceptible market trend towards high-volume transactions
involving international real estate funds. The Real Estate Business Area, for instance,
concluded a transaction with a volume of EUR 230 million, involving a fund structured
according to the capital investment act. This fund invests in the European and Ameri-
can real estate markets on behalf of an institutional investor. This type of investment
and financing structure is also enjoying increased demand.
In addition to its core countries for international business (USA, Great Britain, France,
Switzerland and Spain), financing activities were pursued for the first time in Sweden
and Canada in the year under review. Scandinavia is also set to become a target market
for sales activities. Moreover, as part of the Bank’s Eastern European strategy, the Real
Estate Business Area will extend the scope of its business activities to include the EU
accession countries, including the Hungarian subsidiary bank MKB.
In order to meet our customers’ diverse needs, the business area, in tandem with the
Global Markets Division, is turning increasingly toward innovative financing products.
These include hedging instruments to secure exchange and interest rates, structures
incorporating mezzanine elements, or B-notes serving as participations in real estate
financing tranches secured by lower-ranking collateral. In 2004, the business area was
involved in B-note transactions both at the New York foreign entity and in Munich.
Thus, as a member of an international banking syndicate, BayernLB was involved in
funding the acquisition of a large well-known property in New York with a total trans-
action volume of more than USD 1 billion. This was achieved by interlinking senior and
junior tranches with varying structures.
Residential real estate financing
In residential real estate, sentiment in 2004 was clouded by the weak overall economic
trend. In financing to completion, pricing became the main factor in cut-throat competi-
tion, while the overall financing volume was lower. The unpredictability of legislation
governing tax and rent continues to represent an obstacle to capital investment.
Debate surrounding the abolition of the home ownership subsidy, on the other hand,
did not have any perceptible impact on demand. All in all, the Real Estate Business Area
achieved its goals in residential real estate financing.
BayernLB – our company
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} International real
estate activities
reinforced
} Tax and rent
legislation thwarts
investment