Interview: James Bauer, Managing Director, REAG - Five reasons to ...

expensive credit lines in Germany as elsewhere,
international property advisor DTZ
launched a new securitisation vehicle in
Frankfurt last week, to enable property
companies and individuals to convert future
rental income in their properties into
cash.
DTZ is working with Albis Securitisation
AG and specialist financial law firm
Nordhues & Cie to offer the new financing
instrument, which will securitise the cash
flow on future rental income independent
of lending banks. The three partners will
handle the complete process, from portfolio
valuation, tax and legal due diligence,
structuring and rating the paper and placing
it on the capital markets. The paper will
be sold using the Albis platform which has
already handled securitisation volumes of
over �€1 billion, since initially being set up
in 2005. The partners are estimating the
volume for the new niche security product
at between €�5bn and �€10bn over the next
two years.
According to Raffaele Lino, the CEO
of DTZ Corporate Finance in Frankfurt,
the partners are already in discussion with
property companies to put together the
first portfolios, with the first paper scheduled
for placement on the capital markets
by the end of March 2008. Lino sees the
product as being an alternative to sale-andleaseback,
but with the difference being
that, instead of selling their properties and
renting them back, they sell them to their
own company and bundle the rents into a
bond, but remain the owner of the property.
Lino also sees the product as being
interesting for Germany municipalities, who
are keen to privatise property holdings but
are increasingly wary of resistance from
their communities, in what has become a
thorny political issue in Germany.
What is certainly clear is that investors
are going to look much more closely in future
at the quality and the origin of securitisations,
and they will have to be priced
over Euribor accordingly. While the DTZ
product is similar to a CMBS, (and nobody
is denying that the market for CMBS products
is not exactly rosy right now), it does
seem to have a lot more risk-transparency
for the capital markets investor. Whereas
with a CMBS, the investor is reliant on the
originator’s due diligence and the assessment
of the rating agencies, the DTZ product
permits investors to scrutinise the rent
receivables and access information on the
commercial tenants making up the rentroll,
in a way not possible with the traditional
CMBS product.
Dr Claus-Rainer Wagenknecht, the
chairman of Albis Securitisation AG, over
whose platform the products will be sold,
said he sees increasing demand for financial
products independent of the lending
banks. “It’s not just the current credit
crunch that will cause the cost of credit to
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rise in the future. Bank mergers in Germany
and elsewhere will also lead to lowered
lines of credit in the medium- to longer
term….We think this is an interesting
niche market, which should establish itself
quickly.”
Germany/Asset Management
Sweeping changes at GEHAG
in Berlin following merger
with Deutsche Wohnen
It seems to be all go at the Berlin housing
company GEHAG since we reported
on the company in our July 18th issue of
REFIRE.
At that time, listed German residential
property specialist Deutsche Wohnen
AG merged with GEHAG to create the second-largest
German listed housing company,
with over 50,000 residential units.
About 85% of GEHAG was owned by US
private equity investor Oaktree Capital
Management, with German bank HSH
Nordbank owning the remaining 15%.
Deutsche Wohnen bought the company
for a combination of cash, shares and
convertible bonds which valued GEHAG
at about €1.84 billion, with Oaktree ending
up with nearly 25% of Deutsche Wohnen’s
shares.
Hermann Dambach, Oaktree’s business
manager for Germany said, follow-
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