Commerzbank Said to Be Close to Selling Its U.K. Property Loans

Commerzbank AG, Germany’s second-biggest bank, is in talks to sell its Eurohypo U.K. real estate lending unit to Wells Fargo & Co. and Lone Star Funds, three people with knowledge of the matter said.

Negotiations are continuing and no deal has been reached, said two of the people. The portfolio, made up of distressed and performing debt, is valued at 5 billion pounds ($7.6 billion), one person said. All three asked not to be identified because the information is private.

U.S. investors such as San Francisco-based Wells Fargo are targeting European loan books because the region’s lenders are reducing their real estate assets to meet new regulations. Commerzbank is winding down Hypothekenbank Frankfurt, formerly known as Eurohypo, to meet European Union conditions for aid from the German government as a result of the European debt crisis.

In December, Lone Star agreed to buy TLG Immobilien, a company that owns about 800 buildings in the country’s eastern states, from the German government for 1.1 billion euros ($1.4 billion) including debt.

Commerzbank, based in Frankfurt, Dallas-based Lone Star and San Francisco-based Wells Fargo declined to comment.

The Financial Times reported the Eurohypo talks yesterday, saying it would be the biggest sale of property loans by a European bank since the financial crisis.