Deutsche Bank Said to Explore Selling U.S. Real EstateSarah Mulholland and Devin Banerjee
Deutsche Bank AG is exploring the sale of about $2 billion of U.S. commercial real estate loans held by the bank’s Special Situations Group, according to a person with knowledge of the matter.
Germany’s largest lender is considering a joint venture with a private-equity firm, said the person, who asked not to be named because the talks are private. The assets comprise distressed mortgages and other types of debt.
Amanda Williams, a spokeswoman for Frankfurt-based Deutsche Bank, declined to comment on the potential sale.
Deutsche Bank is seeking to take advantage of rising real estate values and investor appetite for higher-yielding debt. Financial institutions around the world are also shrinking their businesses because of stricter capital rules and before the implementation of the Volcker Rule, a provision of the 2010 Dodd-Frank Act that restricts banks’ ability to trade with their own money.
The Special Situations Group is overseen by Jonathan Pollack, the New York-based global head of commercial real estate for Europe’s biggest investment bank. In the aftermath of the financial crisis it bought distressed assets including a portfolio of loans from Capmark Financial Group Inc. in 2012.
Alternative-asset investing firms including Oaktree Capital Group LLC, Ares Management LP and Apollo Global Management LLC are expanding their real-estate offerings as they diversity their revenue streams. Oaktree this year hired Ben Bianchi, the former global head of Deutsche Bank’s Special Situations Group, as the Los Angeles-based firm raises its first real estate debt fund.
Oaktree is seeking returns net of fees in the high single digits with its real estate debt strategy, John Frank, the firm’s vice chairman, said on a February conference call. The group is seeking opportunities that carry less risk than those pursued by its real estate opportunities funds, and the debt strategy has appealed to investors seeking yield, Frank said.
Deutsche Bank is a dominant player in the commercial-mortgage bond market where loans on everything from strip malls to skyscrapers are packaged into securities and sold to investors. The bank has been the top underwriter in the U.S. since 2011, according to the Commercial Mortgage Alert, an industry newsletter.