Colony Capital breaks ground with €370m German loan deal

The Los Angeles-based firm says it has struck its fourth nonperforming loan deal in Germany but, more importantly, it is the first time syndicated loans have been sold together as a package by a banking consortium as an NPL transaction in Germany, possibly in Europe.

Colony Capital’s funds have bought a package of nonperforming loans with a face value of €370 million from four German banks.

Los Angeles-based Colony said the four sellers were Eurohypo, Landesbank Hessen-Thüringen (Helaba), Berlin Hyp and Archon Capital Bank, and that the loans were issued to one single borrower to develop properties primarily in Berlin and Frankfurt in the mid- to late 1990s.

In a statement today, the firm claimed it had broken new ground in European real estate investing because it was the first time syndicated loans had been sold together as a package by a banking consortium as an NPL transaction in Germany, and possibly in Europe.

Dilip Awtani, managing director and head of Colony’s Europe Debt Strategies, said: “We believe the underlying properties are attractive commercial real estate investments that can be re-positioned into core-plus or similar properties. Our strategy is to partner with bankers to help them reduce exposure to non-performing loans and to monetize illiquid assets.” He added: “Europe is an active arena for underperforming and distressed assets, and we are pursuing many commercial real estate opportunities throughout the region to put our capital to work.”

Since the end of 2009, Colony has made four NPL portfolio acquisitions in Germany. The first was acquired from Bankaktiengesellschaft (BAG) bank, and had a face value of $90 million. Colony said BAG sold the loans to allow it to focus on servicing non- and sub-performing loans from other cooperative banks in Germany.

Awtani, who was hired in June 2009 to lead Colony’s distressed acquisitions efforts in Europe, said at the time there were “significant opportunities to over the next few years to buy underperforming real estate assets from traditional lenders searching for liquidity.”

“There is enormous value in the underlying property in Germany and other European countries,” the former GE Capital executive director added.