The fallout from the credit market crunch reverberated around Europe last month as property owners struggled to sell large portfolios and buyers found it tough to finance acquisitions, according to senior City sources.
It is understood that Goldman Sachs' Whitehall Fund was still struggling to sell a €4.5 billion portfolio of department stores in Germany operated by retailer KarstadtQuelle at press time.
In July, the private equity real estate fund decided to sell its 51 percent stake in a vehicle owning the property; the remaining 49 percent is owned by KarstadtQuelle. But the credit crunch in August has made it very difficult for buyers to finance the acquisition of the portfolio through the debt markets.
“Lack of liquidity in the market is making the sale unlikely any time soon,” a source in Europe's lending market told Private Equity Real Estate in late August. The source added: “A number of deals are being pulled.”
Goldman Sachs declined to comment.
In general, European bankers have been attributing some excess to the “fringes” of the market. They argue there is no systemic risk in the real estate debt markets.
Shares in publicly owned specialist real estate lenders have nevertheless taken a pounding: German lender, Eurohypo, for example, expects a €30 million loss resulting from exposure to US subprime property.
Neil Lawson-May, the firm's joint head of real estate investment banking, told Reuters in August that bidding for real estate assets in the “physical” market was likely to become less aggressive as borrowing costs rise and lending terms become less generous. Shares in the bank began to recover after August 21.
Shares in another publicly listed lender Hypo Real Estate, which said in a statement on August 3 that it had no exposure to US subprime real estate, also fell steeply at the peak of the credit crunch but have since rebounded strongly.
“We are ‘outperform’ on Hypo at the moment because it massively benefits from the fact that the securitization market has completely dried up,” said Christian Wiss, an analyst at Fox-Pitt, Kelton.
Morgan Stanley makes debut UK senior living buy
Morgan Stanley's sixth real estate fund has formed a joint venture with publicly traded company Sunrise Senior Living to acquire and manage 12 assisted living communities already developed or under development throughout the UK. The debut senior living deal in the UK for Morgan Stanley is valued at $1.1 billion (€800 million). The sites were part of a $1 billion Sunrise joint venture with Pramerica, the investment arm of Prudential Financial, announced in January. Under that agreement, Pramerica agreed to invest $160 million in exchange for an 80 percent stake in a project to develop 18 senior living communities in the UK. Morgan Stanley has now bought 12 of those sites, six of which have already been completed, leaving six sites still retained by the Pramerica/Sunrise partnership.
Quinlan on Amsterdam trip for new office fund
Quinlan Private has acquired The Atrium office in Amsterdam for approximately €200 million ($276 million) from New York-based real estate firm Tishman Speyer. Located in Amsterdam's business district, the complex includes about 34,000 square meters of office space. The Atrium is being acquired for Quinlan's recently established Western European Office Fund, which will also include the BleichStrasse I office and hotel complex in Frankfurt along with Senator House in London. Quinlan acquired the €60 million, mixed-use property in Frankfurt last month in a 50-50 joint venture with German developer FOM Real Estate. Senator House comprises 14,500 square meters of office space on Queen Victoria Street in the City of London.
HBOS secures social housing firm
Scottish bank HBOS' integrated finance team has backed the management buyout of UK social housing company Keepmoat for £783 million ($1.5 billion, €1.2 billion) using a package of integrated debt and equity. HBOS will become a minority shareholder of Keepmoat alongside the management team, which is led by chief executive David Blunt. Terry Bramall and Dick Watson, the principal shareholders in the company for more than 35 years, have sold their stakes. The business has a turnover of £535 million and an order book of £3 billion. HBOS' integrated finance team has completed seven deals this year, recently buying social housing maintenance company Apollo Group alongside Lloyds TSB for £410 million.
Aberdeen acquires €108m property in Stockholm
Aberdeen Property Investors has acquired a €108 million office property in central Stockholm. The 40,000-square-meter building is the head office of Swedish Match, a Swedish tobacco products company. The site will continue to be the head office for the company after the acquisition. The investment was made through Aberdeen Property Funds SICAV Pan-Nordic, which has been active in the Nordic region for the past several months. In July, acquisitions totalling €328 million were closed in Norway and Finland. The fund's total portfolio currently amounts to €618 million and includes properties in all four Nordic countries.