GE Capital Real Estate has scooped a £1.4 billion (€1.67 billion; $2.26 billion) portfolio of performing commercial property loans in Europe as it seeks to grow its commercial real estate lending practice.
The US firm, which reversed plans to build a third party real estate investment management business in 2012, has bought the portfolio from Deutsche Postbank, calling it “one of the GE Capital’s more significant portfolio acquisitions in recent years”.
In a statement on the deal, Mark Begor, chief executive officer of GE Capital Real Estate, said: “This transaction supports GE's plans to grow our core commercial real estate lending business globally. It also demonstrates GE’s ability to underwrite portfolio deals and positions us as a lead provider in the market for the long-term.”
The assets are 55 performing commercial property loans with primary UK borrowers many of which have near-term loan expirations. That short-term profile is providing GE with a chance to step in with fresh refinancing.
The portfolio acquired – called Project Tower – attracted several bids including from Citigroup and ARES Management who teamed up to bid. JPMorgan also made it to the latter stages of the process.
Though the European real estate market is alive with alternative providers of finance to fill the gap left by traditional banks, GE pointed out that the commercial real estate unit had been lending for 40 years.
It has reduced its equity investments to real estate from 60 percent of its holdings since the start of the Global Financial Crisis and has been exiting fund investment management contracts where possible. Jonathan Kern, president of global investment management at GE Real Estate left the business in April this year amid the strategic focus switch to lending.
Of the new transaction, Ellen Brunsberg, managing director of GE Capital Real Estate UK, added that it was a “significant investment” and an expansion opportunity for GE’s commercial real estate lending activities in Europe. GE Capital Real Estate has 1300 employees globally and already has 100 in the UK.