Deutsche Bank may be well positioned on the global investment banking stage but in Europe it is happy to stick to its roots. “Our perspective in Europe is to stick to our traditional strength, which is serving Deutsche Bank’s historical client base,” says Jacques Brand, managing director and global head of real estate, gaming, lodging and leisure.
Happily for Deutsche Bank, this client base includes a solid foundation of German corporations, many of which will be considering restructuring or disposing of their real estate assets.
Deutsche Bank’s European heritage is unusual for the investment banking sector, which is dominated by US players. It boosted its global presence in 1999 with the $10.1bn acquisition of US bank Bankers Trust, but its real estate activities still reflect its European roots. In 2001, the bank advised globally on transactions worth more than €7.4bn (excluding hospitality and leisure), with Europe accounting for €7bn of this total.
Deutsche Bank as a whole has undergone a restructuring in the past year, crystallising the lines between the group’s different property activities. In February, the bank announced that all its real estate asset management operations were to be handled by the DB Real Estate division.
The bank’s separate real estate investment banking operations, which include the hospitality and leisure sector, are headed by Brand, based in New York. In Europe, Nick Jacobson is head of the European advisory division while Tim Lloyd-Hughes is in charge of hotel and leisure activities.
Jacobson says Deutsche Bank’s strategy is to expand the group’s advisory and real estate debt finance capabilities. This will be led by the bank’s four dedicated teams in Frankfurt, London, Milan and Paris (which covers France and Benelux). “We are not opportunistic,” Jacobson adds. “We have a very clear business plan for these markets.” The bank expects to add more staff to the 37 already working in Europe.
Much of Deutsche Bank’s investment banking activities in the UK have involved transactions to take stock exchange-listed companies private. The team is headed by David Church, who has 10 years of experience as an analyst and good contacts with quoted companies and their shareholders.
Church’s team has already advised on taking UK companies BPT, Eskmuir and Allied London Properties private, as well as on the sale of Wates City of London to Pillar Properties.
The team is now advising UK company Marylebone Warwick Balfour on its three-to-four-year break-up plan, which Church says shows the bank’s ability to formulate creative solutions. “MWB is going private in the public arena,” says Church. “It will be built up and then broken up. We are effecting in the public markets what private equity investors would do.”
MWB’s assets will be sold off between now and December 2005, with at least £2 per share being returned to shareholders. Some parts of the company, such as the Malmaison hotel chain and serviced-office group MWB Business Exchange, will be built up before being sold.
The deal offers shareholders the chance to share the benefits of going private, and also avoids the sticky situation of management getting large incentives to instigate such a move. MWB’s management has forgone all future bonuses and share incentives and staff will split a bonus, depending on the cash returned to shareholders.
Church predicts that public-to-private deals will remain firmly on Deutsche Bank’s agenda. “Such deals arise from a combination of interest from the private equity sector and disillusionment from public equities investors. The sector is priced wrongly. We access the capital pools that will price it correctly,” he says. He adds that other markets – including Scandinavia, France and Germany – are likely to follow the UK’s lead. But “the chance of success in each of these countries is different”.
Deutsche Bank’s activities in France, Italy and Germany, headed by Erik Sond
