Deutsche Bank is launching a $215m closed-end fund to buy its New York headquarters building, in what is believed to be the largest purchase by a German fund of US property. The fund will be marketed to German investors, and is the latest sign of growing appetite among Germans for trans-Atlantic investments.
The bank’s fund management division Deutsche Immobilien Anlagegesellschaft is negotiating to acquire the 30-storey office building at 31 West 52nd Street, which was built in the mid 1980s by Hines Interests. It is being sold by Lehman Brothers, on behalf of a consortium of investors called the 40 West 53rd Street Partnership.
Deutsche Bank occupies 65% of the 68,096 m2 building; other tenants include investment adviser Wasserstein Perella.
The deal has not closed, so Deutsche Bank refused to comment on the launch of the fund. It is believed, however, that the investment will offer unit holders in Germany a net return of around 7%.
The number of German closed-end funds investing in US real estate has mushroomed during the last year, as fund managers have sought new opportunities. The end of special tax incentives to encourage closed-end fund investment in eastern Germany, and the low yields on offer in western Germany are both factors that have made the US attractive to investors.
Deutsche Bank is keen to put the bad experience of the Jürgen Schneider fiasco in Germany behind it, and the New York fund is a sign of a new dynamism in Deutsche Bank’s property activities worldwide. In Italy, the bank is poised to launch the country’s first listed property investment fund (see Survey, page 25)
In Germany, Deutsche Bank is restructuring all its real estate activities into a new division, Geschaftsbereich Immobilien (GBI).
GBI will include DB’s own property lending business, the bank’s big mortgage subsidiary Frankfurter Hypothekenbank Centralboden, and its real estate investment funds, Deutsche Grundbesitz Investmentgesellschaft and Deutsche Immobilien Anlagegesellschaft. It also includes DB’s real estate management business, which is responsible for 2.6m m2 of floorspace.
In GBI, these will all now come under a single management. The division will have a loan volume well over DM 100bn. According to DB management board member Michael Endres, pooling know-how on property finance and risk assessment “makes it possible to serve the customers far more comprehensively and better”. GBI will have joint marketing and operate common standards for processing loan requests.
DB said it had reorganised is property activities in order to prevent a repeat of the problems caused by the collapse of Jürgen Schneider’s property investment activities in 1994. Schneider – who is currently on trial for fraud – allegedly duped German banks into giving him loans by providing forged rental contracts. DB, which had an exposure of DM 1.2bn, was his largest creditor.
