As far as the market was concerned, Eurohypo was set to return to lending on 1 July. Instead, on Tuesday night, its parent Commerzbank issued the shock statement that the bank was to be wound down. It bodes ill.
No one, including the Eurohypo team itself, predicted a decision that meant that a bank with a €56bn UK property loan book would stop all new lending.
It marks a spectacular U-turn. In March, the future of Eurohypo’s UK business looked to be secure when Commerzbank said that while much of Eurohypo’s property activities would be wound down, a core real estate lending business would continue through a new real estate and ship finance division.
This week that changed. The statement from Martin Blessing, Commerzbank’s chairman of the board of managing directors, was especially chilling: “The strategic objective is that of consistently focusing Commerzbank on customer-centric and sustainably profitable core business and further minimising risks and capital lockup.”
That it does not see property lending as a “sustainably profitable core business” will rightly worry an already debt-starved market.
Eurohypo’s well-respected team may well end up leading a management buyout. Equally, its book could be acquired and offer a new lender in the market a running start.
Good may yet come of this decision. For now, though, it remains a deeply troubling one.
Slade makes his mark
• John Slade, the new chief executive of BNP Paribas Real Estate, is keeping a low profile for now. But behind the scenes he is making his mark. At a meeting of senior directors in Paris on Monday he set out his – initial – plans to expand the business significantly over the next half decade. He needs to. Despite the backing of one of the world’s biggest banks, the firm has long punched below its weight.
Meanwhile, at the top of the advisory food chain, sit a handful of firms serving the international corporate market. CBRE and Jones Lang LaSalle sit at the head of the table. C&W may be underweight in the UK but, as a truly international business, sits on their shoulders.
If DTZ, with UGL’s backing, plays its cards right it will share the spoils, too. As will the likes of Johnson Controls – less familiar on this side of the pond but a highly focused, hungry player all the same.
In this climate, many firms simply risk being left behind. Even if they are not targeting the same global clients, the industry’s ambitions are being dragged ever upwards. Slade knows that. In its current guise, BNP PRE is neither big enough nor niche enough to thrive. Two weeks in, he has begun the process of addressing that. Others will need to as well.
• Among those praised at this week’s IPF dinner by guest speaker Jonathan Edwards was the British construction industry. Edwards, Britain’s most medalled athlete, was eulogising about “textbook” preparation for next month’s Olympic Games. It was a shame, pointed out more than one observer, that the “brand/sponsorship police didn’t allow British construction companies to shout their Olympic achievements”. Quite.
• If you are in central London on Thursday night, make sure you look to towards London Bridge at 10.15pm. A combination of 12 lasers and 30 searchlights will light up the night sky to mark the formal inauguration of Europe’s tallest building, The Shard. Delivering such an iconic building is a tremendous achievement. Letting it remains a challenge. Full marks to Irvine Sellar for vision, determination and bravery.
• The California Public Employees’ Retirement System has taken a one-third stake in Bentall Kennedy, one of North America’s largest real estate investment advisers. CalPERS is the largest public pension plan in the US and said of the deal: “This relationship will allow our real estate team to further expand on trends and opportunities in real estate investment and management.” Might other funds seek to extend their interest in property from development to advisory?
