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Structured Property Financing
Tailored financing for discerning investors
In the Structured Property Financing segment, we support our clients in making their commercial property investments. The investment properties mostly comprise office buildings, hotels, shopping centres, logistics and residential property, as well as student housing. Our clients include institutional investors, private equity firms, family offices, financial institutions, private individuals, listed property companies, pension funds, and investors with a focus on a particular sector.
The regional focus of our activities is on Europe and North America as well as on the Asia-Pacific region. Our local staff, in close coordination with our sector experts at the Group’s head office, ensure that the requisite know-how is available for every transaction.
The Structured Property Financing segment includes not only Aareal Bank AG but also Aareal Estate AG, whose services include property management and various consultancy services.
Vast range of market opportunities
The market for financing commercial property has shown very solid development over the past financial year, in spite of the considerable uncertainty and restrictions resulting from the COVID-19 pandemic and its implications. Demand for property remains unabated, with risk-return profiles that are still attractive to investors. This is opening up promising growth and development opportunities for us across all types of property – office buildings, hotels, shopping centres, logistics and residential properties, as well as student housing.
The biggest growth drivers in the market include:
Logistics properties
The logistics industry is booming: e-commerce and changing supply chains, in particular, are driving high demand for industrial and logistics space and for corresponding financing.
Cross-border transactions
The trend towards increasing internationalisation is also driving demand for cross-border financial transactions. Complex financing solutions that provide investors with a high degree of flexibility at the same time are proving to be increasingly sought-after.
Green Finance
Demand for green forms of financing is growing at a rapid rate. The markets for both green loans and green bonds have been showing dynamic development for years now, and open up a whole number of new prospects for providers.
Bettina Graef-Parker
Managing Director Special Property Finance
“ESG is moving further and further into the investor spotlight. This process is giving rise to far-reaching changes that we intend to use to our advantage – and to the benefit of society as a whole.”
Growth through flexibility
Our aim is to expand our financing business further, paying due attention to the risks involved, and leverage the opportunities offered for attractive new business even more in the years ahead – whilst maintaining our conservative risk policy. Portfolio volume – which had already reached the €30 billion level at the end of 2021, one year earlier than planned – is set to increase further by €1 billion per annum over the next three years. This means it will grow to €33 billion by 2024 – with the corresponding positive impact on income.
Thanks to our international markets access, we can generate this growth in our traditional asset classes and regions. We will rely first of all on our flexibility in terms of regions, property types and structures, and second on our expertise in structuring financing, also offering participations in our credit portfolios to business partners. We could also envisage financing further asset classes for which there is increasing demand and in which we can establish specific expertise. This means that we will be monitoring markets and developments even more closely than in the past and seizing opportunities for new business with attractive risk/return profiles as and when they arise.
Moreover, the Bank will continue to gradually expand its ESG-compliant business over the next years, with €2 billion in new green financings to be originated between now and 2024, of which roughly one third already in the current year.
Growth in the lending business is set to go hand in hand with more efficient portfolio management, investments in further improving the Bank’s infrastructure and in lowering the segment’s cost/income ratio, from 43.6% – already a very good level by industry standards – to below 40% by 2023.
The use of artificial intelligence (AI) opens up new options for data analysis – for example when it comes to meeting ESG requirements, analysing markets and performing property valuations. As a result, we are aiming to make greater use of AI in risk management, lending, and in industry and market monitoring.
Severin Schöttmer
Managing Director Special Property Finance
“Innovative technologies like artificial intelligence, process mining and big data are helping to make us more effective and efficient. This will boost our competitive standing and allow us to offer our clients even better service.”
New financing solutions and
process improvements
Green Finance
Aareal Bank expanded its range of financing solutions to include green finance products when it granted its first green loan back in July 2021. This solution is based on the Aareal Green Finance Framework - Lending, which was reviewed by the ESG rating and research agency Sustainalytics. Additional green loans were extended during the year. The Aareal Green Finance Framework – Liabilities was also developed in 2021, to allow Aareal Bank to also be able to issue green bonds.
DealFlow
The loan approval process at Aareal Bank has been mapped digitally using DealFlow since the summer of 2020. This has made the processing steps involved considerably faster, and also improves the quality of the advisory service, because media discontinuity and multiple entries can be avoided, and existing data can be evaluated better and faster.
Learning tenant database
Aareal Bank has created a learning database to optimise anonymised tenant lists in cooperation with the start-up realxdata. It combines and aggregates data from different formats and makes it available for bank-wide systems. This allows the database to lay the foundation for various AI-supported analyses and scenario calculations in several divisions of the Bank.
News tracker
Aareal Bank has been using a news tracker since 2020. It scans the web for specific information, selects the statements that are relevant to the Bank's financing portfolio, for example on selected properties or regions, and provides it, bundled with different analysis options, to our Credit Risk department. The AI-based product for detecting signals in the lending process was developed by the start-up Rocketloop. Aareal Bank was on board as a pilot client from day one.
Transaction highlights
In the last financial year, we once again successfully supported and financed numerous transactions in our Structured Property Financing segment.
