In the latest sign of the reshaping of European banking, Deutsche Bank has transferred its real-estate investment banking team to Eurohypo, the property finance specialist created by merging its own mortgage bank subsidiary with those of Dresdner and Commerzbank. The idea is to link the wider bank’s lending with higher-margin advisory, structuring and capital markets work.
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Rivlin (left) and Lawson-May: group leaders with |
Leading the group are Neil Lawson-May and Paul Rivlin, both old Deutsche hands. They have long experience in the real-estate market. Before joining Deutsche in 1995, Rivlin helped set up County Natwest’s property finance team in the mid-1980s. Lawson-May began at James Capel, joined Morgan Grenfell, and rose to become MD in Deutsche’s structured finance division.
At a time when many capital markets professionals are counting themselves lucky still to have their jobs, the London-based team is still growing. News of the move to Eurohypo was followed a few days later by the announcement of three new hires.
Adrian Elwood joins from broker Teather & Greenwood, where he was an equity analyst specializing in quoted property companies. Ed Stacey, formerly managing director responsible for derivatives business relating to the property market, will be covering the same area at Eurohypo. Caroline Philips, head of European real estate securitization at UBS, will move to lead the team’s third-party securitizations and CMBS programmes, managing balance sheet use in close collaboration with the central treasury in Frankfurt.
Paul Rivlin, joint-CEO of Eurohypo Investment Banking, expects a profitable 2003, not least because property escaped much of the battering visited on other asset classes over the past year and looks like one of the best bets over the next few months. “We certainly had a very good 2002.” he says. “There were two factors behind this – real estate as an industry held up better than others like telecoms or autos, and also we are still expanding. Five years ago, there were just the two of us and a couple of juniors. In 2002, we had a bigger team, and could do bigger deals all over Europe, deals that would have been impossible before.”
Recent highlights include advising Telereal on its £2.38 billion acquisition of property from BT and Rembrandt Partners on its purchase of Uni-invest for £1.8 billion. The team also arranged and underwrote HBAG’s e275 million acquisition of AGIV. And the first deal under the new name was announced in early January – the team structured a e100 million sale and lease-back of seven hypermarkets for Eroski, Spain’s second-biggest supermarket group.
While at Deutsche, Rivlin and Lawson-May reported to Frankfurt and worked closely with Bernd Knobloch, Eurohypo’s deputy CEO, and with other senior figures in the new bank. When the property lending business moved, it was logical for securitization, syndication and advisory activities to go with it. At this early stage, most of the London-based team are drawn from the Deutsche group, but this is a distinction Rivlin hopes will fade as the team expands further.
Rivlin emphasizes flexibility when discussing the kinds of business his team will be targeting. He says: “This is an opportunistic kind of business, and we’ll go where the opportunities are. But there are a number of things we’re looking at in the UK and Western Europe – there are still opportunities in Sweden and the Netherlands, for example. And Germany is interesting. It’s a big, very expert market, but there is some distress around at the moment that could create all sorts of openings.” Creating opportunities in these markets will involve working with Eurohypo’s local lending offices – the bank has staff in 20 cities in 14 European countries and will soon have offices in New York, Chicago and Los Angeles.
He adds: “We won’t be putting much weight on non-real-estate corporations outsourcing their requirements – you’re more likely to see a couple of big take-privates and some asset disposals over the year. Ideally we’d hope to be doing eight to 10 deals over 2003. It would be nice if one of these was worth e2 billion like the Uni-invest deal, but we’ll be looking at a range of sizes and structures.”
For bankers used to working at Deutsche, a smaller bank will be a big change. But a e236 billion balance sheet should be big enough for the more specialized demands, and the team won’t have to compete for attention and resources from other groups in a big bank. Rivlin says: “This lets us run our own securitization effort setting our own priorities. There should be benefits to being in a smaller organization with fewer competing interests.”
Eurohypo isn’t the only German bank trying to reinvent itself as a global provider of higher-margin advisory and capital markets services alongside its traditional lending role. But it does look like one of the best-positioned to do so. It is bigger than many of its rivals, such as Aareal, which was split off from DePfa to form a specialist property unit in 2001. And it does not have to face the kind of uncertainty that attaches to other peers – several Landesbanken have made inroads into real estate over the past few years, but their ability to compete may shrink with the loss of the cheap funding enabled by their state guarantees.
Rivlin hopes the blend of size and specialization will set Eurohypo’s investment banking operations apart from competitors’. He says: “Were not seeking to make a big distinction between funding and advisory activities – we see real estate as largely a project-driven business requiring all-round capabilities. So our willingness to use our balance sheet over the medium term should give us an edge over more purely capital markets houses, and the fact we have an investment banking team with plenty of deal experience will let us compete against lending banks.”
