08.01.10

By Deirdre Hipwell

German bank to wind down London arm

German bank HSH Nordbank is to close its UK property lending arm and start winding down its operations to focus on its core German lending division.

The German lender, which has a €4bn UK property loan book and has financed some of the biggest office developments in the City of London, has ended plans for any further expansion in the UK market.

The bank will continue to work with existing clients, meet any pre-existing funding commitments and continue to provide development finance for schemes still under construction.

However, the lending team, including the highly regarded head of business origination Andrew Sutherland, has been given instructions to withdraw from the UK market, which will lead to a series of sales in due course.

A spokesman said: “HSH Nordbank has refocused its business strategy.

As part of this process HSH Nordbank has formed a restructuring unit — a separate organisational unit within the bank — which was launched on 1 December 2009. The restructuring unit is in charge of winding down the non-strategic portfolios.

“The restructuring unit is not a ‘bad bank’ since attractive, profitable businesses that no longer fit the bank’s future strategy were also allocated to it,” he added.

“In the future HSH Nordbank’s real estate financing will focus mainly on Germany. Additionally, we will accompany our domestic clients on the major Western European markets.”

HSH Nordbank rapidly expanded into the UK market during the past 10 years.

Among the office schemes it funded are Minerva’s Walbrook development opposite Cannon Street station, and its 560,000 sq ft St Botolph’s scheme, which recently secured law firm Clyde & Co as a tenant taking 145,000 sq ft at £48/sq ft (news, 18.12.09).

The bank’s decision is not thought to be related to any particular concern over its exposure to the UK property market but is a result of domestic and political pressure in Germany following the significant state aid it received during the credit crunch.

Banking experts say HSH Nordbank’s withdrawal from the market could be shortsighted and misguided, as it will lose the client relationships it has built up in the UK over the past decade.

The spokesman added: “In the wind-down process we are going to co-operate closely with our clients. Naturally, all loan agreements will remain in place. In the wind-down process, parts of portfolios may be sold. Capital markets transactions can also play a role. However, that depends on the development of the markets. Thus, as of today we cannot give a guess on how long the process may take.”

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Source: Property Week (www.propertyweek.co.uk)