German real estate company Hypo Real Estate Group (HRE), the unit that spun off from German bank HypoVereinsbank in 2003, is looking to expand its securitization and asset management business, said Georg Funke, CEO of HRE.
HRE is also combining its Dublin-based Hypo Real Estate Bank International worldwide real estate business with that of Stuttgart-based Wrttembergische Hypothekenbank under the HRE Bank International umbrella - a move that Funke said would create more refinancing capabilities for the firm.
The HRE company restructuring involves the merging of international and German property trading as well as enlarging the management board to include posts for the group's heads of risk and asset management. In 2006, HRE grew organically and increased new business to around 34 billion ($44.71 billion). According to Funke, in order to attain returns that surpass the 9% to 11% mark, the group will be looking to take more risks and achieve higher returns through securitization or syndication.
He added that the securitization and asset management businesses - which have up to now been separate as international and German real estate businesses - were brought together. The management of these combined teams has also been considerably expanded through the establishment of separate risk and asset management units.
The group will be looking beyond internal syndications and reallotments and will begin combining unsecured and pfandbrief-backed refinancing. "The simpler things are on the refinancing side, the stronger you are when you are going after new business and the stronger you are in new business, the stronger you are in refinancing," he said. Public finance is another field that Funke thinks is a potentially profitable business, especially since financing constraints faced by public borrowers have put a premium on lenders' abilities to manage very complex financing solutions, where formerly municipal bonds or loans to governments had been comparatively straightforward operations.
"We have already done securitizations in the past and we intend to broaden our activities with this market," said an HRE spokesperson. In fact, the firm last week closed its GBP596 million ($1.15 billion) U.K. commercial mortgage loans securitization, ESTATE UK-3. The partially funded synthetic securitization transaction of U.K. commercial mortgages referenced a portfolio comprising 13 loans. The transaction was structured and arranged by Hypo Real Estate Bank International's Stuttgart-based securitization team.
HRE Bank International intends to continue to issue off the ESTATE trust throughout 2007. "Hypo Real Estate Group will increasingly use securitization as a distribution channel to access the secondary markets," said Stephan Bub, member of the board at HRE who is responsible for securitization.
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