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Aareal Bank completes €350m WestImmo acquisition

Aareal Bank Group has completed the acquisition of all of the shares of Westdeutsche ImmobilienBank AG (WestImmo) for €350m, acquiring a €4.3bn performing European commercial real estate loan book.

This is Aareal’s second acquisition inside the last 15 months, after the €342m purchase of Corealcredit Bank AG from Lone Star which closed at the end of March 2014.

Erste Abwicklungsanstalt (EAA), the bad bank which wholly-owns WestImmo, after former owner WestLB split its business lines in September 2012.

WestLB, which was mandated by the European Commission to sell WestImmo as a condition of its €5.4bn bailout package in October 2008, was transferred into EAA, Germany’s first bad bank post the global financial crisis, with WestLB rebranding as Portigon.

CoStar News understands that under bidders at various stages included PIMCO, whose parent company, Allianz, itself has a growing German property loan book and ING Real Estate Finance.

Back in 2012, Apollo Global Management attempted to buy WestImmo, including real estate loan of €8bn including sub and non-performing loans, but the deal fell through with West LB citing “severe market deterioration” and “an unacceptable final sale price offer”.

Aareal completed the acquisition, funded out of the bank’s cash reserves, yesterday on 31 May 2015.

The acquisition of WestImmo is a targeted investment into Aareal Bank’s core business segment of Structured Property Financing.

In a statement, Aareal said: “This transaction creates added value for Aareal Bank from the very beginning, partly with the negative goodwill of approximately €150m recorded upon closing the deal; in addition to this one-off effect, the transaction will make a positive contribution to Aareal Bank Group’s consolidated operating profit.

“Aareal Bank aims to integrate WestImmo swiftly into the Group. The technical integration is intended to take place by the end of the year. Discussions will shortly take place with the competent bodies about the future strategic focus of the new subsidiary, which apart from renewals is no longer active on the market itself on account of EU requirements since 2012.

“These discussions will for instance cover the possible inclusion of WestImmo in Aareal Bank’s new business activities and the settlement of existing overlaps in the location network. Operations in Mainz will be maintained for at least three years. Strategic options are being examined for the private customer business of WestImmo concentrated in Munster, which is not part of Aareal Bank Group’s core business.

“Overall, Aareal Bank assumes that a significant number of jobs at WestImmo will be kept at least in the medium term, regardless of the extensive integration planned. A control and profit transfer agreement will be concluded in the near future as part of the forthcoming integration of WestImmo.”

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