Helaba Annual Report 2016
Annual Report 2016

Real Estate

Helaba's Real Estate segment encompasses commercial real estate lending operations and the real estate management activities pursued with subsidiaries and affiliates of the Bank.

Real Estate Lending

Helaba concentrates in its real estate lending business on Germany and selected international markets in Europe and the USA. Real estate lending business has special strategic significance for Helaba on account of its deep roots in the real economy of its home region. It has built its business model in this area around stable, long-lasting customer relationships and it is these, in conjunction with its international profile and uninterrupted presence in the target markets, that underpin Helaba's successful real estate lending.

Helaba ranks as one of the leading providers of commercial real estate loans in Germany, where it focuses on financing larger portfolio and project developments in the commercial-use sector and portfolios for the commercial housing sector. Its real estate lending customers include professional commercial investors – both private and institutional – as well as real estate funds and residential property companies.

The main target markets of interest in Europe are France, the UK, Scandinavia, Poland, the Czech Republic and the Benelux countries. Real estate lending business in the USA concentrates on New York and the other major urban areas of the East and West Coasts. Customers in international business include international and local funds, real estate companies and other commercial investors. Helaba has achieved moderate growth in the international markets over the years. The strength of its presence in the market has helped to further enhance its good reputation and its market standing. Helaba continued to diversify its real estate lending portfolio across the target markets in 2016 in line with the preferred use types. The proven relationship banking approach remains the cornerstone of its activities in the market.

The pattern of steady growth that has become established in target markets of relevance for Helaba in Europe and the USA over recent years continued in 2016. The European investment markets were in good shape overall. Favourable economic fundamentals provided for ongoing growth in the US office space markets and the rented housing market and owner-occupier residential construction both remained on an upwards trajectory, particularly in the major population centres along the Eastern and Western Seaboards.

The investment market in Germany, as in Helaba's other target markets, grew again in 2016 as a result of the persistently low level of interest rates and a lack of investment alternatives. Real estate remains a priority for institutional investors and insurance companies with funds to invest. Central locations and prime properties in the office, retail and mixed use categories remain the focus of attention, although a shortage of supply in these areas is driving increased investment activity in the hotel, logistics and special-purpose real estate categories and in regional locations.

Demand for residential portfolios remains very strong. The favourable conditions enabled Helaba to beat its forecasts in new business. It maintained its lending portfolio in a competitive environment for finance despite a significant proportion of early loan repayments. Margins in new business declined, due to the sustained high level of competition, but remained adequate.

Helaba capitalised on the sustained positive environment for syndication once more in 2016 as an underwriter of relatively large deals. It strengthened its collaboration with the Sparkassen by enabling them to become involved in commercial real estate finance business. Joint working in relation to smaller volumes is being stepped up and the Bank continues to expand co-operation with debt investors such as insurance companies and pension plans and funds. Helaba expects new business to decline slightly in 2017 in the face of even tougher competition. It intends to prioritise qualitative growth in the lending portfolio, including through an increase in the activities of the Debt Capital Markets unit.

Helaba's business activities in France focus on the Paris area and selected regional markets. Progress continued along the successful established trajectory in the year under review. Moderate growth is expected in this important European market in 2017.

New business at the London branch office fell back slightly in 2016. Helaba's experts believe that London will remain a significant location for real estate despite Brexit.

New business continued to grow in the USA, where Helaba increased its volume of business despite another year of plentiful early loan repayments – albeit in part thanks to the strong dollar. New York, Washington and the major cities of the West Coast will remain Helaba's principal focus in new business activities Helaba does not anticipate any change in the direction of travel in US real estate business following the political transfer of power and expects this important market to continue to offer good opportunities.

The Bank strengthened its business in Scandinavia significantly, especially in Norway and Finland, and opened a representative office in Stockholm in September 2016 to bring it closer to customers and target markets in the Nordic region.

Helaba enjoyed continued success in the Central European markets of Poland and the Czech and Slovak Republics, concluding a series of large financing transactions, especially for international investors, against the backdrop of further dynamic economic growth and increasing investment activity in the real estate sector.

The Bank aims to maintain its market position in what is a highly competitive environment. Hand in hand with the consistently high level of demand for real estate investments goes sharp competition for lucrative financing arrangements. Helaba expects 2017 to bring a significant quantity of early repayments once again and is therefore forecasting only a slight increase in the volume of real estate finance business. Activities will accordingly centre on consolidating customer relationships and maintaining a consistent presence in the market. Helaba employs professional portfolio management to meet regulatory capital requirements.

Real Estate Management

Helaba's Real Estate Management unit looks after the Bank's real estate affiliates and performs the role of owner in respect of the Bank's own real estate as well as taking on a range of other tasks in the real estate management field. Real estate group Helaba Immobiliengruppe comprises the GWH Immobilien Holding GmbH Group (GWH Group) and OFB Projektentwicklung GmbH (OFB), which includes the subsidiary GGM Gesellschaft für Gebäude-Management mbH (GGM).

Helaba is able to manage its real estate assets successfully to optimise profitability and risk. It increased the already high occupancy rates of the various properties again during the year under review. The MAIN TOWER, one of its two head offices, continues to offer exceptionally high building quality thanks to substantial investment. This building received a Platinum rating – the highest award possible for existing real estate – under the U.S. Green Building Council's LEED (Leadership in Energy and Environmental Design) standards in September 2016, an accolade that recognises the constant improvements made in building management to optimise energy performance. The professionally operated viewing platform has made the striking MAIN TOWER a popular destination for Frankfurt residents and visitors alike.

The companies of the GWH Group cover the fields of real estate management, real estate sales, real estate development business and real estate services. The Group had a portfolio under management comprising around 49,000 residential and commercial units as at the end of 2016, a year in which it continued with various measures to optimise the portfolio including the successful sale from the portfolio of homes for owner occupation.

GWH purchased real estate assets to increase its portfolio of homes to let in the defined growth regions of Rhine-Main, Rhine-Neckar and the Rhineland and also acquired properties in the new locations of Hanover and the Erfurt-Weimar region. The company purchased approximately 2,000 homes in total in financial year 2016. GWH Group plans further purchases and new build projects for homes to let in the current financial year and is systematically identifying opportunities to add further homes to existing sites to ensure best use is made of the land already in its possession. GWH Bauprojekte GmbH boosted revenue and income once again in real estate development business. It built 86 homes for owner occupation and 214 homes to let for the GWH Wohnungsgesellschaft portfolio within the Alea new build project in Frankfurt.

The outlook for all divisions of the GWH Group is positive. Demand is strong in the residential real estate markets, which offer potential for growth in the areas of both new build homes to let and the letting of existing residential space in the portfolio. The attractiveness of real estate investments at a time of persistently low interest rates is boosting real estate development business and real estate sales.

OFB provides commercial real estate services covering Frankfurt, Erfurt, Berlin, Kassel, Munich, Düsseldorf and Leipzig. Its project development activities involve the planning, construction and marketing of commercial space and it also provides general contractor and project management services as well as professional management of commercial real estate through subsidiary GGM Gesellschaft für Gebäude-Management mbH.

The OFB Group specialises in its project business in the office, retail, hotel and logistics sectors. The highlights of 2016 in this area included the start of construction of the Kornmarkt Arkaden development in Frankfurt am Main. The sono west (Frankfurt am Main), new KION Group HQ (Gateway Gardens at Frankfurt airport), VERSO (Wiesbaden), new SAP office building (Eschborn) and BernsteinCarré (Leipzig) projects were marketed successfully and are presently under construction. OFB has completed the Lutherplatz (Kassel) and Stresemann-Quartier (Berlin) projects and handed them over to the respective tenants. Acquisitions of land in urban locations in Frankfurt, Munich, Berlin, Erfurt and Düsseldorf and demand-led planning for their utilisation provide the foundation for future project developments.

Further Topics