HSH Nordbank AG and Aurelius Capital Management have established a joint venture under the name of Aurora Real Estate Partners. The aim of the newly created platform is to establish and manage a portfolio of high-yield real estate loans, focusing initially on Europe.
The loans acquired for the portfolio are due to be securitized as commercial real estate collateral debt obligations (CRE CDOs) and placed on the capital market. The general figure set for the loans to be contributed is between €5 and €50 million each, with the fund's target size totaling up to €300 million.
The new mezzanine fund launched as part of the joint venture is designed to serve the finance requirements particularly of those real estate customers requiring a higher percentage of borrowed capital. Subordinated loan tranches from the fund can be made available, for which there is growing demand on the market. The business opportunities for banks in this segment with long-term loan commitments on their balance sheets are limited, due to the high equity backing required by Basle II. In November 2006, HSH Nordbank launched a European CMBS program for securitizing senior loan tranches with a LTV ratio of up to 75%.
"With the establishment of our new platform we have created the conditions for more comprehensive exposure on the rapidly growing market of high-yield loans and collateral debt obligations in the real estate sector," explained Peter Rick, Deputy Chairman of HSH Nordbank's Management Board. "We have widened the range of financing options we are able to provide to professional real estate investors by adding an important element. At the same time, through the capital relief realized in this way, HSH Nordbank is also expanding its options in the area of senior finance deals. It gives us particular pleasure to have found, in Aurelius Capital Management GmbH, a partner with extensive experience, an excellent reputation and a very strong international team."
"The establishment of a CRE CDO platform constitutes for Aurelius Capital Management an important step on its way toward the expansion of the existing company. A partnership with HSH Nordbank, which has an excellent global network and know-how in the segment of commercial real estate finance at its disposal, constitutes for us a key basis of successful collaboration. Using both the size and strength of HSH Nordbank in generating assets and the ability of Aurelius Capital Management to identify and implement highly profitable opportunities, our joint subsidiary Aurora Real Estate Partner aims to claim the position of leading CRE (commercial real estate) manager in Europe in the medium term," explained Hans- Michael Schania, CEO of Aurelius Capital Management.
Source: HSH Nordbank
