In the first half of 2007, HSH Nordbank AG's real estate segment generated operating profit after risk provisions of €145 million, an increase of 27% over the same period one year earlier. Net interest and commission income rose 7% to €250 million in the same period despite the difficult conditions underlying the market. At just under €13 million, risk provisions dropped to an encouragingly low level (previous year: €42 million). The pre-tax return on equity widened appreciably from 18.2% to 22.3%.
"After a subdued start to the year, finance business picked up substantially in the second quarter, although the pressure on margins continued due to the intensive competition," said Peter Rieck, deputy CEO of HSH Nordbank AG and responsible for the real estate business. "Thanks to our structuring skills, we were again able to assist important real estate investors in complex cross-border transactions."
"The good conditions prevailing on the global real estate market bolstered the gratifying growth in our finance business, allowing us to appreciably reinforce our market position as a potent international provider of real estate finance in the first half of the year," he added. HSH Nordbank serves commercial real estate clients on the German and international property markets, primarily investors in commercial and residential real estate, fund companies, listed real estate companies, project developers and housing companies.
Further expansion of new business in H1 2007
With new lending commitments of €7.1 billion, the good year-ago figure of €6.5 billion was exceeded. In the first half of 2005, new business had been valued at €3.2 billion. The bulk of new real estate business was executed outside Germany. This includes €2.5 billion in the United States, where new business received a strong boost from the booming investment market. New lending commitments in the U.K. amounted to more than €1.2 billion. At nearly €1 billion, new business in the Nordic region was also brisk, while financing business in the Netherlands came to an encouraging €500 million.
Balanced real estate loan portfolio
HSH Nordbank's entire portfolio of business with real estate clients was valued at €26.2 billion at the end of June 2007, up from €24.3 billion in June 2006. Of this, more than half (53%) or just under €14 billion comprised foreign finance for real estate in leading cities in Europe and the U.S. (H1 2006: €10 billion, share of foreign business 41%) The real estate loan portfolio is thus characterized by broad international diversification.
In order to extend the range of finance tools, a platform for establishing and managing a portfolio of subordinated real estate loans has been created. These slices are to be securitized and placed on the capital market via a real estate mezzanine fund. With the acquisition of a 50% state in US Treuhand effective June 1, 2007, the Bank's real estate subsidiary HSH Real Estate has broadened its international footprint as a fund initiator. In this way, HGA Capital and US Treuhand have emerged as the joint number two in closed-end real estate funds in terms of capital placements.
The consulting business continued to perform well in the first half of the year. To illustrate, HSH Real Estate did the consulting work on the purchase of the housing company BauBeCon and on the sale of an office property portfolio owned by the Robert Vogel company.
In the project development segment, HSH Real Estate is involved in two projects in the Bavaria Quartier in Hamburg, namely the 'Bavaria Office' and the 'Atlantic Haus'. It is the owner, builder and project manager of the Bavaria Office, which is currently under construction. The second project, the Atlantic Haus office building was recently sold by HSH Real Estate to the UBS Wealth Management CEPF fund.
"Looking forward to the remaining part of the year, we continue to expect brisk new lending business. However, the intensive competition with domestic and