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Structured Property Financing

Smart solutions for property investors

Requirements for the lending business of tomorrow

Globalisation, digitalisation, urbanisation: The requirements for financing commercial properties have changed considerably in recent years and the complexity of such transactions has increased significantly. It is fair to expect that these requirements will increase even further in the future, as the new needs triggered by such megatrends will also give rise to new business models, offering structures and financing options.

With our Structured Property Financing segment, we have adapted to these new requirements at an early stage. This includes above all the further expansion of our unique selling points, for which we are renowned in the market: our structuring expertise, the combination of local market know-how and comprehensive industry knowledge, our balance sheet capacity and our reliability. In our Structured Property Financing activities, we rely on international market cultivation and the digitalisation of our business in order to be a strong partner for our clients.

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"Cross-border and digitalisation expertise are basic."

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Christof Winkelmann, Member of the Management Board of Aareal Bank AG

Mr Winkelmann, what trends and tendencies are you seeing in structured property financing?

The property financing market is currently experiencing numerous changes – which are profound in some cases. This is due in part to megatrends that are having a growing impact worldwide and in part to regulatory requirements. Globalisation, urbanisation and digitalisation are the specific megatrends affecting the commercial property industry and in turn us as a property finance house. At the same time however, regulation is being tightened more and more which means that transactions are becoming much more complex overall.

How is Aareal Bank tackling increasing globalisation?

We have been operating at home and abroad for many years so we have a high level of expertise in cross-border financing. We know the industries and countries in which we operate extremely well and we have spent the last few decades build­ing a wide network within the commercial property industry. This helps us a great deal when syndicating our financings and constitutes a major competitive advantage since the ability to place loans on the market is becoming increasingly important. For this reason, further expanding our network of syndication partners is one of our key strategic goals. At the same time, we have also significantly increased our share of international business such as in the US.

How is the market for property financing changing as a result of technological advances?

First of all, digitalisation means that the needs of property users are changing significantly. This requires a higher level of customer handling and property management that is more active. This is why property finance houses not only need to have corresponding market knowledge, but also need to identify relevant trends in good time and be able to rank and assess their impact. In the case of property financing itself, the significance of digital processes is also increasing – less so in the business itself which requires profound expertise and well-established contacts but more so in the administra­tion of transactions. Digital processes can provide significant ease and efficiency gains for both sides.

In what areas exactly?

Last year we started an extensive digitalisation campaign that covers various areas and interlinks them with one another. An example of this is the Aareal Client Cockpit we developed which will serve as the future digital interface with our clients – it is clear, user-friendly and optimised for the central process workflows in loan origination. In order to be able to gain an overview of all market and property information and analyse it, we have compiled a structured database called market:data with internal and external property market information. And to make our own business processes even more efficient and even faster, we launched several Smart Process digitalisation projects for our back office. Our clients also benefit from these projects since the increasing complexity of transactions makes it necessary for the processes running in the background to execute demanding tasks smoothly, quickly and inexpensively.

International presence and cross-border financing

Worldwide and around the clock: With our presence in numerous countries in Europe, North America and the Asia-Pacific region, we have been adapting to the increasing globali­sation of the financial and property markets for many years. We offer our national and international clients comprehensive property financing solutions and guarantee competent advice and support around the globe.

We have steadily expanded our market positions abroad, most recently in the USA and Canada in particular. We entered the Australian market in 2018. In Europe, too, we were once again the first choice for many international property investors for complex cross-border financing in the past financial year. These included Apollo Global Management and the hotel property company Pandox.

Apollo Global Management

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In the summer of 2018, Apollo Global Management commissioned Aareal Bank to finance a pan-European portfolio of logistics properties. The five-year loan facility of up to € 800 million provides the Apollo Global Management funds with stability, security and flexibility for their growing and diversified portfolio of logistics properties across Europe.

"We are delighted with Aareal Bank's ability to provide our funds with a stable, long-term facility that will support the growth of our logistics property platform over the coming years. Aareal Bank accompanied the entire process extremely efficiently."

Dominik Jais – Partner, European Principal Finance at Apollo

Pandox AB

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In the autumn of 2018, Aareal Bank AG provided a five-year € 447 million financing for a European hotel portfolio owned by Swedish hotel property company Pandox AB.

The portfolio comprises a total of 14 high-quality hotels with altogether approximately 3,600 rooms in the upper full-service segment, situated in first-class locations in Belgium, Germany, Austria and the Netherlands – including the Brussels Crowne Plaza, the Radisson Blu in Cologne, and Amsterdam's Park Hotel.

"Aareal Bank already supported us with financing for a part of the portfolio in 2016. The working relationship with Aareal Bank has been excellent: thanks to their outstanding expertise in financing complex pan-European hotel portfolios, we were happy to expand and extend this cooperation in 2018."

Liia Nõu – Senior Executive Vice President and CFO at Pandox AB (publ)

Further outstanding international financing projects in the financial year 2018

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The Aareal Client Cockpit

The Aareal Client Cockpit is a future digital interface between our clients in the area of Structured Property Financing and Aareal Bank. Here they can access all important papers and efficiently exchange documents and information. The aim of the Aareal Client Cockpit is to guarantee our clients a high level of process transparency and to enable them to communicate with us even faster and more efficiently.

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"Via the Client Cockpit, clients can access a wealth of information and see at a glance what the status of the credit initiation process is. For example, they can see which process steps have already been completed and which ones are still pending. Clients can create and edit tasks, upload and save documents and send messages to project partners," says Bastian Haider, Project Manager of the Aareal Client Cockpit. "During the development of the cockpit, it was particularly important to us that it not only offers a variety of functions and avoids unnecessary media discontinuity, but that it is also very intuitive to use and that our clients find their way around this platform immediately. That is why we worked with users throughout the development of the prototype and directly implemented their comments and requests."

The new Aareal Client Cockpit was presented to the industry for the first time at Expo Real in autumn 2018. It will be launched on the market in the course of the 2019 financial year.

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The smart back office

In our back office we also rely on innovative digital solutions. The special feature: All solutions are coordinated with each other and are complementary. They provide a better data situation, higher efficiency and greater transparency in all our administrative processes.

Our most important projects include market:data, Smart Process and Aareal Loan File 2.0:

  • market:data is a database in which numerous information relevant to property financing is summarised. It contains internal and external market data as well as macroeconomic indicators. Using a web-based geo-tool reminiscent of Google Maps, the data is visualised so that the user can quickly gain an overview of the environment and compare it with the figures for the selected location. The data is stored centrally and may be evaluated according to various criteria.
  • The purpose of the Smart Process project is to digitalise our business processes. To that end we analyse all processes in which a relatively large number of paper-based documents are still used and media discontinuity frequently occurs. The first process digitalised under the Smart Pro­cess project is the credit initiation process, for which we are currently developing a digital solution called DealFlow.
  • In 2017, we introduced the Aareal Loan File, an electronic credit file which we are now developing further with the Aareal Loan File 2.0 project. The aim is not only to create a digital archive, but also to provide a comprehensive docu­ment management system in order to be able to access drafts, e-mails and supplementary data relating to the credit file with little effort. Aareal Loan File 2.0 is intended to create an end-to-end digital process chain and thus make systematic evaluations and queries possible. This makes daily business in credit processing considerably more con­venient and secure.

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