State-owned German bank WestLB is on the brink of selling its Pfandbrief-issuing subsidiary WestImmo to Apollo Global Management, according to those who track the market, with a sale widely expected to be concluded by the end of the month.

While Apollo declined to comment, WestLB is expected to sell WestImmo at a huge discount, insiders say, with the subsidiary unlikely to fetch more than EUR 250 mln. Such a price would represent a sharp drop on last year’s value, when real estate analysts estimated that WestImmo would sell for between EUR 400 mln and EUR 500 mln. Most banks are trading at a huge discount to book value, Dirk Richolt, head of debt advisory services at CBRE in Germany, told PropertyEU. WestImmo’s book value is believed to stand at around EUR 600 mln.

US private equity group Blackstone is believed to have submitted a bid for WestImmo last year, although it is no longer involved in the process, someone close to the company told PropertyEU. Blackstone declined to comment. Wiesbaden-based Aareal Bank is also believed to have bid for WestImmo. A spokesman for Aareal Bank told PropertyEU that the bank ‘is keeping a close eye on all market developments’. He declined to comment on whether Aareal Bank had submitted a bid for WestImmo.

Private equity groups have been widely tipped to acquire WestImmo, largely because they have the financial means to put together a deal of this kind, market insiders say. Last year, Lone Star was believed to be the frontrunner for WestImmo, following its acquisition last June of distressed German lender Düsseldorfer Hypothekenbank for an undisclosed sum. LoneStar’s European head, Bruno Scherrer, told PropertyEU at the time that his company would certainly take a look at other potential acquisitions of distressed lenders if ‘the price reflected changes in asset values and if the funding requirements were manageable’.

However, LoneStar is no longer in the running, according to someone close to the company. LoneStar declined to comment.