Aareal Bank, the German financial services company being taken over by US private equity firm Advent International and Centerbridge Partners, has posted an encouraging set of Q2 financial results against a tough economic backdrop.

Jochen Klösges, CEO, said: ‘Despite high volatility and macro-economic turbulences, we have posted good results for the second quarter. Our earnings power and financial strength are the best possible basis for the uncertain times ahead. However, we keep monitoring the situation closely whilst adhering to our high-risk sensitivity.’

Consolidated operating profits increased around 50% to €61 mln in Q2 2022 compared to €41 mln for Q2 the previous year.

Aareal Bank has a number of different business lines - real estate financing being one of them. For example, in July, it made a €200 mln “green loan” to France’s RedTree Capital to buy and refurbish a 26,000 m2 office near Paris.

In total, Aareal wrote out €1.9 bn of new real estate finance loans in Q2, slightly down on €2.2 bn in Q2 2021 perhaps demonstrating a slowdown taking place.

But given a rapid Q1, the bank has already surpassed an aggregate lending book target of €31 bn just six months into the year.

In total it has managed €5.2 bn of real estate finance for the first half of 2022 compared to €3.3 bn for H1 2021. Highlights included a €140 mln financing agreement with new client Vertiq Capital for two high-end hotels in Paris and London.

Outlook
The bank said it still expected to make a consolidated annual profit at the lower end of €210 mln - €250 mln.

‘The potential impact of the war in Ukraine – both in terms of the bank’s limited exposure to Russia and the economic consequences of sanctions imposed and the escalated geopolitical tensions – remains, however, very difficult to estimate at this point in time,’ it said.

Atlantic BidCo, the vehicle owned by Advent and Centrebridge, expects to complete the takeover of Aareal in Q4 this year or Q1 2023.

Corestate challenges
Aareal’s results come two days after Corestate Capital posted its H1 update showing weaker business development. Group revenue of €23 mln was significantly down on the previous year due to a decline in its real estate debt business.

The company, which makes both equity and debt investments in real estate, has made a €125.4 mln loss in H1 2022 heavily impacted by one-off operating effects, impairments and risk provisioning, compared to a €35 mln profit in H1 2021. The company said the board had once again intensified cost-cutting and efficiency measures that had already started.

‘The noticeable macro-economic uncertainty in conjunction with the interest rate and inflation dynamics led to a slump in transaction volumes in the real estate sector in recent months,’ said the company. ‘As a result, in the real estate debt segment the group recorded a sharp decline in income from structuring and financing advisory services.’

Revenue in the real estate equity segment, on the other hand, is proving relatively stable at €24.1 mln compared to €26.7 mln the previous year.