DG HYP to pull out of UK property lending

Published 09th Dec 2010

German property lender DG HYP is to shut its international lending business, removing one of the more active banks from an already debt-starved UK property market.

Last month DG HYP’s parent company, DZ Bank, told it to undertake a review of its international business, and as a result, offices across the globe including London, Paris and New York are to be closed.

Teams will stay in place indefinitely, but a source said that the London team does not to expect to stay with the company for longer than six months. The bank’s international loan portfolio will be managed from Germany and wound down over time.

The decision has been taken to focus on the bank’s domestic market because of the effects of the incoming Basel III banking regulations. This means that banks have to hold more capital on their balance sheet and also makes lending to property less profitable.

As the unlisted subsidiary of a larger bank, DG HYP is unable to tap shareholders for more capital to shore up its capital position, and so is focusing its activities on its core German market.

Banking sources suggested that similar problems could affect other German lenders.

DG HYP was one of the banks highlighted by Savills in its report on the UK market as being among the most active lenders to property. Deals its has backed with debt this year include the refinancing of 5 Canada Square in Canary Wharf by Evans Randall, the purchase of the N1 Shopping Centre in Islington by Henderson Global Investors and the purchase of Drapers gardens by Evans Randall.

Source: ' Property Week '

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