WestLB Unit Attracts Low-Ball Offers

FRANKFURT (Reuters) – WestLB has received a raft of non-binding offers for its real estate finance unit but the offers are below book value, sources said, stoking fears that a fire sale could spoil real estate asset valuations.

German property lender Aareal Bank (ARLG.DE) is one of a handful of potential bidders that have submitted an offer for Westdeutsche Immobilienbank, sources familiar with the matter said Tuesday.

However, the offers are below book value, said a banker familiar with the auction, which is in its early stages. There is no current book value published for WestImmo but at the end of 2008, WestLB valued it at 850 million euros.

WestLB must sell WestImmo to meet European Commission demands for a radical restructuring in exchange for approving a bailout. WestLB has to find new owners by 2011.

Bankers fear a fire sale of real estate assets could depress asset valuations at a time when the fragile German banking sector is seeking to recover from a credit crisis which forced every major real estate lender to seek state aid.

Shares in Aareal, which was also forced to seek a bailout, were trading 1.7 percent higher at 1109 GMT, while the Stoxx banking index .SX7P was up 0.5 percent.

The price WestImmo will fetch could determine whether other banks will be forced to revalue their own real estate assets, bankers involved in the sector said.

As a condition for approving state aid, the Commission has ordered Frankfurt-based Commerzbank (CBKG.DE) to sell its Eurohypo unit by 2014.

 

Munich-based Hypo Real Estate [NUEGg.F], another real estate lender which is now nationalised following several bailouts, is also shedding assets, as part of a radical overhaul.

 

The Financial Times Deutschland in its Tuesday edition cited financial sources as saying a number of private equity bidders for WestImmo had also emerged and that WestLB was asking 500-700 million euros ($676-$947 million) for the unit.

 

WestLB and Aareal Bank declined comment. ($1=.7395 Euro) (Editing by Karen Foster) (Reporting by Patricia Uhlig in Frankfurt, Matthias Inverardi in Duesseldorf and Edward Taylor in Frankfurt; editing by Karen Foster)