Aareal Bank owners hire advisers to sell property lender’s tech arm, sources say

By Thomson Reuters Mar 14, 2024 | 5:37 AM

By Amy-Jo Crowley, Emma-Victoria Farr and Pablo Mayo Cerqueiro

LONDON/FRANKFURT (Reuters) – The owners of Aareal Bank have lined up advisers to sell its tech unit, three people familiar with the matter told Reuters, as the German property lender navigates a global crunch in commercial real estate.

The shareholders, led by Advent International and Centerbridge Partners, recently chose Arma Partners to gauge interest in the division, known as Aareon, the people said. They may tap another investment bank as well, the people said.

Other buyout groups including Blackstone, CVC Capital Partners, Hg Capital and KKR & Co have been eyeing the unit ahead of an auction planned for later this year, one of the sources said, speaking on condition of anonymity because the talks are private.

Aareon, which offers property management software, was valued at 960 million euros ($1.05 billion) when Advent acquired a minority stake in the company in 2020, before taking parent Aareal Bank private last year as part of an investor consortium.

The unit’s valuation has significantly increased since then, a second source said, without specifying a number.

Aareal expects the division to generate up to 170 million euros in core earnings this year, up from 100 million euros in 2023, according to its latest guidance.

Aareal Bank, Advent, Blackstone, Centerbridge, CVC, Hg and KKR declined to comment. CPP Investments, another shareholder in Aareal, declined to comment, while Goldman Sachs, also an existing investor, did not respond to a request for comment.

Arma Partners and its parent Mediobanca did not respond to a request for comment.

Wiesbaden-based Aareal Bank is battling a global slump in commercial property values and concerns about lenders’ exposure to the sector.

The bank said in February that a quarter of its 4 billion euros in loans for U.S. offices were likely to go unpaid, warning there could be more to come as the property rout takes hold.

The message came just days after agency Fitch downgraded its credit rating to BBB, two notches above junk.

Despite the challenges, the group has said it does not expect to need fresh capital and is targeting up to 350 million euros of operating profit this year.

($1 = 0.9128 euros)

(Reporting by Amy-Jo Crowley, Emma-Victoria Farr and Pablo Mayo Cerqueiro; Editing by Anousha Sakoui and Sharon Singleton)