The Real Deal National

Have no fear? Debt brokers say Deutsche Bank quelled concerns about real estate lending

The German bank announced it will cut 18K jobs, primarily from its investment banking division
By David Jeans | July 09, 2019 08:59AM

Deutsche Bank CEO Christian Sewing (Credit: Getty Images and iStock)

Deutsche Bank CEO Christian Sewing (Credit: Getty Images and iStock)

It’s business as usual.

That’s the message Deutsche Bank has sent to New York’s real estate industry following the weekend announcement it would shutter its investment banking arm’s equity sales and trading divisions and slash thousands of jobs worldwide.

The German bank has been battered in recent years, enduring losses and a declining reputation in part based on its associations with President Trump. And while news of the company’s restructuring and job cuts sent shockwaves through the banking industry, the reaction from lending pros has so far been muted.

For James Millon, who worked as a director in Deutsche Bank’s commercial real estate loan originations until 2016, any winding down of the bank’s U.S. real estate operations would come as a shock.

“It’s a sacred cow,” said Millon, who now is an executive vice president of CBRE’s debt and structured finance division. “It’s probably the most profitable division in the bank.”

Adi Chugh, who runs the boutique debt brokerage Maverick Commercial Properties, said that “there’s been no change in messaging from them to us or our clients.” Maverick has done multiple deals with Deutsche’s commercial real estate lending division, including a $164 million loan at 172 Madison Avenue.

Deutsche frequently tops commercial lending rankings, and last year issued two of New York’s top 10 largest construction loans, which included an $800 million loan to Silverstein Properties for the ABC Network’s headquarters, and $750 million in debt to Harry Macklowe for One Wall Street project.

In 2017, Deutsche topped The Real Deal’s ranking of top construction lenders in New York after it provided $2.67 billion to nine projects.

But the bank’s announcement over the weekend has led those in real estate to hold their breath as it reevaluates its future. As part of the “turnaround plan,” the bank will cut 18,000 employees, primarily from the investment banking division in New York, London and Singapore.

Deutsche’s head of investment banking stepped down at the end of last week.

The bank has posted losses for four of the past five years, and is reportedly on track to post a record loss in 2019, according to the New York Times. This activity has followed increased scrutiny in its dealings with Trump and failed real estate projects.

“We lost our compass in the last two decades,” Christian Sewing, the bank’s chief executive, told reporters over the weekend. “It is my personal purpose to connect this bank with what it used to be.”

The announcement comes a year after Deutsche said it would move its U.S. headquarters in New York from 60 Wall Street uptown to One Columbus Circle, where it will take 1 million square feet. The building, which was previously occupied by TimeWarner, will be renamed the Deutsche Bank Center. Those plans are unaffected, according to a Bloomberg report.

The bank declined to comment for this article, but pointed to a press release, which made no mention of its plans for its commercial real estate lending business.

Its commitment to commercial real estate lending has remained consistent, according to other debt brokers in New York who sought direction from the bank in recent days.

“We are actively working on Deutsche Bank deals,” said Dustin Stolly, a vice chairman of capital markets debt and structured finance at Newmark Knight Frank. “They have been our largest capital provider by a wide margin in the last two years.”

But despite the reassurances, some brokers remain wary.

“You don’t need to be concerned about an earthquake, until there’s an earthquake,” said Chugh, the head of Maverick. “We are all susceptible to it.”