What to Expect From Deutsche Bank’s Reorganization

As an overhaul gets under way at the financial services giant, capital markets insiders size up what’s ahead for the company’s commercial real estate lending.
Shlomi Ronen, Managing Principal & Founder of Dekel Capital. Image courtesy of Dekel Capital

As news spread this week that Deutsche Bank was restructuring in the wake of years of losses, including cutting 18,000 jobs in Europe, Asia and the U.S. and eliminating its equity sales and trading division, some wondered what that would mean for the German bank’s commercial lending business. But commercial real estate lending executives on both U.S. coasts told Commercial Property Executive they don’t expect any impact despite the bank’s multi-year transformation plan and point to CRE as one of the bank’s strengths.

READ ALSO: Eastdil Secured to Go Private in Management Buyout

Christian Sewing, Deutsche Bank CEO, said in a statement that the bank was refocusing its business around clients and building on its strengths. Sewing also said the U.S. would “remain a core market.” He added that DB’s Investment Bank will focus on its traditional strengths in financing, advisory, fixed income and currencies.

Of particular interest in New York City was Sewing’s comment that Deutsche Bank was still planning to move its North American headquarters from 60 Wall St. in lower Manhattan to the former Time Warner Center on Columbus Circle on the Upper West Side.

Layoffs target equities, stock market operations

Shlomi Ronen, managing principal & founder of Dekel Capital, a Los Angeles-based merchant bank with expertise in capital markets and private equity in commercial real estate, told CPE his firm is currently working on a deal with Deutsche Bank.

“We’ve spoken with DB and the restructuring should not impact their RE (real estate) operations as the RE group is part of the fixed-income operations of the bank and the restructuring/layoffs are happening on the equities/stock market operations of the bank,” Ronen said.

Other CRE lending executives also said they did not expect the Deutsche Bank restructuring to have an effect on the bank’s commercial real estate business.

Felix Gutnikov, Principal & Head of Originations, Thorofare Capital. Image courtesy of Thorofare Capital

“To my knowledge, we do not believe that any of the recent headlines about DB’s restructuring of its investment banking and trading groups will impact their commercial real estate finance operations,” said Felix Gutnikov, principal & head of originations at Thorofare Capital, a Los Angeles-based commercial real estate loan origination and servicing company. “We think that DB’s CRE finance groups are, collectively, the second-most profitable businesses within the organization, second only to its leveraged finance business.”

Gutnikov told CPE he believed that “most of the headwinds will impact their Asia investment banking operations and branches and the layoffs are likely to be narrowed across DB’s stocks/equities groups that focus on trading.”

CRE remains the top business line

Joseph Iacono, managing partner of Crescit Capital Strategies in New York City, also noted that commercial real estate is one of Deutsche Bank’s top business lines. “I would be surprised if they were retrenching. I think they would place more emphasis on it,” Iacono said.

Joseph Iacono, Managing Partner, Crescit Capital Strategies. Image courtesy of Crescit Capital Strategies

Iacono noted Deutsche Bank is very active in very large construction and other loans in cities like New York, where last year the bank issued an $800 million loan to Silverstein Properties for its $1 billion purchase of the ABC network’s headquarters on the Upper West Side and a $750 million loan to Harry Macklowe for the redevelopment of One Wall Street.

He also cited Deutsche Bank’s CMBS activity, both globally and in the U.S. “For 2017 and 2018 they were number two in CMBS book running, which feeds lending and bond distribution on the fixed-income side,” Iacono said.