The Vision

Wells Fargo & Company, the largest commercial real estate lender in the United States, began to eye the property market in the United Kingdom. The US$1.4 trillion bank had built up a large and sophisticated commercial real estate group that had assembled a much-admired U.S. portfolio. While the bank had a European footprint, it had no large-scale commercial real estate presence in Europe and none at all in Britain.

In early 2013, Wells Fargo began to pursue the possible acquisition of the London operations of Hypothekenbank Frankfurt, a German real estate bank long known as Eurohypo. By August, Dechert had helped close this US$6.5 billion transaction — the largest commercial real estate deal in Europe — providing Wells Fargo with an outstanding portfolio of UK commercial real estate assets and a turnkey platform of facilities, people and technology.

The Approach

For this groundbreaking transaction, Wells Fargo set its sights on the London operations of Hypothekenbank Frankfurt, a German real estate bank known as Eurohypo. Eurohypo's UK portfolio had long been a market leader in Europe for large and syndicated commercial mortgage loans. But Eurohypo's parent, Germany's Commerzbank, which had been forced to secure a bailout amidst 2009's global financial turmoil, was obligated by European Commission rules to slash its balance sheet. Commerzbank's woes represented a major opening for Wells.

Drawing on a long-time relationship with Dechert, Wells Fargo called upon the firm's London-based finance partner Jeremy Trinder and New York-based Richard Jones to advise on the massive project to acquire the majority of Eurohypo's London operations, including its US$6.5 billion loan book, its premises and most of its staff. The acquisition would include loans, swaps, commercial mortgage-backed securities (CMBS) servicing and agency roles.

As with most major deals, this one had a large-scale hurdle: two-thirds of Eurohypo's portfolio was performing well, but the remaining third — nearly US$2.1 billion — was not. Yet, it had to be a part of the deal. Wells' strategy would be to buy the good loans while, simultaneously, a private equity firm would acquire the non-performing and sub-performing loans. Wells identified Lone Star Capital as its counterparty for the joint bid and agreed to finance Lone Star's purchase.

Negotiating the sale-and-purchase agreement required specialist knowledge, so Trinder managed a 20-strong deal team and engaged additional counsel on everything from regulatory matters to tax and employment law. The team navigated the deal's challenging logistics: the seller was in Germany, the buyers were in the U.S. and Ireland, staff and properties were in the UK, and Eurohypo's assets were registered in nine different jurisdictions.

The Result

All parties agreed to a deal on July 15, 2013, with the closing date ambitiously set for August 2. By that date, Dechert would need to have transferred a minimum of 75% of Eurohypo's loan book. The firm also would have to obtain regulatory consents to have two institutions — the old Eurohypo unit and a new Wells Fargo entity — legally exist in parallel between the date of agreement and date of close. Dechert successfully cleared both the transfer and regulatory hurdles for Wells Fargo.

In August 2013, the US$6.5 billion transaction — the largest commercial real estate deal in Europe in years — was closed, providing Wells Fargo with an outstanding portfolio of UK commercial real estate assets and a turnkey platform of facilities, people and technology. And the Monday following closing, in an equally impressively transition, Max Sinclair, the new head of Wells Fargo's UK commercial real estate group, opened its London office for business.

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