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MUNICH-Despite embracing a strategy to pursue non-real estate investments going forward, Hypo Real Estate Holding AG is reporting a solid beginning to 2007 for its core business, with annual earnings seen increasing by $40 million thanks to higher revenues from commissions in the first half. Germany’s second largest commercial property lender expects to achieve pre-tax net income of $252 million when mid-year results are finalized next month.

Up from $197 million a year ago, the gains reflect commissions earned from $13.8 billion of business generated in the first half, more than 60% higher than the business level seen during the same period in 2006.

“In view of this positive development, the management board has raised its forecast for the whole year,” CEO Georg Funke says in a release announcing the preliminary tabulation. The 2007 total pre-tax profit should be closer to $978 million, relays Funke, versus initial projections of $937 million. After struggling for much of the year, shares of Hypo Real Estate Group immediately rose by 2.7% on the Frankfurt Stock Exchange to more than $62 per share following the company’s announcement.

Funke did not indicate whether the rally will alter management’s plan to pursue non-core real estate initiatives. The company previously said it wants to invest in roads and other infrastructure projects to increase greater yield than that coming from the competitive CRE lending sector. Earlier this year, company officials indicated a goal of more than doubling pre-tax profit from non-real estate ventures by the end of the decade. Less than 10% of Hypo’s profits came from investments in non-real estate activities last year, but almost $24 billion has been infused in that arena during the first half of 2007. A year ago, that figure was $15.8 billion.

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