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MUNICH-From all accounts, it appears as though Hypo Real Estate Holdings is well on its way to becoming a fully nationalized institution by the German government. Berlin has said it plans to buy the lender’s outstanding shares, after having said in March it would take an 8.7% stake in it. Meanwhile Soffin, the German government’s financial market stabilization fund, has told the media it plans to make an offer for 91.3% of Hypo’s shares in what would be a $390-million transaction.

While the financial details are still being worked through, borrowers and other lenders here in the US are looking beyond the current events to a post-nationalized Hypo. At one time, the bank was a major commercial real estate finance provider. Now largely out of the market, it absence has been conspicuous.

History provides little guide as to how Hypo will act as a nationalized institution as this will reportedly be the first post-war nationalization of a German bank. The semi-nationalized US banks–banks that received capital injections under TARP–provide scant anecdotal evidence that such a move will spur lending in the near term.

Indeed, some observers say the opposite usually occurs. “Normally, when a foreign government nationalizes a bank–as the Irish government has done in some recent instances–the effect is to take that lender out of the game for quite some time, at least months,” Laurie Grasso, a Herrick, Feinstein commercial real estate attorney who represents developers and lenders on finance issues, tells GlobeSt.com. “That’s just the way it is when the government gets involved. In the case of Hypo Real Estate AG, they’ve been idle for the last year anyway, so their absence will be a continuation of that, rather than something new.

The larger issue with Hypo is what the new, government-owned iteration will look to do about lending on commercial real estate in New York and elsewhere in the United States once the government layer is absorbed into the equation, Grasso continues. “A lot may depend on how the American economy and the various real estate markets that were relevant to Hypo are doing at that point. Only time will tell. So while it’s never favorable to lose a lender, this loss, which may be temporary anyway, won’t have much of an immediate effect because Hypo had been dormant anyway.”

Even with government funding as its base, Hypo would still act as a private sector lender, David S. Akeman, director of capital markets for Stan Johnson Co., pointed out. “The buy-out and nationalization of Hypo Real Estate AG may provide future benefits to the US commercial real estate market as it allows Hypo to remain a viable lending institution in the future,” he tells GlobeSt.com. “But the immediate effects for the next six to 12 months will probably be negligible as the fundamentals of real estate will continue to drive the lending market.

“These fundamentals still include good location, credit tenants, and long lease terms,” Akeman continues. “The mantra for the lenders is currently, and will continue to be, lower LTVs, higher interest rates and tighter underwriting.”

At bottom, the consensus appears to be, any resumption no matter how far off is better than the current course Hypo has been on.

Hypo has been a very big player in the US market for many years, Clifford N. Mendelson, senior managing director of Transwestern’s Structured Finance Group, notes. “The nationalization of the bank is probably a good thing as it likely creates liquidity and thus may help get them lending again,” he tells GlobeSt.com. “Their exit from the market caused a huge hole in construction lending as they were one of the most active European banks. They were the ‘go to’ construction lender of choice for many of our biggest developers here in the US.” Hypo did not return a call to GlobeSt.com in time for publication.

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