How Aareal's Jumbo Pfandbrief took off

A long history of Mortgage Pfandbrief expertise.

When the DePfa Group was broken up in the early 2000s, Aareal Bank was not initially permitted to issue its own Pfandbriefe. The Mortgage Bank Act (HBG) was still in force at that time, which stipulated that only specialist Pfandbrief issuers were allowed to launch Pfandbriefe. The Bank therefore founded Aareal Hyp AG in 2003, enabling it to refinance part of the portfolio via Pfandbriefe within the Group once again. This was a success: as demand was high, Aareal Hyp was able to issue Pfandbriefe totalling EUR 500 million with an average term of over eight years in the first quarter of 2003. In total, it issued Pfandbriefe worth EUR 2.1 billion in its first financial year.

The overall framework changed just two years later, when the German Pfandbrief Act (PfandBG) created a new legal foundation for issuing Pfandbriefe. The 'specialist bank principle' no longer applied – but high quality standards continued to be prescribed. This paved the way for Pfandbriefe to be issued directly under the name 'Aareal Bank', and Aareal Hyp was thus merged into Aareal Bank in 2006.

The Jumbo Pfandbrief – one name, one promise.

The name 'Aareal Bank' would soon become even more attractive to international investors, too. The Bank issued its first Jumbo Pfandbrief in 2006, initially still under the name of Aareal Hyp. It was a real heavyweight. Thanks to their much higher issue volume of at least EUR 1 billion, Jumbo Pfandbriefe can easily be traded at any time. Aareal Bank's debut Jumbo impressed investors, particularly with its broadly based cover assets comprising first-rate mortgage loans. These included property loans for a wide variety of types of use, distributed regionally across 14 countries, including the USA and Canada. Several teams went on a roadshow through ten European countries to ensure a smooth flow of information to investment companies.

The results were more than impressive: the order book for the "Jumbo" was three times oversubscribed within a very short time, and it received the best possible rating of "AAA" from Fitch Ratings. The internationalisation of the equity and liabilities side significantly strengthened Aareal Bank's capital market position. In short, the Jumbo took off. The Bank actively continued its tried and tested Jumbo issuing strategy in 2007. Once again, it was very successful. Just one hour after opening, the order book stood at over EUR 1 billion, and by the time the books closed, the issue was several times oversubscribed.

Responsibility, stability and progress.

The Jumbo that was launched in 2006 is an important milestone in the history of Aareal Bank. It has a place in the successful history of the Pfandbrief, which has always offered stability and security in fast-moving and uncertain times, leading it to become a hit German export. 250 years after it was first launched, it continues to play an important role as a stable, secure financing instrument for our Bank.