RREEF eyeing unsecuritized bank assets

By Richard Barley

LONDON (Reuters) - Deutsche Bank's (DBKGn.DE: Quote, Profile, Research, Stock Buzz) alternative investments arm, RREEF, is looking at buying unsecuritized assets being sold by banks as they clean up balance sheets strained by the credit crunch.

"We're looking at distressed situations that tend to be coming off the banks' balance sheets more than anything else," Chuck Leitner, global head of RREEF, told the Reuters Global Real Estate Summit in London on Wednesday.

"The stuff that never quite made it to securitization is the stuff that's out there ...There's a fair amount of that and we look at all of those deals."

He said since the deals could be quite large, consortiums are forming to look at the assets.

Securitization markets froze as the credit crunch hit last summer, leaving bank balance sheets loaded with assets that lenders had originated but could no longer distribute.

Leitner's comments underline the efforts that banks are making to adapt to a market where securitization is still not functioning.

"It's still a fairly murky market in terms of the bid and ask, and where all that is going to clear," Leitner said. "(But) there definitely is some clearing going on."

However, the process will take some time. "I'm saying we're going to get well into 09 before we really have clarity there," he said.

RREEF is also looking to expand its investments in mezzanine debt, which ranks just above the equity in the capital structure.

"We have a mezzanine fund business that's been U.S. oriented historically," Leitner said. "We're looking at ways to globalize that activity."

"We think buying debt in this market is a good strategy ... we're seeing better yields on that (mezzanine debt) than we've seen in a long time."

A number of other investors are also considering this space, seeking to fill the gap left between purchasers' ability to contribute equity and banks' willingness to extend senior debt and to capitalize on the higher returns on offer.

(See www.reutersrealestate.com for the global service for real estate professionals from Reuters)