Polus Capital is among investors buying about 50 million euros of a roughly 300 million euro loan on the MesseTurm at a 30% to 40% discount, Bloomberg reported. The trade puts a market price on European office debt.
European office values have been hard to see because few buildings trade. Debt on one of Frankfurt's best-known towers just provided a price signal.
Polus Capital is among investors buying part of a loan secured on the MesseTurm, the Frankfurt office tower owned by Blackstone, Bloomberg reported on Wednesday, citing people with knowledge of the matter. Polus is close to buying about 50 million euros of the roughly 300 million euro loan, at a discount of 30% to 40% to face value, according to the report. That would be about a sixth of the loan.
We could not establish the seller, the loan's maturity or whether it is performing from the parts of the report available to us. Blackstone's equity position in the building is not known.
What a discount on a loan means
A loan trades at a discount when buyers doubt it will be repaid in full, when its interest rate is well below what new loans pay, or both. A 30% to 40% discount on debt secured by a building is steep. It implies that buyers see a real chance that the value of the building could fall below the amount owed, or that they require a much higher return to take the risk.
That does not mean the loan is in default, and it does not establish the building's value. It does show what at least some investors will pay for exposure to European office debt today.
Why it matters beyond one tower
Trades like this one help set prices for the wider market and give owners, lenders and fund managers a reference point when they value similar assets.
Buyer's view, market's view
For the buyers, a deep discount on debt secured by a landmark building offers a cushion and a potentially attractive return if the loan is eventually repaid.
For the market, the size of the discount is a reminder that office debt in Europe is still being repriced, and that marks on comparable loans held at or near face value may be tested.
What to watch
Whether the trade completes, any disclosure of the loan's terms or status, Blackstone's comments on its European office exposure, and other sales of European office loans at a discount.