HSH Nordbank Reassigns US Loan Chief

Commercial Mortgage Alert
March 7, 2008

James Fitzgerald, head of North American lending for HSH Nordbank since June 2004, was reassigned as part of a corporate shakeup in the German lender’s home office.

Fitzgerald was replaced late last week by senior vice president Greg Allen, previously head of U.S. originations under Fitzgerald. Allen, in turn, was replaced by senior vice president Michael Carter, formerly senior relationship manager. A bank spokesman said Fitzgerald remains with HSH as a consultant, scouting out investment opportunities for the bank.

The turnover reflects turmoil at the lender’s Hamburg headquarters. Like many German banks, HSH suffered heavy losses from the U.S. subprime-mortgage meltdown. The stateowned bank has had to postpone an IPO, in the works since late 2005, until next year.

Claudio Lagemann, global head of real estate and Fitzgerald’s immediate superior in Hamburg, left the bank late in January. Allen reports to Peter Axmann, deputy head of global real estate, while the bank decides on its next move. Allen and Carter both joined HSH in 2006 from Aareal Financial Services. Allen oversaw Aareal’s commercial real estate operation. Carter was a managing director and loan originator.

Fitzgerald headed the New York office of Paris-based Credit Lyonnais before jumping to HSH in 2004. HSH then embarked on an ambitious expansion plan, opening a branch office in San Francisco and competing aggressively for a bigger share of the U.S. commercial lending market. Last April it launched HSH N Residual Value, a Bermuda-based provider of residual value insurance on commercial real estate, administered by CRCapital Advisors of Stamford, Conn.

Among HSH’s competitors, the ramped-up lending was seen as part of a drive to boost the bank’s profile in anticipation of the IPO. But the aggressive pricing strategies put the bank in a tight spot late last year when it found itself with an overhang of some $3 billion of commercial mortgages in need of syndication, leading to a suspension of lending. Company executives said lending would resume in a few weeks.

One of the bank’s biggest headaches was syndicating the $400 million senior portion of a $750 million floater that it originated last August on the Manhattan House condo-conversion project. The syndicate, which closed in December, includes Emigrant Savings, Bank of America, Bank of New York Mellon, HSBC, ING, M&T Bank and Wells Fargo. HSH retained the $350 million B-note.

HSH is embroiled in litigation with UBS over losses from a synthetic CDO (North Street, 2002-4) that UBS underwrote in March 2002. In a suit filed last month, HSH is seeking roughly $275 million in damages due to losses in the pool, which was tied to the U.S. mortgage market.