The company is backed by GI Partners, a trans-Atlantic private equity group that has already successfully funded two other specialist work-out companies. "What makes us a little bit different is, firstly, that we're German – we have no pretensions to being pan-European - and that it's really about looking at the real estate industry in a vertical sense," says Keith Fischer, one of the Elystan principals. "We're capable of taking advantage of opportunities all the way from a acquiring a piece of a small mortgage bank or an entire mortgage bank, to running down performing or non-performing loans and mortgage back securities, or hard real estate assets." Apart from the funding advantages that a German banking licence might bring, he also sees a need in Germany for a virgin' mortgage bank which can do new business, refinance portfolios, and re-finance developers.

Other Elystan founders are Robert Grassinger, former Hypo Real Estate board member, and former investment banker Ulrich Kastner. The group points to work done in NPLs in Germany over the last eight years by the Houston-based Lone Star Funds. "We at Elystan look at this crisis right now as still primarily a banking crisis," Fischer says. "Obviously the real estate industry is in terrible shape, values have moved out by 15% to 20% in some instances... But the greater dislocation is in the banking industry itself. We see the crisis moving from distressed banks to the sell-off of distressed portfolios in six to 12 months' time. We think it will really pick up in the second half, or potentially early in 2011 simply because the banks haven't sorted themselves out yet. I think in the second half of this year we'll see the first of what I would call 'transfer of assets' from banks to the private sector."

Elystan means to deploy a minimum $137 million of equity this year and next, and maybe double that in total. "There are really two issues here," Fischer says. "German banks do not have the workout departments - the staff on hand to sort out the problems on their own... And banks tend to take a nuanced view of their sponsors, the asset owners. Some banks will go to great lengths to work with existing sponsors to avoid having to take back the assets. Then there are others where banks lose patience. There, the bank will simply say call this loan because it expects the assets to be less valuable a year from now if they don't change the sponsor. Those situations are particularly interesting for us; we view ourselves as a potential bank partner to step in and replace the borrower."