More than €80bn in European real estate loans was sold last year as the market for legacy loan portfolios disposals reached a high watermark in the present de-leveraging era, according to newly-published data by C&W Corporate Finance in London.
C&W Corporate Finance team in London, the leading source for aggregated commercial real estate (CRE), residential and real estate owned (REO) loan activity throughout Europe, estimates that 2014’s record-breaking €80.6bn in loan sales eclipses the previous year by two-and-a-half fold.
Last year’s loan sales tally was comprised of €56.4bn (70%) in CRE loans, €13.7bn (17%) in residential loans, €9.7bn (12%) in REO sales and €806m (1%) corporate loans.
Loan portfolio sales volumes in 2014 was driven by the convergence of IBRC’s relatively rapid liquidation, the wall of US equity capital chasing yield and the depending lending markets to facility transactions.
Federico Montero, Cushman & Wakefield’s head of loan sales, EMEA Corporate Finance, said: “All records were broken in 2014. The €80.6bn of loan sales recorded highlights the full extent of the troubled assets European lenders have had to deal with since the crash. It also illustrates the vast amount of US capital still hungry for distressed opportunities in Europe.
“As in previous years, the UK and Ireland took centre stage in 2014 with both markets recording staggering volumes of closed transactions. However, with activity levels from key vendors such as Lloyds and RBS expected to slow in 2015, lenders in southern and eastern Europe may have a gap to bring more product to the market.”
Cerberus tops loan portfolio investor table 2014
Cerberus tops the C&W Corporate Finance Investor League Table 2014, acquiring more than €17bn of European CRE loans and REOs.
For the second year running, Cerberus led the flock of investors chasing European CRE loan and REO opportunities, finishing 2014 closing six deals in the final three months to account for 41% of the volume transacted in Q4 and almost 22% of the annual total.
Not too far behind with a further 20% was Lone Star, who dominated the Irish headlines at the start of year with several IBRC purchases and led the league table for the majority of the year.
Third place went to Blackstone who acquired €8.7bn of CRE loans and REOs over 7 transactions in 2014, a total which would have comfortably topped the league table in 2013.
The CarVal and Goldman Sachs partnership also had a late surge to come fourth, acquiring c. €3bn of Irish CRE loans from IBRC and Lloyds. Finishing off the top five is JP Morgan, who purchased two large performing loan portfolios in a bid to strengthen its European lending presence.
Loan portfolio sales to fall to €60-70bn in 2015
C&W Corporate Finance predicts the loan sales market peaked in 2014, with this forecast for the coming year expected to moderate slightly to between €60-70bn.
IBRC was the single largest vendor in 2014, accounting for €18.7bn in nominal loan sales. This was followed by €10.1bn from NAMA; €9.6bn from the Royal Bank of Scotland; €6.4bn from Catalunya Bank; and €5.84bn from Lloyds Banking Group, completing the top five vendors.
The five largest vendor intuitions collectively sold €50.6bn in real estate loans in 2014, reflecting just under two-thirds (63%) of the annual loan transactional activity.
By geography, the UK and Ireland continued dominate as the most active jurisdiction accounting for €52.4bn (65%) of all last year’s real estate loan sales in Europe.
Spain, 2014’s third most active jurisdiction accounting for €16.3bn (20.2%), could emerge as one of the top two most active jurisdictions, alongside Ireland, given the near completion of both RBS and Lloyds legacy sales.
NAMA is already has a visible pipeline of more than €5bn in loan sales this year, the vast majority of which is secured by Irish real estate, including projects Jewel (Dundrum), Milner (Gerry Barrett), Tolka (John Flynn), as well as Pat Doherty’s Harcourt Developments loan portfolio and the Project Albion UK loan portfolio.
C&W Corporate Finance estimates that there is currently €21.7bn in live loan portfolio sales. These include:
- The protracted circa €11bn sale of Westdeutsche Immobilien from bad bank Erste Abwicklungsanstalt;
- Two Irish commercial and residential property loan pools from Permanent TSB, the €1bn Project Leinster and the €500m Project Munster. Morgan Stanley is selling both;
- FMS Wertmanagement’s maiden European CRE loan portfolio sale, the €740m Project Gaudi. Please see here for separate report;
- Bank of Cyprus’ potential sale of the €545m Project Ariadne to the highest bidder, Sankaty Advisors. Please see here for the story.
“Although EAA aimed to have completed the sale of German mortgage bank Westimmo by the end of 2014, the bank remains in the market due to pricing not reaching expectations,” wrote C&W Corporate Finance in today’s published report, entitled European Real Estate Loan Sales Market.
“As such, EAA still tops the live sales list by quite some way. Despite the fact that Spanish banks fared relatively well in the ECB’s stress test, more activity can be expected from the national banks with many agreeing to take immediate measures to accelerate the clean-up of their balance sheets.”
In addition, C&W Corporate Finance has identified a pipeline of a further €24.8bn in planned loan portfolio disposals, with almost one-third of which (31%) expected to emanate from Italy and a further 20% from Ireland.
In the case of both jurisdictions, the live and planned disposals are in part a response to the Asset Quality Review test by the ECB published last October, with banks accelerating their non-core disposals to reduce their risk-weighted assets and improve their Tier One capital ratios.