C&W Corporate Finance team in London has updated its influential European Real Estate Loan Sales Market report to the end of the third quarter.
In total, European banks hold c. €531bn of gross non-core real estate assets. This equates to a €53bn reduction in European Bank’s exposure compared to the figures reported in C&W’s European Real Estate Loan Sales Market Report Q2 2014. After allowing for loan loss provisions, the total net exposure amounts to €333bn.
The figures in the influential report include exposures to European CRE loans, residential mortgages and REOs which C&W Corporate Finance believes are subject to disposal strategies by lenders.
The third quarter has been the busiest quarter of 2015 so far with €21.0bn of CRE loan and REO sales recorded, taking total loan transactions over the year-to-date to €44.6bn. This year to date tally reflects a 23% decrease on the total volume of closed transactions recorded over the same period in 2014.
Live and planned sales amount to €92.7bn, just below the high watermark recorded last quarter, including €54.0bn of live deal. This reflects 2.5 times the live volume recorded at the end of last year and approximately €9.4bn more than the amount of closed sales throughout the entirety of 2015.
Cushman re-iterated that this pipeline underscores its predication earlier this year, that 2015 will deliver €60bn to €70bn of NPL transactions.
Full table of live and planned NPLs published at the end of this article.
Cerberus top of the NPL league table so far in 2015
The investor league table remains closer than ever with Cerberus at the top of the list, accounting for 17% of all transactions in 2015, following the acquisition of the €3.5bn Capital Home Loans’ loan book and RBS’ £1.4bn nominally-valued Project Rathlin loan portfolio.
Cerberus also won the Project Lucas Netherlands NPL from Van Lanschot in August, the residential tranche of Project Finn and is rumoured to be close to acquiring a slimmed down Project Aurora NPL from Helaba.
Second and third positions are once more occupied by the Deutsche Bank and Apollo partnership, on the back of their acquisition of the bulk of Project Finn, and Lone Star who recently won one of the last major UK NPLs, Project Churchill.
Banks and AMAs shed €53bn in last 12 months, SAREB, UKAR and NAMA collectively hold €215bn
Over the year to the end of September, European banks and AMAs exposure to non-core real estate assets has fallen by €53bn.
Italy has bucked the trend, experiencing an increase in its gross exposure of almost €30bn over the past 12 months, bringing its total to €67bn.
Irish and UK banks alongside AMAs, remain the most active vendors with NAMA, Permanent TSB and RBS, collectively responsible for over €16.6bn of CRE loan and REO sales in 2015.
Momentum continues to build in peripheral European countries with the key markets of the UK, Ireland, Spain and Germany now responsible for just 80% of closed deals compared to 91% last year.
According to C&W Corporate Finance’s research, European bad banks hold more than 45% – or circa €236bn – of the total gross exposure to non-core real estate.
More than 90% of this total is held by just three bad banks: SAREB (€87.2bn), UKAR (€71.8bn) and NAMA (€55.8bn). The remaining €21.4bn is distributed amongst a further nine AMAs.
In terms of net exposure, the total held by AMA amounts to €141bn, providing an indication as to the write-downs accepted by the agencies upon acquisition of the loans. Banks with an explicit deleveraging plan or those that have established internal non-core units account for 47% of the total gross exposure.
Federico Montero, head of loan sales, EMEA Corporate Finance said: “Although exposure to non-core real estate by European banks has fallen by c. €53bn compared to last year’s analysis, a significant amount of impaired assets are yet to be worked out providing huge opportunities for investors especially within Southern and Eastern Europe.”
Spain and Italy see increasing non-core RE exposure
By face value, the countries with the largest exposure remain Spain and the UK. Spain’s exposure to non-core real estate has increased, rising from €192bn to €203bn over the past year due to the reclassification of loans following last year’s asset quality review (AQR).
Similarly, Italy has seen its figures rise by almost €30bn, stemming from the delay by the country’s banks in establishing deleveraging plans. “As this begins to change, sales activity will undoubtedly increase as shown by the 10 sales already closed this year compared to just three throughout 2014,” Cushman’s report stated.
The Netherlands has also seen an increase in exposure to non-core real estate, rising by almost €2bn.
“Although at an early stage of development, the distressed asset market in Netherlands has attracted investor interest with closed sales over the year-to-date already almost four times those recorded throughout the entire of 2014,” the report stated.
This appetite bodes well for the expected sale of Propertize, the bad bank formed from the Netherlands government’s nationalisation of SNS REAAL’s property finance division in 2014, which owns €4.3bn in net real estate loan exposures.