The largest four loan portfolios – projects Swan (€5.5bn), Ruby (€4.0bn), Emerald (€2.1bn) and Porto (€1.0bn) – reflect €12.6bn, or 72% of the visible CRE-related live pipeline (this percentage, and all that follow, is calculated excluding portfolios which the size is unpublished).
In the mid-sized deal segment, between €250m and up to €1bn, there are seven deals together worth €3.4bn, comprised of predominantly CRE in Ireland (2 deals; €1.1bn); Italy (2 deals; €848m); Germany (1 deal; €700m); Portugal (1 deal; €501m); and Romania (1 deal; €287m).
There are a further 10 smaller deals – of up to €250m in size – worth €1.5bn – which are dominated by CRE assets in Spain (4 deals; €592m); Germany (2 deals €477m); and the Netherlands (3 deals; €350m).
In addition, KPMG cites four confidentially-sized CRE portfolios – projects Rembrandt, Isabella, Julieta and an unnamed Generali Dutch CRE and residential loan portfolio.
NAMA and Propertize are substantially the largest sellers: NAMA has three transactions – projects Ruby, Emerald and Lee (€350m)– together amounting to €6.5bn, or 37% of the current visible pipeline; Propertize’s has two deals, Project Swan and Project Triple (€130m) together amount to €5.6bn, or 32% of the current pipeline.
By country, there 12 of the current 25 ongoing CRE-related loan portfolio sales account for €15.3bn of CRE-related loan sales, or 88% of the visible pipeline, from four jurisdictions. This segment is comprised of:
- Ireland: three deals – projects Ruby, Emerald, Abbey (€700m), together worth €6.8bn, or 39%;
- Netherlands: four deals –projects Swan, Triple, Hieronymus and the Eurocommerce Loans portfolio, together worth €5.9bn, or 34%;
- Portugal: two deals – projects Porto and Andorra, together worth €1.5bn, or 9% of current stock; and
- Germany: three deals – GE Capital’s office loan portfolio, Lone Star’s secured NPL sale and FMS Wertmanagement’s Project Samba, together worth €1.2bn, or 7% of visible stock.
In addition to the €17.5bn in ongoing CRE and CRE-dominant loan portfolios, KPMG has identified a further €12.5bn in corporate, consumer, SME, residential, secured, unsecured and mixed portfolios. A significant minority of this pool of ongoing European loan sales will be backed by CRE assets.
By deal size, there are two deals which are €1bn and above, reflecting €5.2bn, or 42% of the visible stock. In the mid-size range, from €250m up to €1bn, there are 14 deals, together amounting to €6.5bn in loans, or 52%. In the small deal bucket, below €250m, there are six deals together amounting to €889m, or 7%.
In addition, there is one unknown deal size – Intesa Sanpaolo’s Project Towers loan portfolio and platform.
KPMG reported that there was more than over €104bn in closed transactions across 30 European countries in 2015, including €86bn from the UK, Ireland, Italy, and Spain.
KPMG writes: “Intense competition between buyers for portfolios in the UK and Ireland since 2013 has led investors to turn their eyes southward toward the recovering economies of Spain and Italy for acquisitions.
“Spain recorded over €15bn in closed transactions, with Italy just behind with over €13bn in 2015. Notably, both markets have now begun the process of selling real estate owned (REO) and real estate secured debt in larger volumes, which has drawn greater attention from buyers and financiers.
“Countries in Central and Eastern Europe (CEE) continue to mature as loan sale markets, with over 35 transactions brought to market across all asset classes. Notably, Hungary saw its first successful secured loan sale by MKB Bank to Lone Star, and Romania saw the largest successful sale in CEE this year, the €1.2bn Project Tokyo sold by Banca Comerciala Romana (Erste Group) to Deutsche Bank.”
In the UK, over the short to medium term, UKAR plans to dispose of £800m equity release lifetime mortgages, £5.5bn of self-certified mortgages and £22bn of buy-to-let mortgages.
In Ireland, NAMA is on track to complete its wind down two years ahead of its 2020 targeted timeline. Spain continues to lag behind the UK and Ireland in its deleveraging journey.
KPMG writes: “2015 also saw an increase in the number of portfolios where sales were delayed or withdrawn from market due to high bid-ask spreads.”
However, an improving macroeconomic environment leading to increased real estate values is driving the narrowing of the bid-ask spread, notably for real estate-backed loans.
The Italian government has, to some extent, streamlined bankruptcy proceedings and the foreclosure process, establishing a more creditor-friendly environment which is expected to stimulate NPL sales, suggests KPMG.
In addition, KPMG reports that, in early 2016, the Italian government is due to release a new guarantee scheme on securitised bad loans – the Garanzia Cartolarizzazione Sofferenze (GACS) – with the objective to facilitate the de-risking process of Italian banks.
KPMG writes: “The GACS, which will be released only on rated senior tranches at market price (thus not classified as state aid as defined by the European Commission), is expected to provide Italian banks with an opportunity to dispose of bad loans, reducing the cost of senior notes, and thus further boosting the Italian NPL sale market.
Further afield, many investors are now eying Greece and Cyprus for future deal flow as the domestic banks seek to “revive their banking sectors, address problem loans, and as their banks continue to divest their overseas subsidiaries across CEE,” writes KPMG.
The situation in Greece, of course, remains precarious. Greece’s most recent EU bailout – of €86bn in August 2015 – expires in 2018. Many investors are likely to wait for further certainty of what happens thereafter before deploying capital in the struggling country’s commercial real estate market, whether in equity or debt.
CRE Ongoing Loan Portfolios Sales
|Vendor||Project||Type||Country||Face value (€m)|
|Propertize||Project Swan||CRE + Platform||Netherlands||5,500|
|NAMA||Project Ruby||CRE + Resi||Ireland||4,000|
|NAMA||Project Emerald||CRE + Resi||Ireland||2,100|
|Millennium BCP||Project Porto||CRE||Portugal||1,000|
|GE Capital||Germany offices & loans||CRE||Germany||700|
|Caixa Geral de Depositos||Project Andorra||CRE||Portugal||501|
|UniCredit/BMPS/Unipol||Una Hotels debt||CRE||Italy||500|
|Confidential||Project Botticelli||CRE + Resi||Italy||348|
|Intesa Sanpaolo||Project Rosemary||CRE + Resi||Romania||287|
|Lone Star||German NPL sale – secured pool||CRE||Germany||247|
|FMS Wertmanagement||Project Samba||CRE + Resi||Germany||230|
|Banco Mare Nostrum||Project Neptune||CRE||Spain||200|
|Banco Mare Nostrum||Project Stream||CRE||Spain||160|
|FMS Wertmanagement||Project Hieronymus||CRE||Netherlands||120|
|Confidential||Project Spring||CRE + Corporate||France||88|
|FGH Bank||Project Rembrandt||CRE||Netherlands||Unknown|
|ING Group||Project Isabella||CRE||Spain||Unknown|
|Generali||Dutch property portfolio||CRE + Resi||Netherlands||Unknown|
Non-CRE European Ongoing Loan Sales
|Vendor||Project||Type||Country||Face value (€m)|
|General Electric / Credit Agricole / RBS / Prelios||Project Compilation||Corporate + Consumer||Italy||4,200|
|Veneto Banca||Italian NPL portfolio||Unknown||Italy||1,000|
|Grupo Cooperativo Cajamar||Project Baracoa||Corporate||Spain||800|
|Nova Ljubljanska Banka||Project Pine||Corporate||Slovenia||800|
|Santander||Project Mamut||Resi + SME||Spain||800|
|Heta Asset Resolution||Project Friuli||Corporate/SME + Platform||Italy||700|
|Iccrea Bancalmpresa||Mixed Secured / Unsecured||Secured + Unsecured||Italy||500|
|Eurobank||Bancpost and Retail||Corporate + Consumer||Romania||500|
|Nova KBM||Slovenian NPL portfolio||SME + Retail||Slovenia||420|
|Aegon||Project Otto||Resi + platform||Hungary||360|
|Santander||Unknown||Secured + Unsecured||Portugal||280|
|Lloyds Banking Group||Project Twickenham||Other||Spain||276|
|CIB||Project Helena||Corporate + SME||Hungary||237|
|Privredna Banka Zagreb||RE and Corporate NPL||Resi + Corporate||Croatia||200|
|Cassa Centropadana||NPL portfolio||Secured + Unsecured||Italy||170|
|Snoras||Project Marble||Resi + Corporate||Russia||140|
|Credit Agricole||Project Olympus||Consumer + Platform||Greece||86|
|Intesa Sanpaolo||Project Towers||Platform||Italy||Unknown|