Record €99bn of debt sales in play, says C&W

Sellers with assets up for grabs include bad banks UK Asset Resolution and NAMA and commercial lenders Bankia and GE Capital.

A record €99 billion of non-core real estate exposure in Europe’s banks is currently or soon to be up for sale, according to Cushman & Wakefield’s (C&W) latest loan sales market report. C&W Corporate Finance said that the highest-ever level of live sales was a “staggering” volume and is 4.5 times the volume recorded at the end of Q1 2015, reported PDI sister title Real Estate Capital.

The assets up for grabs include UK Asset Resolution’s (UKAR) €17.6 billion Granite Portfolio of residential mortgages, GE Capital’s €10.4 billion of UK home loans, and Irish bad bank NAMA’s sale of €7.2 billion of mixed-use assets, named Project Arrow.

Spanish lender Bankia is also looking to sell a €4.2 billion real estate owned (REO) portfolio, the largest sale of its type ever, called Project Big Bang.

The UK accounts for 45 percent of live or planned sales, Ireland 27 percent and Spain 15 percent.

C&W’s report said despite a relatively quiet H1 2015, when total sales were €23.5 billion, 2015 is on track to see €60 billion to €70 billion traded, which the firm predicted earlier this year. Last year, total volume traded was €80 billion.

About €9.5 billion of sales were made in Q2 2015 compared to €14 billion in Q1.

“Despite a relatively subdued start to 2015, it would be a mistake to assume that activity in the European CRE loan sales market is subsiding,” said Frank Nickel, C&W partner and chairman of EMEA corporate finance. “Closed sales in the last three months are below those recorded in Q1 2015 or any quarter in 2014, but behind the scenes there has been a flurry of preparation work as key vendors line-up ‘mega-deals’ for the second half of the year.”

More than €233 billion of non-core real estate assets remain in the ownership of European asset management agencies (AMAs), which made up 43 percent of total non-core exposure. NAMA, Spain’s Sareb and UKAR together accounted for more than €212 million.

Total sales by AMAs for 2015 are predicted to be between €50 billion and €55 billion with live commercial property loans and REO deals valued at around €30 billion. 

Ireland’s Permanent TSB was the most active seller in H1 2015, disposing of about €4.5 billion of assets. It is currently finalising the sale of its €481 million Project Connacht to US firm CarVal Investors.

New York-based Cerberus Capital Management has been the biggest buyer so far picking up almost €5.7 billion of assets in the first half of the year, almost a quarter of all sales, including Permanent TSB’s €3.5 billion Capital Home Loans UK mortgage business.

Down the line, China may be the next stop for investors once activity in Europe slows. Having established four ‘bad banks’ in 1999 to manage RMB1.4 trillion ($225 billion; €207 billion) of distressed assets from four large state institutions, the banks will still have about RMB828 billion ($133 billion; €122 billion) of real estate exposure to dispose of by the end of the year.