Home > Commercial Real Estate News > C&W- European real estate loan sales to gather pace in 2013 #cre #ccim #sior

C&W- European real estate loan sales to gather pace in 2013 #cre #ccim #sior


European real estate loan sales to gather pace in 2013

30 Jan, 2013, London

European real estate loan sales to gather pace in 2013.

Against a background of continued economic
uncertainty and impending regulatory changes, the pace of activity in the
European real estate loan sale market will accelerate significantly over the
next two years according to a new report from property consultant Cushman &
Wakefield. Over the past 12 months, a total of 33 completed loan sale
transactions were recorded, totaling €21.7 billion (up 146% on 2011),
demonstrating that European commercial real estate (CRE) loan portfolios can be
successfully traded. The market has made a strong start to 2013 and in view of
the build up of activity amongst the banks and their legacy entities and their
aggressive deleveraging targets, Cushman & Wakefield is forecasting over €25
billion of CRE loan portfolio and real estate-owned (REO) sales for the
forthcoming year.
Of the €21.7 billion of loan sales in 2012, approximately €10.6bn (50%) of
closed transactions were secured against commercial real estate, with €4.13bn
and €4.10bn secured against mixed and residential loans respectively. The
remaining transactions were a combination of REOs (€2.6bn) and infrastructure
loan sales (€213m), representing 12% and 1% of the total value respectively.
During 2012 the average transaction size of loan sales also showed a slight
increase, rising from €549m to €658m since 2011, suggesting a trend towards
larger portfolio sales. However, there was wide divergence around these
averages, with the transactions in each year ranging from €50m to €1.8bn in
2011, to €40m to €2.5bn in 2012.
Michael Lindsay, head of Corporate Finance at Cushman & Wakefield, said:
“2013 is going to be a very active year in the CRE and REO loan sales sector
with the volume of transactions increasing considerably. Whilst large loan sales
of €500m+ are still expected to hit the market, there is a wall of capital
available, much of it from end users investors, for smaller transactions in the
€200m – €500m range. Banks and legacy entities should consider tapping into this
liquidity through appropriate scaling and composition for their planned sales.
Selling into a deeper market should help banks maximize recoveries.”
Iberian Peninsula and Benelux to see high levels loan sale activity in
Over 90% of the transactions in 2012 (by volume) occurred in just
four countries – UK, Ireland, Germany and Spain. The UK market alone accounted
for 28% of the closed transactions, followed by Spain (26%), Germany (21%) and
Ireland (18%). Whilst 11 transactions were recorded in the UK market, 6
transactions were recorded in Ireland, Germany and Spain respectively. This
demonstrates that the UK currently has the most liquid loan sale market in
Europe, although it is anticipated that the Iberian Peninsula and Benelux may
become the most active regions over the coming 12 months, especially with the
establishment of Spanish asset management agency, SAREB.
Cushman & Wakefield analysis shows that during 2012, nine of the top 10
sellers were banks based in the UK, Ireland, Spain or Germany. Topping the list
is Lloyds Banking Group, offloading over €6bn in CRE loans and Santander with
over €3bn. However, it is anticipated that activity will spread throughout the
rest of Europe, as banks attempt to deleverage further in non-domestic markets,
focusing on their core markets, where they have greater knowledge and a higher
head count.
European asset management agencies poised to accelerate
The numerous European asset management agencies are poised to
accelerate activity this year according to Cushman & Wakefield’s report.
Whilst NAMA has been less active than anticipated during 2012 (selling only
€398m of loans) it is expected to accelerate deleveraging plans this year. It
has already completed one transaction this year; the sale of a €85m junior note
within a €270m securitisation of mainly Dublin offices and retail assets to
Northwood Investors, and has recently announced plans to sell two portfolios
worth over €1bn. Similarly, with the establishment of SAREB, and discussions of
further asset management agencies in other countries (for example the
Netherlands), the range of sellers to be more evenly distributed. Finally,
German legacy bank entities such as FMSW, EAA and Hypothekenbank Frankfurt
(formerly Eurohypo) have been relatively inactive, but it is expected that more
transactions will develop, for example the latter’s planned UK loan book
With 14 of the 33 transactions recorded over €500m, the market has been
dominated by those who have the resources, expertise and capital to close these
larger transactions. Cushman & Wakefield research shows that the top 3
buyers, Lone Star, BAML and TPG, accounted for (c. 47%) of the total volume
closed in 2012.
Several private equity firms have been vying to buy portfolios of European
bank debt consisting of troubled commercial real estate mortgages. Cushman &
Wakefield expects that more players will look to set up offices to take
advantage of the opportunities available.
US-based investors continued to show their market dominance, accounting for
over 80% of the loan portfolios sold during the year according to the data. This
increase in appetite has been shown by their increasing presence in Europe,
often “setting up shop” with the specific aim of taking advantage of the many
opportunities presented by deleveraging banks. This has come in the form of
adding employees to the region, acquiring servicing platforms, or both. The
majority of these investors will continue to take advantage during 2013,
especially those who had a high level of unsuccessful bids during 2012.
Cushman & Wakefield is currently tracking over €3.6bn of live
transactions, with knowledge of over €8.6bn of CRE loan and REOs sales in the
planning stages. While 81% of the live sales are taking place in the mature
markets of the UK, Germany, Ireland and Spain, C&W is aware of transactions
being planned in immature markets such as Portugal and Russia.
According to Federico Montero, Partner in the C&W Corporate Finance team:
“We believe other estimates of 2013 volumes to be understating the potential of
the market. With evidence of over €12bn of live and planned transactions, we
expect European real estate loan and REO sales in excess of €25bn during
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