Booming year end as European loan sales break record

A groundbreaking fourth quarter meant the market for European real estate loan sales and real estate owned (REO) deals reached a new record of €85.9 billion in 2015, according to a report from Cushman & Wakefield.

Volumes in the first three quarters had been lower than in the same period of 2014, but with UK Asset Resolution (UKAR) selling the €17.8 billion Granite portfolio and Ireland’s National Asset Management Agency (NAMA) selling the €6.3 billion Project Arrow, the fourth quarter closed on a massive €39.4 billion.

This final-quarter figure represented almost half (46 percent) of the yearly total and was the biggest amount ever transacted in a single quarter.

The report noted that the mega-sales from UKAR and NAMA filled a gap in the market left by the likes of Irish Bank Resolution Corporation (IBRC), Lloyds Banking Group and RBS, which had taken centre stage during 2014.

The UK accounted for 43 percent of all sales in the final quarter of last year, while Ireland saw €23.7 billion of deals close during 2015 and Italian sales increased 12.5 times to around €5 billion. But Spain saw a 41 percent drop in activity last year compared with 2014.

“Although the UK and Ireland have again topped the sales volumes in 2015, there has been a real shift in the product vendors are offering,” said Federico Montero, head of loan sales, EMEA Corporate Finance, at Cushman & Wakefield. “Supported by growth in the underlying residential market, large mortgage portfolios have dominated the headlines.”

The European Real Estate Loan Sales Market Report predicts high levels of activity in the UK, Ireland, Spain, the Netherlands and Italy in 2016.

Eyes are turning towards Italy in particular, with significant growth in sales volumes expected. The country has now established a national management agency (AMA), the National Resolution Fund, which currently holds just €750 million of real estate-related non-performing loans (NPLs) but is likely to inherit further soured loans over the next couple of years.

The report identified €78.6 billion of live and planned sales currently, and estimates deal volume of between €70 billion and €80 billion in 2016 – suggesting that if last year’s total is not broken, it may at least be threatened.