Deloitte reports €7bn of ongoing European CRE loan sales

Commercial real estate loan portfolios with an aggregate face value of €21.6 billion were traded across Europe during the first half of 2016, according to new research published by Deloitte.

In addition, €7.1 billion of CRE loan sale transactions were ongoing at the end of the period, the firm’s latest Deleveraging Europe report noted. During 2015, a total of €34.9 billion face-value of CRE debt was traded across Europe.

Residential property loans totalling €1.5 billion were sold in the first six months of the year, with €7.8 billion in the process of being sold. However, sales of residential property debt portfolios remained significantly behind 2015’s year total of €33.3 billion.

Overall, Deloitte recorded €44.3 billion of loan portfolio sales across all asset classes during the first half of the year, with a further €67.8 billion ongoing. The firm predicted that total transactions for the year could reach as much as €140 billion, which would be an increase compared to last year’s total of €104.3 billion.

“Across Europe, increased regulation, governmental reforms and higher capital requirements have added pressure on banks to divest. This pressure can be seen with increased loan sale activity levels in Italy and Spain,” Deloitte said.

An uptick in activity in Italy was noted, with €52.1 billion of completed and ongoing loan portfolio transactions, driven by government reforms and the introduction of a state guarantee securitisation scheme for NPL securitisations.

However, CRE loan deals accounted for just €1.6 billion of Italian business, with a further €1.5 billion ongoing. Deals done in H1 2016 included the €1.2 billion Project Sandokan, sold by UniCredit to PIMCO. Banca Popolare di Bari is currently selling an €800 million CRE book.

The Spanish loan portfolio market had a strong first half, following a slow start. As with Italy, CRE loan sales accounted for a small proportion of business. In total, Deloitte noted just €543 million of ongoing CRE deals, concentrated in CaixaBank’s Project Sun. The firm noted a similar amount in Portugal.

However, real estate debt did feature in other Spanish deals, with €2 billion of completed and €1.3 billion of ongoing real estate development loan book transactions and €400 million closed and €200 million ongoing sales of real estate-owned assets.

CRE loan portfolio sales in the UK came to just €600 million in H1 2016. “The implications of Brexit continue to evolve on a daily basis, but what is clear in the short term is that a number of loan transactions were temporarily put on hold,” Deloitte said.

The firm noted that the UK government announced in the March 2016 budget that it plans to sell £17.5 billion former Bradford & Bingley loans over the next two years, with the first of a number of transactions rumoured to be in the second half of 2016.

Ireland saw €7.2 billion of completed CRE loan portfolio deals, with a further €2.8 billion ongoing. Irish business included Projects Ruby and Emerald, sold by the National Asset Management Agency (NAMA) to Oaktree Capital Management. Ongoing deals in Ireland include NAMA’s €1.5 billion Project Tolka, the €350 million Project Lee and the €232 million Project Beara.

In Germany, €4.4 billion of CRE loans were sold in the first six months of the year, with €800 million ongoing. Among the deals, Cerberus Capital Management bought the €230 million Project Samba from FMS Wertmanagement. Commerzbank’s sale of the €800 million Project Gobi CRE book remains ongoing.

In the Netherlands, €6.2 billion of CRE sales were closed and €1.6 billion were ongoing, Deloitte said. The largest deal of the year by far was the purchase of the €5.5 billion Project Swan loan book by Lone Star from Propertize.

“Whilst project Swan overshadowed many of the other transactions happening in the Dutch market, what is clear is that the Netherlands continues to see a steady flow of deals both as direct real estate and in loan format from a variety of sellers including Rabobank and GE Capital,” Deloitte said.

Ongoing CRE loan deals in the Netherlands include FMS Wertmanagement’s sale of the €580 million Project Hieronymus and Blackstone’s €500 million Project Castor.