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Iberia dominates non-core loan sales pipeline

The largest pipeline features Spanish non-core property loans and lender-owned real estate, with sales relating to assets boasting a combined face value of €31.5bn ongoing.

Spain and Portugal look set to feature prominently in the European real estate loan sales market during the second half of 2017, with investment banking firm Evercore reporting €44.1 billion of live sales in Iberia at the mid-year point.

The largest pipeline features Spanish non-core property loans and lender-owned real estate, with sales relating to assets boasting a combined face value of €31.5 billion ongoing, reflecting 61 percent of the European total. Portugal is an increasingly active market, with €12.6 billion of live sales recorded.

Across Europe, Evercore was tracking 22 live transactions at the end of H1 2017, with a face value of €51.7 billion – 86 percent up on the volume being tracked at the end of 2016.

Santander boosts the Spanish total, with its reported sale of a 51 percent stake in around €30 billion of non-performing loans and foreclosed properties, which was acquired when it bought Banco Popular for a nominal €1. In Portugal, Lone Star looks set to buy Novo Banco in a deal which will put the US private equity firm in control of significant NPL assets, representing the largest loan sale in the country to date.

“Circumstances have motivated some organisations in Spain and Portugal to move ahead with sales,” said Federico Montero, managing director of Evercore’s Real Estate Portfolio Solutions unit. “Banks have been sold to new owners that are incentivised to go ahead with loan sales, so Spain and Portugal will be busy in the next two to three years.”

Based on Evercore’s research, Italy has Europe’s largest share of non-core real estate, at €210 billion, which is highly concentrated within four banks; Intesa Sanpaolo, Monte dei Paschi di Siena, UniCredit and Banco BPM.

Spain’s total stood at around €187 billion of gross assets, of which €82 billion was held by its national ‘bad bank’, SAREB, making it the largest holder of non-core European real estate debt with 15 percent of the total.

The overall size of the European non-core real estate debt pile, on a face value basis, is €537 billion, Evercore estimated. Due to increased clean-up efforts, the total fell by 16.7 percent between the end of 2015 and June 2017.

Taking loss provisions into account, the net non-core total is around €269 billion, implying a coverage ratio of 50 percent, up from just over 44 percent in Q4 2014, as banks increased their capital provisioning.

Evercore has upwardly revised its prediction for the volume of non-core real estate loan and lender-owned properties in 2017. Initially, the firm predicted between €50 billion and €60 billion of sales, although it now expects that up to €80 billion could be transacted.

During the first half of the year, €28.1 billion of sales were closed across 36 deals; a higher first-half total than in 2015 and 2016, which saw €25.5 billion and €19.5 billion, respectively.

The H1 total excludes the €26.1 billion securitisation completed by Italy’s Banca Monte dei Paschi di Siena in early July, although it does include the €15 billion sale by UK Asset Resolution of the Project Ripon book of Bradford & Bingley mortgages to Blackstone and Prudential. That deal made the UK the largest loan sales market of the half-year period, with a total of €17.7 billion. Aside from the Ripon deal, the UK’s total was also supported by secondary loan and foreclosed property sales by private equity firms exiting portfolios.

Italy accounted for 13 percent of sales, representing around 37 percent of its 2016 total. Spain fell short of expectations during H1 at just below €3.3 billion.

Blackstone was the most active buyer, with €12.1 billion of purchases. Aside from Project Ripon, it bought the €400 million Project Patriot from Banco Popular and the €300 million Project Buffalo from BBVA. Cerberus, Lone Star and Oaktree, which were among the top buyers in recent years, did not feature in the top 10 for H1 2017.