Busy Q4 adds to leap in 2012 non-performing loan sales

Further big sales ahead in 2013 as Lloyds prepares two more portfolios

The value of real estate non-performing loan portfolios traded this year looks set to reach €22bn across Europe.

The total, which is well up on last year’s €18bn and a leap from €2bn in 2010, includes €8bn of deals agreed or closing in Q4, said Richard Thompson, European portfolio advisory group partner at Pricewater-houseCooper’s, which collected the data (see chart).

Banks told PwC there are about €150bn of European real estate loans to be deleveraged over the next five years, most of which will be non-performing. Lloyds alone is set to close three separate portfolio sales in Q1 2013: Project Forth, Project Pittsburgh and Project Lane.

The sale of the £778.6m Scottish and north of England Project Forth non-performing loans, to Kennedy Wilson and Deutsche Bank, has been agreed at just below £390m.

The €350m Project Pittsburgh Irish book is being sold to CarVal Investors, while a larger Irish book of €1.8bn – Project Lane – is being sold to Apollo Global Management.

Lloyds has dominated recent activity in Europe’s real estate NPL sector and has packaged up two further loan portfolios that will lead the market into next year: Project Chamonix and Project Wagner (see panel).

The bank benefitted from first- mover advantage, with a scarcity of deals helping pricing. Thompson acknowledged  criticism of banks that, given the need to deleverage, deals are not happening quickly enough.

“Banks need to be careful not to leave it too long,” he said, as the higher the deal volumes in  countries that are already developing as ‘mature’ markets, the lower the price.

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“We could end up with too many sellers and buyers have limited resources to look [at portfolios].” Loan sales are only just picking up in Spain, where Lone Star is said to be negotiating with Varde Partners to buy a €2bn non-performing Spanish loan portfolio from BBVA.

Eurohypo, meanwhile, is in talks with Anchorage Capital Group and Spanish developer Alza Real Estate about selling €400m of loans called Project Copernicus, secured against six assets in Madrid and Barcelona.

However, low bids forced it to pull the sale of Project Sol, a portfolio of the same size. PwC reported sales by UK, Irish and Spanish banks, as well as activity in Germany, where work-outs are more common than loan sales.

For example, Cerberus’s asset management plan for nine secondary retail properties in Germany, which it acquired from Wells Fargo, can start now that its purchase of Project Phoenix is complete.

Italy, Portugal and the Nordics are other places where PwC reported loan sales and it also expected loans to come from French banks.

One loan buyer said there may be disposals by NAMA and IBRC (formerly Anglo Irish) next year.
See Data, loan portfolio sales, p22

Lloyds set to sell German and UK loans

Indicative bids were received last week for Lloyds’ Project Chamonix, an €850m batch of non-performing loans mainly secured against secondary and tertiary German retail properties.

Apollo, Lone Star and Cerberus have put forward offers, as MSREF is thought to have done, although “the list is likely to be long at this stage”, said an insider on the deal.

Lloyds’ other new package of loans for sale, Project Wagner, is a £500m UK non-performing book, although details of the office and retail portfolio, which is presumed to be of poor quality, have yet to be circulated.

The bank is also close to completing the sale of a £150m loan portfolio held against unit trusts managed by Tritax, to Cerberus, for £70m.

 

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