A record €99bn of non-core real estate exposure in Europe’s banks is currently or soon to be up for sale, according to Cushman & Wakefield’s (C&W) latest loan sales market report.
C&W Corporate Finance said that the highest-ever level of live sales was a “staggering” volume and is 4.5 times the volume recorded at the end of Q1 2015.
The assets up for grabs include UK Asset Resolution’s (UKAR) €17.6bn Granite Portfolio of residential mortgages, GE Capital’s €10.4bn of UK home loans, and Irish bad bank NAMA’s sale of €7.2bn of mixed-use assets, named Project Arrow.
Spanish lender Bankia is also looking to sell a €4.2bn real estate owned (REO) portfolio, the largest sale of its type ever, called Project Big Bang.
The UK accounts for 45% of live or planned sales, Ireland 27% and Spain 15%.
C&W’s report said despite a relatively quiet H1 2015, when total sales were €23.5bn, 2015 is on track to see €60-70bn traded, which the firm predicted earlier this year. Last year, total volume traded was €80bn.
About €9.5bn of sales were made in Q2 2015 compared to €14bn in Q1.
“Despite a relatively subdued start to 2015, it would be a mistake to assume that activity in the European CRE loan sales market is subsiding,” said Frank Nickel, C&W partner and chairman of EMEA corporate finance.
“Closed sales in the last three months are below those recorded in Q1 2015 or any quarter in 2014, but behind the scenes there has been a flurry of preparation work as key vendors line-up ‘mega-deals’ for the second half of the year.”
More than €233bn of non-core real estate assets remain in the ownership of European asset management agencies (AMAs), which made up 43% of total non-core exposure. NAMA, Spain’s Sareb and UKAR together accounted for more than €212m.
Total sales by AMAs for 2015 are predicted to be €50-55bn with live commercial property loans and REO deals valued at around €30bn.
New York-based Cerberus Capital Management has been the biggest buyer so far picking up almost €5.7bn of assets in the first half of the year, almost a quarter of all sales, including Permanent TSB’s €3.5bn Capital Home Loans UK mortgage business.
Down the line, China may be the next stop for investors once activity in Europe slows. Having established four ‘bad banks’ in 1999 to manage ¥1.4tn (€208bn) of distressed assets from four large state institutions, the banks will still have about ¥828bn (€123bn) of real estate exposure to dispose of by the end of the year.