Spain shines in slow Q1 for European loan sales

Spain was the most active market for real estate loan sales during the first quarter of 2016 in what Cushman & Wakefield has described as a subdued start to the year.

Just €3.7 billion of real estate loans and real estate-owned property was sold during Q1 2016, down 91 percent from the same quarter last year and making it the quietest quarter since Q2 2013, according to the firm’s latest European Real Estate Loan Sales Market report.

Half of Q1’s volume was traded in Spain. Bankia sold its €645 million Project Babieca CRE loan portfolio to Deutsche Bank. Banco Sabadell was also active, selling its €550 million Project Empire portfolio of residential real estate-owned properties to Blackstone. Despite being the best performing market, Spanish sales were also down from Q4 2015, by around 40 percent.

The report showed that, following a record 2015 across Europe, activity has continued in the background with many vendors reassessing their positions and portfolios before preparing their next moves. Lenders had completed sales prior to the end of 2015 in order to hit annual targets, almost guaranteeing a quiet Q1, Cushman added.

No €1 billion-plus ‘mega-portfolios’ were traded during Q1 and the average deal size was just €207 million compared to €574 million in 2015. However, Cushman said that it is tracking €28.6 billion of live sales, plus a further €38.2 billion of planned sales, meaning that it expects 2016’s eventual total to reach €70-80 billion.

Europe’s asset management agencies (AMA) are expected to boost this year’s figures due to ongoing sales processes. AMAs were quiet during the first quarter, accounting for just 14 percent of closed sales. However, Ireland’s National Asset Management Agency (NAMA) is in the process of selling the €4.7 billion Projects Ruby and Emerald, advised by Cushman, while Dutch bad bank Propertize is selling the €5.5 billion Project Swan portfolio.

The profile of buyers and sellers reflected the smaller transaction size. GE Capital, which is divesting its European exposure, was the largest seller in Q1 with €1.1 billion of closed sales. Banco Sabadell followed with €980 million, then Bankia with €645 million, Credit Agricole with €360 million and Royal Bank of Scotland with €339 million.

AnaCap was the most prolific buyer, acquiring three of GE’s four portfolios. Deutsche Bank and Blackstone each closed a single deal.

Aside from Spain, Italy also had a relatively active quarter, with more than €1.1 billion of sales, following a strong end to 2015. GE Capital was responsible for 84 percent of Italian sales. Bank of Italy is currently looking for an adviser to handle the sale of €8.5 billion of loans transferred to it from four regional Italian banks, although the volume of real estate exposure within the portfolio is not clear.

The UK had a particularly quiet quarter. Last year’s business was dominated by the €17.8 billion Project Granite residential mortgage book sale by UK Asset Resolution (UKAR) and several lenders have completed their deleveraging. Cushman reported that, after an initial market sounding, the Co-operative Group has decided to retain its €9 billion Optimum portfolio of residential mortgages. However, UKAR is mulling the sale of its €21.8 billion Bradford & Bingley mortgage book, following last year’s successful Granite sale.

The report is the last to be compiled by Federico Montero, formerly head of loan sales for Cushman’s corporate finance division. Montero recently left the firm after four years to take up a new role with an investment bank. He continues to work for Cushman on a consultancy basis as it handles the sales of Projects Ruby and Emerald for NAMA.