Cushman & Wakefield has shown that government asset management agencies have €264bn of non-core real estate to offload, ahead of next month’s stress tests for European banks.
The real estate adviser has published an analysis of 10 European entities set up to liquidate bad property assets and loans owned by national banks.
The European Real Estate Loan Sales Market report for the third quarter shows that more commercial real estate loans and real estate-owned transactions were closed this year to-date (€54.9bn) than in 2012 and 2013 combined.
With a pipeline of €30.8bn in live sales and €24bn in planned disposals, Cushman expects the total volume for 2014 to break the €60bn mark.
Federico Montero, head of EMEA loan sales, said upcoming stress tests would force banks to reclassify troubled assets.
“Many European banks will be forced to finally face up to the facts… which in turn may cause a few capital requirement challenges,” he said.
“With the clear success of the Irish and Spanish asset management agencies, other European governments may follow suit in setting up asset management agencies to workout the non-core exposures.”
Cushman reported a net value of €173bn once loan loss provisions were factored in.
The assets management agencies represent 45% of the total exposure held by all European financial entities, according to Cushman & Wakefield.
Nearly 40% of the total gross non-core assets held by the agencies relates to Spain, with the country’s Sareb organisation accounting for almost all of it.
More than half (51%) of the non-core exposure is secured by residential assets, while 31% is secured by commercial property assets.
Frank Nickel, executive chairman of Cushman & Wakefield’s EMEA corporate finance group, said: “Whilst the UK, Spain and Ireland continue to dominate the investment landscape, new geographies are beginning to attract global capital for the first time – a trend that is only set to continue with the ongoing asset quality reviews helping to facilitate the deleveraging process.
“However, investors will remain cautious in regards to new markets, with the country’s legal system being a crucial investment factor.”
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