US private equity firm Cerberus Capital Management has retained its top spot as the biggest buyer of commercial real estate loan portfolios in Europe in Q1 2015, according to research from Cushman & Wakefield’s EMEA Corporate Finance team.
US private equity firm Cerberus Capital Management has retained its top spot as the biggest buyer of commercial real estate loan portfolios in Europe in Q1 2015, according to research from Cushman & Wakefield’s EMEA Corporate Finance team.
Following its acquisition of €3.5 bn in residential loans from Permanent TSB Capital Home Loans platform, the face value of transactions Cerberus has completed since the start of 2014 now comes to almost €21.5 bn.
Deutsche Bank and Apollo together occupied second place in Q1 2015 after forming Haybell Limited to purchase €1.5 bn of Irish CRE loans in the form of Projects Leinster and Munster. This is not the only successful partnership to be formed between an investment bank and a US private equity firm over the past year, as demonstrated by CarVal Investors and Goldman Sachs in the latter part of 2014.
Competition for smaller sales continues to increase. The next three investors in the list together account for a further 15% of all completed transactions by face value. Although Starwood Capital and Goldman Sachs are familiar names within the loan sales market, the inclusion of Otto Group in the top five list and PVE Capital and Mars Capital within the top 10 list indicates how the range of buyers continues to expand in line with an increasing number of smaller sales.
Permanent TSB was the biggest vendor over the period with €5 bn, followed by NAMA (€1.1 bn) and Banco Sabadell (€675 mln). In total, Permanent TSB accounted for 41% of sales in an attempt to cover its capital shortfall following the results of the Asset Quality Review last October.
NAMA was unsurprisingly active in the first few months of the year, completing a string of sales. With several larger loan portfolios currently in or being prepared for market, the agency will again be a key vendor of UK and Irish real estate loans in 2015, Cushman & Wakefield predicted.
Sales activity begins to spread
In addition, C&W expects Italian banks will look to take advantage of both the investor interest which is starting to shift further afield in Europe and the continuing recovery in the Italian real estate market.
Germany is also expected to gather momentum, with its local AMA (Asset Management Agency) able to accept the current improved level of asset pricing and looking to follow in the footsteps of its Irish and Spanish counterparts.
The major sale by EAA of WestImmo to Aareal Bank in Q1 2015 is a prime example of this improved optimism. Having previously decided not to sell the business due to the low level of bidding, improvements to the market have allowed the German AMA to crystallise a smaller loss.
Following the success of both NAMA in Ireland and Sareb in Spain, other European AMAs such as Propertize in the Netherlands and Austria's HETA will bring more portfolios to the market. In total C&W is forecasting €60-70 bn of loan portfolio sales in 2015.
The report also signals that the early buyers of NPLs (non-performing loans) are starting to sell secondary portfolios, often in off-market deals. Having worked out the loans, the likes of Lone Star and Blackstone are now bringing repackaged asset portfolios to the market, sometimes just 12-18 months after they acquired the related loan portfolio.
The timing of an investor’s resolution strategy is highly dependent on the enforcement procedures within a country; the relatively simple foreclosure proceedings in the UK and Ireland have made loan sale opportunities in those countries even more attractive over the past few years.
In addition, secondary vendors will be able to sell those performing loans which were included within a larger loan portfolio to lenders looking to grow their loan books. Overall, secondary sales will appeal to a wide range of buyers due to the relatively small lot sizes on offer and due to the improved assets being further down the risk curve than the original NPLs.