CMBS issue in Europe collapses to EUR 1.5 bn

Royal Bank of Scotland estimates that the issue of commercial mortgage-backed securities (CMBS) in Europe decreased drastically to just EUR 1.5 bn in July from EUR 14.6 bn a month earlier, the Financial Times reported on Wednesday. This compares with some EUR 11.3 bn in the same period a year earlier.

The emergence of CMBS deals in Europe over the past few years brought liquidity to the market and helped fuel the boom in European commercial real estate. But the crisis of confidence stemming from the sub-prime mortgage crisis has led to a major drop in demand for CMBS paper, leaving some lenders stuck with loans they cannot securitise and sell on, the paper said. This problem has struck following the sale of the HSBC bank headquarters in Canary Wharf, London to Metrovacesa for £1.1 bn (EUR 1.6 bn) early this summer. PropertyEU reported earlier this week that HSBC is still burdened with an £800 mln (EUR 1.2 bn) short-term loan that it made to the Spanish property company to enable them to complete the deal. HSBC had hoped to refinance its loan by selling it on to other banks, which would also have reduced its financial risk to the building. The international credit crisis hitting property deals is now making this approach difficult, so both HSBC and Metrovacesa are looking for an alternative solution.