European banks sold €28.1 bn of non-core real estate loans and assets in the first half of 2017 and are on course to transact €60-€80 bn this year.
The latest Evercore European Distressed Real Estate Market report logged 36 non-performing loan and asset transactions in H1 2017, down slightly on last year's H1 total of 40 but higher by volume, boosted by UK government agency UKAR’s €15 bn sale of Project Ripon.
Ripon's portfolio of former Bradford & Bingley mortgages was sold to Blackstone and Prudential. This deal boosted the proportion of residential assets sold, amounting to 64%, with a further 26% of disposals linked to commercial real estate loans and 10% to commercial property assets.
The Project Ripon sale also meant that the UK recorded the highest value of closed transactions at 63% of the total, far higher than Italy and Spain which are the two European countries with the highest proportion of sour loans outstanding, amounting to almost €400 bn.
Evercore said that reported H1 activity in Italy was 13%, the second busiest jurisdiction - which does not include the €26 bn NPL securitisation completed last week on 4 July by Banco Monte dei Paschi di Sienna (BMPS).
Volumes in Spain were 'slightly below expected levels in the year to date' says the report, with just under €3.3 bn of closed sales, or 12%. 'As anticipated, the distressed real estate markets in both Ireland and The Netherlands have been quiet. While this is likely to change in Ireland due to potential sales from NAMA, AIB and Danske Bank, Dutch activity is likely to dry up further following a record 2016 due to Propertize's sale,' it said.
Spain to top list in H2
However, Evercore's Real Estate Portfolio Solutions (REPS) team led by Federico Montero expects a slightly different story in H2. Of the 22 live transactions with a face value of €51.7 bn that they are tracking, Spain tops the list with 61% of that volume.
Key deals expected to transact are Santander’s sale of €30 bn of NPLs and properties due to its recent take over of Popular, and Lone Star's impending acquisition of Portugal’s Novo Banco. As a result, Evercore has revised its 2017 sales volume forecast up from €50 bn-€60 bn to between €60bn and €80 bn.
Other H1 closed deals were: Germany's EAA's sale of its management arm and related €900 mln loan portfolio to UK-based servicer Mount Street; while HSH Nordbank sold a mixture of aviation and CRE loans to Macquarie and BAML/Davidson Kempner respectively.
One more trend highlighted by Evercore is a rise in the number of secondary loan and REO sales emerging from private equity firms. 'This has been led by Blackstone, which sold UK student housing assets from NAMA's former Project Tower in addition to former Project Hercules (Spanish) mortgages.'
