European banks sell EUR 7.5b of property loans in 2012: CBRE

European banks have completed over EUR 7.5 bn of commercial real estate loan sales so far in 2012, according to global real estate adviser CBRE.

The 14 transactions tracked up to September have seen the region’s lenders dispose of a range of loan portfolios including those secured against assets in the US and Australia as well as in Europe.

Of these, six involved sales of loan portfolios where the assets were solely located in the UK and Ireland. With Lloyds Banking Group recently reported to be selling a portfolio of predominately Irish debt valued at EUR 2 bn and comprising over 700 individual property loans, CBRE estimates that over EUR 11 bn of loans, divided into nine portfolios, are currently being marketed by the region’s banks.

Natale Giostra, head of EMEA & UK Debt Advisory, CBRE, said: 'Both performing and non-performing loan portfolios have been successfully transacted this year by European banks seeking to reduce their exposure to real estate.'

Some institutions, such as RBS, are now expressing a preference to pursue asset sales where they have control over the physical property, Giostra noted. 'However,' he added, 'as we can see from the Lloyds example, loan disposals are still seen as the most efficient strategy for reducing overall exposure, particularly where the underlying assets require active management or lot sizes are smaller meaning they are time consuming and costly to deal with individually.'

CBRE expects completed loan sales in 2012 to fall short of the EUR 20 bn recorded in 2011.

Financing to support loan portfolio purchases has also opened up in 2012, helping the market further, with more lenders now offering complex loan-on-loan senior debt financing to support acquisitions, driven by the attractive margins that can be achieved, particularly over a 3-5 year period.