European RE Loan and REO sales set new record in 2015

Following a flurry of activity in the fourth quarter, a record €85.9 bn of real estate loan and real estate owned (REO) transactions completed throughout 2015, surpassing the previous high of €82.1 bn in 2014, according to research conducted by C&W’s Corporate Finance team.

With many key vendors completing their deleveraging plans, the total for 2015 was substantially boosted by a handful of very large deals in the UK and Ireland towards the end of the year.

In fact, over €39.4 bn of transactions closed in Q4 alone, representing 46% of the annual total. This was driven by UKAR’s €17.8 bn Granite Portfolio and NAMA’s €6.3 bn Project Arrow, which together accounted for over 36% of all transactions in 2015. As a result, Q4 2015 was the busiest quarter ever recorded, C&W said.

Looking to repay a government bailout loan, UKAR sold a portfolio of former Northern Rock mortgages to Cerberus, which itself had an agreement with TSB Bank for the transfer of a €4.5 bn portion of better performing loans. C&W said the loans, which were purchased by Banco Sabadell earlier in 2015, were ‘a leading example’ of how international banks are increasingly looking to use the UK loan sales market to rapidly grow their lending books.

US investors continued to flood into Europe in the year, with Cerberus topping the investor league table once again, having purchased €28.1 bn of European RE loans and REOs in 2015.

Geographically, the UK and Ireland once again led the way, together accounting for 71% of all sales. However, there has been a real shift in the product vendors are offering, according to Federico Montero, head of loan sales at C&W’s EMEA Corporate Finance team. ‘Supported by growth in the underlying residential market, large mortgage portfolios have dominated the headlines,’ he noted.