Just €3.7 bn of closed European real estate loan (RE loan) and real estate owned (REO) sales completed in the first three months of 2016, down by 91% on the record final quarter the year before, an analysis by Cushman & Wakefield Corporate Finance reveals.
Despite the massive volume drop Cushman & Wakefield said that its research showed that activity had been continuing in the background as many vendors are reassessing their positions and portfolios before preparing their next moves.
'Despite the relatively quiet start to 2016, a significant increase in sales activity is expected over the next six months supported by around €28.6 bn of live sales. We estimate that the 2016 closed transaction volume will be in the region of €70-80 bn,' said Federico Montero, head of loan sales, EMEA Corporate Finance, Cushman & Wakefield.
'The loan sales market in Ireland and Spain has been successful due to the early adoption of asset management agencies and realistic provisions for their NPLs. Although Italy has taken some small steps towards dealing with a mountain of distressed debt, further reforms to foreclosure law and appropriate levels of provisioning are required in order to converge investor and vendor pricing and to evolve Italy into a key market.'
Smaller deals
The average size of transactions was just €207 mln in the first quarter of 2016, compared to €574 mln in 2015. With no 'mega-deals' (sales with a face value over €1 bn) being recorded, the largest sale to date came from Bankia, which disposed of its €645 mln CRE loan portfolio dubbed Project Babieca to Deutsche Bank.
On a country basis, Spain accounted for 50% of the closed volume so far in 2016, while Italy continued its strong end to 2015 with more than €1.1 bn of sales. The UK has seen a significant dip in activity levels following a record year boosted by UKAR's sale of its €17.8 bn Granite Portfolio and several UK lenders completing their deleveraging.
European asset management agencies (AMA) accounted for just 14% of closed sales since the start of the year, although NAMA in Ireland and Propertize in the Netherlands are currently in the market with significant deals.
