JLL advises EU Commission on bad property loans

Jones Lang LaSalle's European Valuations Team is advising the European Commission to take a consistent approach to valuations of distressed assets destined for government assets relief schemes.

'Many of the impaired assets intended for asset purchase or insurance schemes will be illiquid and complex assets to value,' noted Dermot Charleson, director of JLL's European Valuations Team. 'Calculating long-term economic value is inherently subjective and a consistent approach to valuation will be important for the EU Commission to ensure fair competition for state aid across EU member states.'

The European Commission is seeking consultation on an approach to the valuation of distressed assets destined for government assets relief schemes. These schemes are designed to clean bank balance sheets of impaired assets of which bad commercial property loans form a significant part. The Commission issued guidance in February urging a common European approach to allow transparency, disclosure and the correct and consistent valuation of assets to go into such schemes.

The Commission has addressed the issue of currently depressed market values and the level of write-down and proposes that impaired assets be transferred to asset relief schemes at prices based on their 'long-term real economic value' rather than current market value. The difference between these two values will constitute state aid.