The volume of closed commercial real estate loan sales in Europe including the UK fell to €23.5 bn in the first half of this year, a decline of 42% compared to the year-earlier period, according to a new report by Cushman & Wakefield.
The volume of closed commercial real estate loan sales in Europe including the UK fell to €23.5 bn in the first half of this year, a decline of 42% compared to the year-earlier period, according to a new report by Cushman & Wakefield.
C&W's Corporate Finance team recorded just €9.5 bn of closed commercial real estate (CRE) loan and real estate owned (REO) sales in the three months to July, down 32% on the Q1 2015 volume.
In full-year 2014, C&W registered a record €80.6 bn of loan sales in the UK and Europe.
Predictably, the UK and Ireland again accounted for the bulk of the total in H1 2015, with continental European asset management agencies (AMA) driving just €2.7 bn of sales, or 12% of the six-monthly total.
Busy second half
Sales volumes were down in the first half, but C&W is predicting a busy second half of the year with over €99 bn of live and planned sales currently being tracked, Frank Nickel, Chairman of Cushman & Wakefield’s EMEA Corporate Finance, said.
'Despite a relatively subdued start to 2015, it would be a mistake to assume that activity in the European CRE loan sales market is subsiding. Closed sales in the last three months are below those recorded in Q1 2015 or any quarter in 2014, but behind the scenes there has been a flurry of preparation work as key vendors line-up ''mega-deals" for the second half of the year. No doubt, investors will have plenty of distressed opportunities before the year is out in which to invest their capital across the UK, Ireland and Europe as a whole.'
These sales include several ‘mega-deals’ from Lloyds Banking Group and RBS which will virtually complete their non-core deleveraging, he added. In addition, both NAMA and UKAR have recently launched ‘mega-deals’ in the forms of the €7.2 bn Project Arrow and the €17.6 bn Granite Portfolio respectively, which they will look to complete before the year’s end.
According to C&W, a 'staggering' volume of transactions has been brought to market since the end of the first quarter, with more than €74.0 bn of live sales currently being tracked. This is the highest level of live sales ever recorded and is over 4.5x the live volume recorded at the end of March.
UK, Ireland and Spain dominate
In total, C&W estimates that asset management agencies (AMA) have more than €233 bn of gross European non-core real estate exposure. NAMA (Ireland), SAREB (Spain) and UKAR (UK) account for 91% of this figure.
With €107 bn, SAREB has the largest exposure to non-core real estate loans on the continent. Germany's FMS and EAA follow with €19.7 bn and €15.9 bn respectively, while Dutch bad bank Propertize accounts for €7.4 bn.
Other continental European countries with asset management agencies charged with winding down exposure to non-core real estate loan include Austria (€5.2 bn), Denmark (€3.1 bn), Portugal (€2.9 bn), and Slovenia (€1.3 bn).
Due to the success of existing AMA, C&W expects further entities are likely to be established in the near future in Italy, Romania and Poland. Mark Zrt in Hungary is set to be the newest AMA and will start purchasing assets in H2 2015, C&W said.