European bank loan sales at €7.5bn

CBRE says €7.5bn of property loan portfolios have been sold so far this year, but the final tally will likely fall short of the 2011 amount traded due to price and valuation disagreements.

European property loans sales have hit €7.5 billion so far this year but the year-end level could fall short of 2011 amid value and price disagreements.

Research by Los Angeles-based property broker CBRE said it estimated that so far in 2012 more than €7.5 billon of commercial real estate loan sales in the public domain had been completed by European banks.  

The firm has totted up 14 transactions involving the region’s lenders offloading a range of loan portfolios including those secured against assets in the US and Australia as well as in Europe. Of these, six were sales of loan portfolios where the assets were solely located in the UK and Ireland.

CBRE estimated there were more than €11 billion of loans, divided into nine portfolios, currently being marketed and highlighted one on-going sale – Lloyds Banking Group reportedly selling a portfolio of predominately Irish debt valued at €2 billion and comprising over 700 individual property loans.

Natale Giostra, head of EMEA and UK debt advisory, said in a statement that both performing and non-performing loan portfolios had been successfully transacted this year by European banks seeking to reduce their exposure to real estate.

He said: “Some institutions, such as Royal Bank of Scotland, are now expressing a preference to pursue asset sales where they have control over the physical property. However as we have seen 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.”

Philip Cropper, managing director of real estate finance at CBRE’s London office, however added that there were still stumbling blocks. He said: “Pricing in particular is a key factor, and we have seen several transactions fall by the wayside during the year due to the complexities of being able to accurately value large and intricate loan portfolios, where there are sometimes large levels of distress. We therefore expect completed loan sales in 2012 to fall short of the €20 billion recorded in 2011.”

Nevertheless, CBRE's Cropper insisted his firm expected a “good quantum” of sales to be transacted before the end of the year, with further announcements of new loan sales anticipated.

The firm also said financing to support loan portfolio purchases had opened up in 2012, helping the market further, with more lenders now offering complex loan-on-loan senior debt financing to support acquisitions.

In a separate study this week, Corestate Capital, the Zug-based firm, and the Real Estate Management Institute of the EBS Business School said there would be an increase in distressed real estate assets for sale in Germany in terms of both number and transaction volume over the next two years.