Almost €80bn of European live and planned loan portfolio sales to trade in 2016

Almost €80bn of European live and planned loan portfolio sales are expected to close in 2016, as the loan sales market looks to keep pace with 2015’s record-setting €85.9bn of transactions, a new high watermark of annual trade volumes for the matured investment market.

2015’s annual tally was driven by two mega deals in the final quarter of 2015, both won by Cerberus: the £13bn (c. €17.8bn) Granite portfolio, sold by UK Asset Resolution (UKAR), the investment entity which manages the UK government’s ownership of Northern Rock and Bradford & Bingley; and the c. €6.3bn Project Arrow, the Irish non-performing loan portfolio (NPL) sold by NAMA.

Together, these two trades ‘filled the gap’ in the market from 2014’s mega IBRC loan book sell-off as well as piecemeal trades from Lloyds Banking Group and RBS. 

According to Cushman & Wakefield’s Corporate Finance team in London, approximately €39.4bn of European real estate loan (RE loan) and real estate owned (REO) deals closed in Q4, representing 46% of the annual total and the largest-ever single quarter transaction volumes in the four-year history since volumes were tracked.  All portfolio sizes are measure in nominally-valued loan balances.

The two Cerberus trades ensured that Cerberus retained its crown as the most active buyer of European real estate loans in 2015 – with a final tally of €28.1bn, reflecting a 59% increase on the c. €17.7bn of nominally-valued loans acquired in 2014. 

Of course, this was significantly bolstered by the purchase of UKAR’s Project Granite which alone accounted for c. 48% of Cerberus’ total.  Lone Star was 2015’s second most active loan buyer, with €5.78bn closed, led by the £2.7bn (€3.6bn) Churchill loan portfolio, closely followed by Blackstone which acquired GE Capital UK mortgage book.

For 2016, C&W’s Corporate Finance forecasts transaction volumes of between €70bn and €80bn, which is based on live and planned portfolio trades.

There are €17.3bn live loan portfolio trades underway, comprised of €9.4bn worth of trades from non-SAREB Spanish lending entities, according to C&W Corporate Finance.  The headline trade in this space is expected to be Bankia’s delayed €4.2bn Project Big Bang. SAREB, by contrast, is expected to remain relatively in 2016, hindered by changes to Spanish accounting rules.

Elsewhere, RBS is expected to complete its UK deleveraging through the €810m Project Detroit loan portfolio, while Millennium BCP will attempt to offload the €1bn Project Porto, in what will be Portugal’s largest real estate loan sale in recent years.

In Italy, activity is steadily increasing with two live sales and “a healthy pipeline of planned transactions” currently tracked by C&W Corporate Finance.

At the turn of the New Year there is already as much as €61.3bn of planned transactions, the majority of which is residential rather than commercial real estate loan portfolios, according to C&W Corporate Finance.

Major planned transactions include:

  • UKAR to sell c.£17bn of B&B residential mortgages, either as an entire portfolio or sub-pools;
  • The Co-operative Group is gauging investor appetite for its £6bn Optimum Portfolio;
  • Permanent TSB’s remaining Capital Home loans, which were delayed due to market congestion;
  • NAMA is looking to bring c. €6bn of RE loans to the market in the form of Projects Emerald and Ruby;
  • Allied Irish Bank is also rumoured to be preparing an Irish loan portfolio for market
  • Propertize’s plan to dispose of the €5.5bn Project Swan portfolio, which is the bad bank’s entire loan book alongside its lending and servicing platform.

Federico Montero, Head of Loan Sales, EMEA Corporate Finance, Cushman & Wakefield, said: “Although the UK and Ireland have again topped the sales volumes in 2015, there has been a real shift in the product vendors are offering. Supported by growth in the underlying residential market, large mortgage portfolios have dominated the headlines.

“Following the success of other European AMA such as NAMA, the Italians have a good illustration of how best to maximise recoveries. With reforms to enforcement legislation now in place, the Italian market is set to grow further over the upcoming years.”

Source: CoStar Finance