European loan sales are forecast to rise by 32% this year to more than €40bn, according to Cushman & Wakefield Corporate Finance.
The firm’s recent report, European Real Estate Loan Sales Market 2014, said the €10bn rise would come on the back of growing momentum and market maturity across Europe.
C&W recorded €30.3bn of closed European commercial real estate loan and asset sales by banks, non-bank financial institutions and asset management agencies in 2013 in 84 deals – up from 45 the previous year.
The figure was bolstered by the increased activity of asset management agencies such as Ireland’s NAMA and Spain’s SAREB and large “bad banks” such as IBRC.
A late surge in loan sales in November and December last year accounted for almost 38% of the total volume for 2013, as both vendors and purchasers attempted to meet year-end targets.
C&W said that 2014 has started as strongly as last year ended: 10 transactions have already completed in January with Morgan Stanley’s disposal of its €5.6bn European loan servicing platform to Mount Street comprising the majority of the €7.1bn total to date.
Michael Lindsay, EMEA head of corporate finance at C&W, said: “The year 2013 saw another significant increase in European loan sales activity. While Europe has yet to achieve the levels of liquidity witnessed in the US, the past 12 months have seen more buyers and sellers becoming familiar with the characteristics and dynamics of the European loan sale market with consequent pricing benefits for sellers.”
Large investment firms with US headquarters, such as Lone Star, Apollo and Cerberus, continue to dominate the market, accounting for 70% of all acquisitions in 2013.
As activity has spread across Europe and the average size of sales has decreased from €500m in 2012 to €360m in 2013, there has been a notable increase in the range of potential buyers, with several smaller local investors paying premium prices to break into the market.
An increase in activity from the various European asset management agencies has boosted transaction volumes, accounting for circa 59% and 40% of closed transactions in Ireland and Spain respectively.
Overall, the asset management agencies have contributed to over €4.8bn of the total closed transaction volume, roughly six times the €799m completed in 2012.
In addition, NAMA, EAA, FMS and IBRC have cumulative live sales of circa €35.8bn, representing 80% of total live transactions, further demonstrating their status as key vendors in the European market.
As in 2012, around 89% of sales by face value in 2013 took place in the key markets of the UK, Ireland, Germany and Spain as lenders continued to reduce their largest exposures.
C&W said while activity would undoubtedly remain high in these four markets, there is also evidence that vendors are increasingly looking to reduce exposures throughout the rest of Europe, with transactions recently being closed in the Netherlands, France, Russia and Italy.
Additionally, as investor confidence has grown, interest has grown for potentially lucrative opportunities further afield with live or planned disposals in Poland, Portugal, Romania and Scandinavia.
It added that with loan-on-loan financing anticipated to become more readily available in several less core markets around Europe and the establishment of more asset management agencies, such as the Dutch asset management agency Propertize, the loan sale market is set to expand across the Continent.
In particular, Cushman & Wakefield Corporate Finance expects a significant increase of activity in the Netherlands and Italy.
Six Spanish servicing platforms were purchased in 2013 by US investors ahead of an anticipated increase in opportunities in that market.
C&W is tracking €45.2bn of live transactions and expects activity in 2014 to be bolstered by the substantial pipeline of planned transactions, which have a face value of €33.7bn.
The report also predicts the European CMBS market will continue to grow during 2014, with forecast issuance of between €12bn and €15bn.
Notwithstanding the timely return of investor interest in new European CMBS issuance evident in 2013 providing some refinancing potential, with €31bn of European CMBS maturities over the next three years, Cushman & Wakefield Corporate Finance anticipates a continued supply of whole CMBS loan sales during this year.
Federico Montero, a partner in Cushman & Wakefield’s EMEA corporate finance team, said: “Last year was a remarkable year for the European loan sale market. As sellers developed their loan disposal strategies and pricing expectations, the pace of deleveraging has accelerated drastically.
“Similarly, the flow of investors into the market hasn’t shown any signs of abating. With more opportunities emerging in a greater number of countries, volumes sold will undoubtedly increase during 2014.”
bridget.oconnell@estatesgazette.com
