Real Capital Analytics’ (RCA) deal flow analysis indicates that Europe is starting to make headway in dealing with its distressed real estate loans, while the US is over the hump having dealt with more than half of its distress.
Of the $394bn (€304bn) of US mortgages that became troubled over the past cycle, 58% have now been resolved, with $164bn remaining to be worked out.
“Part of this has been US banks having the ability to deal with their debt, more US investors interested in taking on the workouts, and also value appreciation that has returned assets into the black,” said Simon Mallinson, executive managing director EMEA. “New instances of distress fell substantially in Q4 and totalled $4bn, the lowest level this cycle.”
In 2012, European banks started to take more aggressive steps to resolve the huge balances of troubled property loans, nearly four years after the wave of distress flooded their balance sheets. Both sales of property and bulk sales of non-performing loans secured by property rose substantially in 2012.
Ireland topped all countries with nearly 90% of its transactions resulting from a distressed situation, while the UK and Germany have also made strong starts. RCA director of analysis Joseph Kelly said “US opportunistic funds have been the buyers of most non-performing loan portfolios, but they have accounted for just 20% of distressed property acquisitions, where a more diverse range of buyers are active.”
