European banks and asset managers plan to sell or restructure 584 billion euros ($795 billion) of riskier real estate as they try to clean up their balance sheets, Cushman & Wakefield Inc. said.
The region’s lenders, asset managers and bad banks, such as Spain’s Sareb, sold 40.9 billion euros of loans tied to property in the first six months, 611 percent more than a year earlier, the New York-based broker said in a report today. Transactions including foreclosure sales will reach a record 60 billion euros this year, Cushman & Wakefield estimates.
Lenders such as Royal Bank of Scotland Plc are accelerating loan-portfolio sales as borrowing costs fall from a year ago and economic sentiment improves. Lone Star Funds and Cerberus Capital Management LP are among U.S. investors that are taking advantage as sellers opt to offer bigger groups of loans, making it more difficult for smaller firms to make purchases, Cushman & Wakefield said.
“U.S. investors have raised an enormous volume of capital targeting opportunistic real estate,” Frank Nickel, executive chairman of Cushman & Wakefield’s EMEA corporate finance group, said in a statement. “‘Mega-deals’ prove popular to these buyers since they offer a chance to gain large exposures to key assets and markets in one transaction, saving on both costs and time.”
The average size of loan-sale transactions in the region increased to 621 million euros in the first half from 346 million euros a year earlier, according to the report.
Lone Star has been the biggest buyer of real estate loans in Europe this year, spending about 15 billion euros, Cushman & Wakefield said. Cerberus is second with 6.3 billion euros of loan purchases.
The 584 billion euros of non-core assets to be sold include loans, foreclosed properties and residential mortgages held on the companies’ balance sheets. The value is before impairments, Cushman & Wakefield said.
“The upcoming stress tests being enforced by the European Central Bank will guarantee that the current high levels of activity in the market will be sustained in the next few years,” Federico Montero, head of loan sales at Cushman’s EMEA corporate finance unit, said in the statement.
Spain has 192 billion euros of non-core real estate that needs to be sold or restructured, the most in Europe, according to the report. The majority is related to residential mortgages and foreclosed properties.