Busy first half for European real estate NPL sales as Spain takes centre stage

By Paul Norman - Wednesday, July 11, 2018 15:00

There have been €45.9bn (face value) of closed real estate loan and real estate owned portfolio transactions in H1 2018 in Europe across 30 transactions, in a busy period that saw attention turn to Southern Europe and in particular Spain's bank major deleveraging effort, report Evercore in its comprehensive European distressed real estate market findings.

The figure is 60% higher than the total for the first half of 2017 (c.€28.6bn) with the H1 2018 total equating to approximately 44% of the 2017 full year volume, showing activity remains at similar levels to those seen in last year’s record market

The European market became considerably more active in Q2 following a relatively slow first quarter. Just over €41.2bn of sales completed in Q2 compared to €4.6bn in Q1 2018, supported significantly by Caixabank’s€12.8bn REO sale which followed the exam ple set by Santander and BBVA last year, Evercore reported.

The trend for large-scale ransactions seen in 2017 has continued into 2018 with inparticular Spanish banks aiming to sell entire portfolios to accelerate their deleveraging efforts. As a result, the average OPB of sales rose to c.€1.5bn for 2018 YTD(1)with 11 deals classified as “mega-deals” (face value greater than €1bn)

The transactions completed to date have predominantly related to CRE loans (c.44% by volume), while REO transactions accounted for a further 30% due to the Caixabank deal. The remainder relates to residential mortgage portfolios, although it is worth noting that many CRE portfolio sales.

In terms of geography thanks to Caixabank’s sale to Lone Star, Spain saw the highest volume of closed transactions in H1 2018 with c.€16.9bn of deals completing and it will continue as a leading market in 2018.

Evercore said Italy’s market "remains lively" and accounted for a further €12.2bn of closed sales in H1 2018.

The loan sales market in Greece continues to develop with the first large secured loan sale completing in Q2.

Southern Europe together accounted for 69% of the total closed volume and continues to draw the attention of all the key NPL investors, Evercore said.

The UK accounted for a further 14.6% or €6.7bn of the total to date, the majority of which was the residential mortgage sale by UKAR. In a similar late stage of the cycle, 13.8% was in Ireland where the €6.3bn of recorded transactions is driven mainly by LBG’s €4.9bn sale of its Irish mortgages to Barclays, PIMCO and M&G.

Still more plenty more where that came from

Evercore is tracking approximately €33.4bn of live European RE loan and REO transactions across 33 deals from 25 different vendors meaning the total for the year is set to reach similar levels to the record levels seen over the past few years.

Spain accounts for circa 38% or €12.8bn of the total live deals and will remain a key focus for investors. A further c.€6.0bn relates to each of Cyprus and Italy.

The largest live transactions recorded by Evercore are:

Project Hellix – c.€6.0bn: Bank of Cyprus is selling its entire stock of bad loans, the vast majority of which are secured by commercial and residential real estate.

Projects Coliseum – c.€5.0bn: Banco Sabadell is marketing four separate NPL and REO sales, the largest of which is the €5.0bn REO portfolio from the former CAM called Project Coliseum

Project Milan – c.€1bn: The sale of secured NPLs from UniCredit, dubbed Project Milan. The Italian bank has been an active vendor in the loan sales market, most notably of its Project Fino securitisation in 2016

Planned Transactions

Evercore's REPS team is tracking a future pipeline of c.€62.5bn in potential European RE loan and REO transactions. This is well above the €35bn it recorded at the end of December 2017. Spain accounts for c.76% of the total pipeline. Italy is the second largest country with a pipeline amounting to c.€14.2bn or 23%, across six transactions


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