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Banks Shedding European Real Estate Assets

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Banks Shedding European Real Estate Assets

By - Wednesday 26 September 2012

Banks in Europe have been continuing to dispose of property assets in 2012, with transactions worth a total of EUR 7.5 billion (GBP 5.9 billion) being completed so far this year. Research conducted by CBRE revealed that the loan portfolios that have been sold have included assets from destinations as diverse as Australia, the US, Ireland and the UK. In addition to the deals that have already been concluded, the organisation estimates a further EUR 11 billion worth of assets are being marketed by various financial institutions in Europe.

Philip Cropper, managing director of real estate finance at CBRE, explained one of the most challenging aspects of this market is valuing portfolios correctly. "We have seen several transactions fall by the wayside during the year due to the complexities of being able to accurately value large and intricate loan portfolios, where there are sometimes large levels of distress," he stated. Natale Giostra, head of Europe, the Middle East and Africa, and the UK debt advisory at the firm, added that many banks are particularly keen to offload assets that need "active management" or small lot sizes that are time-consuming to deal with.

Earlier this month, JP Morgan Cazenove predicted that European banks looking to deleverage are aiming to sell EUR 231 billion worth of real estate holdings in the next year. CoStar UK reported that, of this amount, 37.6 per cent is expected to come from UK property investments, while 21.2 per cent of the total will originate in Spain. Banks in Germany and the Netherlands also have substantial real estate portfolios to dispose of, the firm added. 

According to CBRE's predictions, however, European banks will not offload as many commercial property assets as they did in 2011, when EUR 20 billion of real estate holdings were sold off. Mr Cropper believes the total value of deals by the conclusion of 2012 will be below this level, although he is confident that "a good quantum of sales should be transacted before the year end and further announcements of new loan sales are also anticipated".

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