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Sale of Loan Portfolios
Toxic Debt Sale
European banks have successfully sold off over 7.5 billion Euros worth of loans so far this year according to CBRE. The global real estate advisor has tracked 14 transactions in the region including portfolios secured against American and Australian assets as well as European, but six of the deals have involved portfolios comprised solely of assets in the UK and Ireland.
According to the report this total will reach around 20 billion Euros by the end of the year if the banks get their way. CBRE estimates that banks are currently marketing nine portfolios worth around 11 billion Euros. This includes a sale from Lloyds of 700 individual Irish property loans worth 2 billion Euros. Natale Giostra, Head of EMEA & UK Debt Advisory, CBRE, said: “Both performing and non-performing loan portfolios have been successfully transacted this year by European banks seeking to reduce their exposure to real estate. Some institutions, such as RBS, are now expressing a preference to pursue asset sales where they have control over the physical property. "However as we can seen from the Lloyds example, loan disposals are still seen as the most efficient strategy for reducing overall exposure, particularly where the underlying assets require active management or lot sizes are smaller meaning they are time consuming and costly to deal with individually."
The 20 billion Euros could yet be a conservative estimate as banks increasingly get on board the getting-rid train in advance of new rules increasing the amount of capital they need to hold against property loans.
“It is not a question of if any more, but only a question of when to sell,” said Keith Breslauer, managing director of Patron Capital, the property-focused private equity fund.
“Banks are doing everything in their power to hold out, as they want to wait for the market to improve and pin back there losses, but, ultimately, this stuff has to go,” he added.
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