There were circa €28.1bn (face value) of closed real estate loan and REO sales recorded in the first six months of 2017 across 36 transactions – up on the first halves of 2015 and 2016 – and there are a further €51.7bn of live transactions, particularly including major portfolios in Spain, Portugal, Italy and the UK. The figures recorded in Evercore Real Estate Portfolio Solutions’ European Distressed Real Estate Market comprehensive figures for H1 2017 have led the adviser to revise upwards its annual forecasts for 2017 from €50bn to €60bn to €60-€80bn of sales.
According to Evercore’s H1 2017 figures the circa €28.1bn (face value) of closed RE loan and REO transactions in the first half of 2017 across 36 transactions was dominated by UKAR’s sale of the circa €15bn Project Ripon in Q1.
There were two mega deals – the Project Rippon sale of former Bradford & Bingley UK mortgages to Blackstone and Prudential, and the Banca Marche / Banca Etruria / CariChieti transaction to Atlante II for €1.8bn. The three rebranded “good” banks securitised a mixed circa €2.2bn loan portfolio to the Atlante II fund for a reported price of €713m.
The H1 total was higher than the corresponding totals for both 2015 and 2016 (€25.5bn and €19.5bn respectively), and was in line with Evercore’s initial forecast of €50-60bn for the year on a straight line basis.
Evercore said Project Rippon slightly distorted the true picture of the market as it contained performing mortgages and also diverted attention away from the increase in activity in southern Europe.
In addition, the number of deals completed has dipped compared to the 82 and 40 sales recorded for H1 2015 and H1 2016 respectively. It writes: “This is potentially due to a broadening in the variety of loan disposal structures, particular in Italy, with the more complex processes having a longer overall timeframe.”
64% of the closed volume related to residential mortgages, with 26% linked to CRE loans and just 10% REO sales.
Circa.€17.7bn of the sales were UK transactions in H1 2017 or 63% of the European total. This was over three times the amount sold in the whole of 2016. The UK also saw a number of secondary loan and REO deals from private equity firms exiting portfolios.
A further 13% of reported activity related to Italy where almost €3.8bn of sales closed. In Spain, closed volumes have been slightly below expected levels in the year to date. Just under €3.3bn of sales have completed, equating to circa 35% of last year’s Spanish annual total.
As anticipated, the distressed real estate markets in both Ireland and the Netherlands have been quiet but Evercore said this is likely to change in the former due to potential sales from NAMA, AIB and Danske Bank.
Sellers and buyers
Unsurprisingly UKAR was by a significant distance the most active seller and Evercore points out with plans to sell a further circa €7.2bn of former Bradford & Bingley buy-to-let mortgages in the near future, it can be expected to appear near the top of the list come year end.
In terms of buyers, Blackstone has bought the largest proportion of European RE loans and REOs in H1 2017. It closed circa €12.1bn of deals, including the €400m Project Patriot from Banco Popular and the €300m Project Buffalo from BBVA.
Also involved in the UKAR deal, Prudential bought a circa €3.6bn slice of better performing mortgages and as a result was second most active investor.
Despite being a rescue fund rather than an investor, Atlante II was the third most active buyer following its purchase of NPLs from Banca Marche, Banca Etruria, CariChieti, and separately Carife. Given its involvement in BMPS’s NPL securitisation, it will also likely move up the top buyers’ list during H2 2017
The final top five spots were taken by Bain Capital Credit and Mount Street, the former completing three transactions in Iberia and reportedly involved in several live sales across Italy and Spain
The top five investors together account for 70% of the total closed sales volume. With Lone Star’s deal for Novo Banco awaiting certain approvals and Santander approaching four investors with a circa.€30bn opportunity, the top buyers’ list is anticipated to change over the coming six months, Evercore writes.
Looking forward
The REPS team is tracking 22 live transactions across Europe with a combined face value of circa €51.7bn, an 86% rise on the total being followed as at the end of 2016 and highlighting the level of activity going on “behind the scenes” by vendors in the first half of the year in preparing portfolios for market, Evercore said. Its live transactions table published above was sourced in conjunction with Debtwire.
As expected, Spain tops the list with circa €31.5bn across seven transactions or 61% of the European live total. Growing investor interest in Portugal is supported by circa €12.6bn of live sales.
Italy is the third most active country in terms of live deals.
Top live deals
Santander NPLs & REOs – circa €30bn: Santander is reportedly in the process of marketing a 51% stake in a circa €30bn NPL and REO portfolio to four selected investors. The sale may also include its servicer Aliseda.
Novo Banco – circa €12.6bn: Subject to various approvals, it appears that Lone Star will shortly buy Novo Banco. The bank has a dedicated “side unit” of non-core assets and will give the US PE firm a substantial exposure to the Portuguese NPL market.
Project Elrond – circa €1.5bn: Credito Valtellinese is marketing a circa €1.5bn loan portfolio via an Italian securitisation, which will seek the GACS guarantee on the senior tranche.
Planned transactions
Evercore says there is a pipeline of circa €24.8bn in planned European RE loan and REO transactions. This is above the €18.8bn recorded six months ago, and is supported by an influx of deals from Spain, Ireland and the UK
Approximately 44% of the total relates to Ireland where, following its recent IPO, AIB is expected to continue to wind-down its RE NPLs after the sale of Project Cypress earlier in the year. Evercore said it is also rumoured that Danske Bank is considering the sale of circa €2bn of performing mortgages
In the UK it is expected that UKAR will bring another circa €7.2bn package of mortgages to the market.
Spain comprises a further 8%, with Banco Sabadell planning a circa €1bn disposal.
Source: CoStar