According to Cushman & Wakefield's Corporate Finance team, European banks and asset management companies have a gross exposure to non-core real estate that is subject to disposal or work-out strategies of $770 billion (€584 billion). Properties for sale in Doha
Despite the record amount of commercial real estate (CRE) and real estate-owned (REO) sales seen so far this year, the deleveraging phase in Europe is far from over, according to the findings reported in the firm's European Real Estate Loan Sales Market H1 2014 update.
For the in-depth study, Cushman & Wakefield Corporate Finance conducted detailed research into the non-core real estate exposure of 46 banks and asset management agencies throughout Europe. The nine European "poor banks" studied hold over 46% of total gross non-core real estate exposure, suggesting their significance in the CRE loan and REO sales markets in the coming years.
WPC Updates | Top Buyers of European Real Estate Loans 1st Quarter 2014 The report details eight'mega-deals,' or transactions with a face value of more than $1.3 billion, that closed in H1 and another four that are currently being monitored. These "mega-deals" accounted for 71% of total H1 loan selling value, up from 40% in 2013.
In H1 2014, the average size of loan sale transactions rose to $818 million from $455 million in the same timeframe last year, bucking the trend seen across Europe in 2013, making it even more difficult for smaller investors to engage in the sales process.
Lone Star and Cerberus, two large US investors, continue to make headlines, accounting for 77% of all European CRE loan and REO acquisitions in H1 2014.
Cushman & Wakefield's EMEA Corporate Finance group's Executive Chairman, Frank Nickel, said, "US investors have raised a huge amount of money to invest in opportunistic real estate. These buyers prefer'mega-deals' because they enable them to obtain broad exposures to key assets and markets in one transaction, saving both money and time."
Following a record-breaking first quarter led by IBRC, the second quarter saw activity expand to Southern Europe as vendors seek to capitalize on the region's growing investor appetite. As a result, Cushman & Wakefield's Corporate Finance team reports that $21.4 billion in transactions were completed in the three months leading up to July, more than six times the amount closed in the second quarter of 2013 ($3.3 billion).
When compared with the $32.5 billion figure for Q1 2014, the overall value for the first half of this year is $53.8 billion. This reflects a volume rise of over 30% for the entire year of 2013 and 611 percent for the first half of 2013.
Due to a busy first quarter, Cushman & Wakefield Corporate Finance predicts that closed CRE and REO revenues would hit $79 billion in 2014.
Federico Montero, Head of Loan Sales, EMEA Corporate Finance at Cushman & Wakefield, said, "Although the record loan sales volume seen so far in 2014 is remarkable, the 770 billion in non-core real estate exposure across Europe demonstrates the magnitude of the deleveraging phase still to come. Furthermore, the ECB's forthcoming stress tests would ensure that the market's current high levels of operation will be maintained over the next few years."