Bloomberg News

Banks to Sell $20 Billion of European Real Estate Loans

September 28, 2011

(Updates with Royal Bank of Scotland’s sale of loans in seventh paragraph.)

Sept. 28 (Bloomberg) -- Banks will sell about 15 billion euros ($20 billion) of loans secured by commercial property in Europe through 2012 as they anticipate tougher capital regulations, debt adviser Situs Cos. said.

British, German, Irish and Spanish banks will probably be the most active sellers of property loans, particularly those tied to peripheral markets or overseas, Situs said today in a statement. The Houston-based company has acted as an adviser on distressed loans in Europe, including sales by Credit Suisse Group AG from 2008 to 2010.

European lenders are starting to seek buyers for commercial property backed loans on their books. The Bundesbank, Germany’s central bank, has hired AgFe to help sell more than 4 billion euros of loans used as collateral by Lehman Brothers Holdings Inc. Lloyds Banking Group Plc is looking for a buyer for 1 billion pounds ($1.6 billion) of U.K. commercial property loans.

“Time constraints and pressure to deleverage will be the key drivers of loan sales,” Hugo Raworth, a director in Europe for Situs, said in the statement.

Some commercial property loans have been sold for less than 20 percent of their face value, he said. Most buyers will likely be hedge funds, buyout firms and other specialist investors.

Lone Star Funds

The largest property buyout fund created in the first half was a $5.5 billion distressed-debt vehicle raised by Lone Star Funds, according to alternative investment data provider Preqin.

Royal Bank of Scotland Group Plc agreed on July 13 to sell a 25 percent stake in a fund owning 1.4 billion pounds of U.K. commercial real-estate loans to Blackstone Group LP. RBS said “over time” the Edinburgh-based bank plans to sell the rest of its stake in the fund, which will be managed by the buyout firm.

About 170 billion euros of commercial real estate loans are scheduled to mature by the end of 2012, according to Situs.

An overhaul of bank-capital rules by the Basel Committee on Banking Supervision, known as Basel III, is due to start in 2015. This may trigger further losses, writedowns, foreclosures or sales of more than 200 billion euros of property loans in Europe this decade, CB Richard Ellis Group Inc. estimates.

--Editors: Ross Larsen, Andrew Blackman.

To contact the reporter on this story: Simon Packard in London at packard@bloomberg.net

To contact the editor responsible for this story: Andrew Blackman at ablackman@bloomberg.net


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