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European real estate loan and REO sales surge to new record in 2015

  • Q4 2015 was busiest quarter ever recorded with over €39.4bn of sales
  • Report identifies significant investment opportunities in Italy this year
  • 2016 closed transitions are predicted to be in the region of €70-80bn

Following a flurry of activity in Q4, a record of €85.9bn of European real estate loan (RE loan) and real estate owned (REO) transactions were completed throughout 2015, according to research out today from Cushman & Wakefield.

Despite volumes in the first nine months of the year trailing those observed in 2014, the total for 2015 surpassed the previous high of €82.1bn recorded the previous year. This was due to a handful of very large deals in the UK and Ireland towards the end of the year. The final quarter of 2015 saw both UKAR and NAMA complete the sales of their respective c.€17.8bn Granite Portfolio and c.€6.3bn Project Arrow, filling the gap in the market left by the likes of IBRC, Lloyds Banking Group (LBG) and RBS who took centre stage in 2014.

More than €39.4bn of transactions closed in Q4 alone, representing 46% of the annual total and the most ever transacted in a single quarter.

The UK led the way in 2015, accounting for 43% of all sales in the last quarter, with Ireland maintaining 2014 activity levels with c.€23.7bn closing in 2015. In contrast, Spain saw a 41% drop in activity compared to 2014, while Italian sales increased 12.5 times to c.€5.0bn.

Federico Montero, Head of Loan Sales, EMEA Corporate Finance, Cushman & Wakefield, said: “Although the UK and Ireland have again topped the sales volumes in 2015, there has been a real shift in the product vendors are offering. Supported by growth in the underlying residential market, large mortgage portfolios have dominated the headlines.”

Based on an understanding of remaining NCRE exposure and knowledge of activity to date, Cushman & Wakefield’s European Real Estate Loan Sales market report predicts high levels of activity in the UK, Ireland, Spain, the Netherlands and Italy in 2016.

In particular, Italy is tipped to see significant growth in sales volumes this year. After months of speculation, Italy finally established a national AMA. Despite currently only holding c.€750m of real estate related non-performing loans (NPLs), the National Resolution Fund can be expected to inherit further soured loans in the next 24 months.

Federico Montero added: “Following the success of other European AMA such as NAMA, the Italians have a good illustration of how best to maximise recoveries. With reforms to enforcement legislation now in place, the Italian market is set to grow further over the upcoming years.”

With €78.6bn of live and planned sales currently being tracked, Cushman & Wakefield estimates that the 2016 closed transaction volume will be in the region of €70bn to €80bn. With an increasing number of vendors and over €200bn of NCRE, Spain is anticipated to be one of the leading markets in 2016. Furthermore, driven by increasing investor interest and a recovering real estate market, Italian lenders will bring more to the market over the upcoming year.

Download the report