Soured property-debt sales slump in Europe amid Brexit concerns

[LONDON] The clear up of distressed real estate assets slowed in Europe as deals were delayed by investors concerned about the Brexit vote, according to Evercore Partners Inc.

Soured loans and troubled assets totaling 24.4 billion euros (S$37.2 billion) were sold in the eight months through August, a drop of 39 per cent from the same period in 2015, the merger advisory firm founded by Roger Altman said in a report Tuesday.

Europe's 59 major banks and asset managers had a total 462 billion euros of gross exposure to non-core real estate as of June 30, the report showed.

"A lot of real estate deals in general, not just loan sales, were halted because of Brexit but these may come to market in the second half," said Federico Montero, managing director of real estate portfolio solutions at Evercore in London.

"The annual total will largely depend on whether the UK's asset management agency disposes of the Bradford & Bingley loan portfolio. If it doesn't, there will be a massive hole in full-year sales."

UK Asset Resolution Ltd, established by the British government in 2010 to work out soured assets, is a seeking a buyer for about 22 billion euros of former Bradford & Bingley Plc loans. The portfolio represents more than half of planned real estate debt sales in Europe this year, according to Evercore.

Among the deals already negotiated this year, a venture between private-equity firm Lone Star Funds and JPMorgan Chase & Co agreed to buy Propertize BV, the Dutch bad bank, for about 895 million euros.

Propertize was given as long as a decade to dispose of soured real estate assets after SNS Reaal NV was nationalized in 2013. The Dutch government decided to privatise the company last year, and at that stage it held 5.5 billion euros of loans and real estate.

Future loan sales will be dominated by Spain, where lenders have a gross 189 billion euros of non-core real estate, and Italy, according to Montero.

With 59 billion euros of live and planned deals being tracked, Evercore forecasts disposals this year will total 50 billion euros to 60 billion euros.

That compares with the all-time high of 85.9 billion euros of sales recorded in 2015 by New York-based broker Cushman & Wakefield Inc.

BLOOMBERG