Experts: Lots of Opportunities for U.S. Investors in European Debt
By Carl Gaines June 25, 2013 10:24 am
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SAREB sold a total of 550 homes between February and May of 2013. Currently, it has “another 800 operations which are pending closing and has received preliminary offers on 2,200 other properties,” according to a statement from the bank, which is preparing to sell its first portfolio of real estate—estimated to be worth 200 million euros ($265 million). SAREB is marketing a pool of housing in Seville and Valencia. Investors can bid until July 17, 2013. “We’re working to close the sale with international investors,” a SAREB spokesperson told The Mortgage Observer, “but we can’t give you details in advance.” Apollo, Colony Capital, Centerbridge Partners and Cerberus are rumored to be among the interested investors. “The jury is out at the moment,” said Cushman & Wakefield (CWK)’s Mr. Lindsay. “At this stage, there isn’t enough evidence of transactions completing to see if it will be a big opportunity. Potentially it should be, but it obviously depends on the pricing at which SAREB feels able to trade, in the same way as NAMA.”
In Spain, RCA’s Mr. Kelly added, “there is a similar if not greater level of distressed [properties than in Ireland], so there is no reason why we cannot see the same activity, if not greater.” Much will depend on the incentives provided to investors, he pointed out. “The Irish government lowered the stamp duty quite dramatically. It created a capital gains tax freeze for buyers coming into the market as well as other government incentives to get the market going again,” Mr. Kelly said. “So maybe other governments like Spain should be considering incentives like that for these investors.”
“There’s a time when you move and you act, so you head toward resolving the problem,” agreed Bliss Morris, CEO of the loan sale adviser First Financial Network, which may soon be engaged to prepare several portfolios for sale in Southern Europe.
If Southern Europe still remains a field to be explored, U.S. real estate lenders are bullish on their opportunities in Northern European markets, which are perceived as less risky. “There is a real appetite from U.S. lenders,” said Darren Davey, managing director of London-based commercial mortgage special servicer Solutus Advisors. European banks have to increase their core Tier 1 capital ratio and are shrinking their lending activity. “Lending to real estate has become less and less attractive for European banks,” Mr. Davey added.
“Banks globally have tended to become more focused on their domestic markets,” said Mr. Lindsay. “In the last few years, we have seen increased activity from American players. Some of the insurance companies, like Pricoa [the international commercial mortgage lending business of Prudential (PRU) Financial] and MetLife, have become more active in the U.K.”
“Compared to banks, life insurance lenders naturally take a longer view of real estate, and we are a good fit for [European] owners who take the same long-term view,” said Drew Abernethy, head of Pricoa’s European originations. “But even compared to probably most European lenders, we are able to offer more flexibility.”
For 2013, Prudential has up to $1.3 billion available for long-term, fixed-rate senior debt transactions in Europe. Most recently, it provided a seven-year, $73 million loan on an office property in the Canary Wharf area of London, as well as its first in continental Europe—a $72 million loan for six warehouse properties spread throughout the Netherlands.
Among U.S. banks, Wells Fargo (WFC) is expanding its U.K. activities. The bank has broadened its U.K. commercial property lending, and most recently, in partnership with Lone Star Funds, it entered exclusive negotiations to acquire Eurohypo’s £4 billion ($6.24 billion) U.K. commercial property loan book from Commerzbank (CRZBY). “Commerzbank is currently involved in intensive discussions regarding the sale of a major portion of its commercial real estate finance portfolio in the United Kingdom,” a spokesperson for the bank confirmed.
In Europe, banks “are getting a good margin, a good coupon, higher than they would get for the same collateral in the U.S.” Mr. Davey added. “Europe is attractive from a lending perspective.” So, on overseas fields, the game for U.S. investors has yet to be completed.
apirolo@observer.com
