Real Capital Analytics’ (RCA) deal flow analysis indicates that Europe is starting to make headway in dealing with its distressed real estate loans while the US is over the hump having dealt with over half of its distress.
Of the $394 billion of US mortgages that became troubled over the past cycle, 58% have now been resolved with $164 billion remaining to be worked out.
“Part of this has been US banks having the ability to deal with their debt, more US investors interested in taking on the workouts and also value appreciation that has returned assets into the black,” commented Simon Mallinson, Executive Managing Director EMEA. “New instances of distress fell substantially in Q4 and totalled $4 billion, the lowest level this cycle.”
In 2012, European banks started to take more aggressive steps to resolve the huge balances of troubled property loans, nearly four years after the wave of distress flooded their balance sheets. Both sales of property and bulk sales of non-performing loans secured by property rose substantially in 2012.
Ireland topped all countries with nearly 90% of its transactions resulting from a distressed situation, while the UK and Germany have also made strong starts. Joseph Kelly, Director of Analysis, said “US opportunistic funds have been the buyers of most non-performing loan portfolios, but they have accounted for just 20% of distressed property acquisitions, where a more diverse range of buyers are active.”
The US may serve as a benchmark for Europe as it is much further ahead in the deleveraging process. RCA estimates that it could take up to two further years for Europe to reach the same stage as the US currently enjoys. With over 60% of its troubled assets dealt with, the US market is now seeing positive investor interest in secondary assets and markets.
