Categorized | Commercial

Banks Liquidating Their Commercial Loans in Europe

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Many major banks are in the process of selling off roughly twenty billion dollars in loans related to commercial real estate in Europe. The various banks selling these loans come from all over the globe, though the major sellers are British, Spanish, Irish, and German banks.

This most recent sell-off comes as a result of harsh regulations that are anticipated over the next two years. Based on the most recent sales of commercial property loans, it is believed that banks will only receive roughly twenty percent of the total value of loans. Analysts believe that hedge funds and buyout firms will make up the majority of the buyers.

Lone Star Funds and Blackstone Group are two firms that are likely to be major bidders on the loans. Both buyout firms have been very actively involved in the purchasing of such loans throughout the past few years. Most recently, Blackstone Group purchased twenty-five percent of the commercial real estate loan portfolio of the Royal Bank of Scotland.

The banks are expected to receive far less than the face value of the loans, as time constraints are leading many banks to short sale the loans. Because bank-capital rules will drastically change in 2015, such loans would create tremendous losses and foreclosures, and thus create havoc on the European commercial property lending market.

While Blackstone Group and Lone Star Funds are both expected to be major players in the purchasing of these commercial real estate loans, there is no clear indication as to who else will decide to place a bid.

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About Drew Wilson

Drew focuses on the Commercial and Mortgage/Finance categories.

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