Investor demand for commercial real estate loan portfolios in both the U.S. and Europe appear to be rising, but these are “two different markets right now,” according to one expert.
The U.S. market has seen more transactions trading over the past two years, according to Jason Kopcak, managing director and head of whole loans at Cantor Fitzgerald. “There is a lot of activity in the U.S., but not that many large transactions — and very specific asset classes,” he said in an interview, noting that these deals have been segregated by collateral type, credit/performance, and sometimes geography.
In contrast, the European market is similar to where the U.S. was two years ago, Kopcak said, with “mostly large trades” of mixed-bag assets. Activity in this market picked up in the second and third quarters, he noted.
Recent deals in the European market include a U.K. loan portfolio secured mostly by high quality, London-based office, multifamily and retail properties that Kennedy Wilson and some of its institutional partners agreed to buy for $1.8 billion from the Bank of Ireland.
It's believed the deal represents one of the largest loan portfolio acquisitions in the current cycle, but executives at the company could not be reached for further comment.
Kopcak said about six CRE loan pools ranging from about $1 billion to $10 billion in size have traded in Europe this year with some deals “quietly” getting done.
Assets in Europe have been a mixed bag—not only in terms of property types -- but also in terms of whether the collateral is performing. Such deals have traded in various forms ranging from participations to traditional whole loans, Kopcak said. Some, he noted, have included U.S. assets “coming out of European banks.”
While in Europe the demand tends to be for legacy/seasoned whole loans throughout the credit spectrum, in the U.S. there is a “deeper and aggressive demand for performing bank paper,” said the Cantor executive.
With new originations falling short of demand, investors in the U.S. market have been buying seasoned/legacy originations from 2006 and 2007 if they are “performing” and “clean,” Kopcak said.