U.S. firms look to capitalize on Europe’s debt crisis

New York /
Sep.September 19, 2012 12:00 PM

Amid the European debt crisis, real estate investors on this side of the pond are seeking ways to cash in on the distress. As a result, they are purchasing discounted portfolios of troubled commercial real estate mortgage debt at heavy discounts. Some of the firms include the Blackstone Group, the Dallas-based Lone Star Funds and Colony Capital in Santa Monica, Calif. The firms reportedly aim to reap returns of 12 to 18 percent.

These sales could accelerate in the next two to three years as fewer firms “extend and pretend” — the practice of extending loan terms in hopes that loan values would improve.

Banks across Europe are believed to sell their distressed mortgages to increase capital and prevent future losses. These banks could cut their commercial real estate exposure by nearly $800 million.

CBRE Group data show that 11 billion euros of loans are currently on the market; individual loan sales are also happening off-market. So far this year, there have been 14 transactions for loans sales that reached 7.5 billion euros in value. The loan portfolios consist of commercial property in Ireland and England, and Spain is now the next focus for such acquisitions. [NYT]


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