European Real Estate Debt
ERES 2010
24th June 2010
Iryna Pylypchuk, Associate Director,
EMEA Research & Consulting, CB Richard Ellis
Investment market turnover in Europe
€ Million
Source: CB Richard Ellis, Property Data, KTI
VIX (Daily Close) and CBRE EU-15 Office Yield
VIX
Prime Office Yield (%)
6.5
100
Sept/Oct 08
Lehmans &
Banking Crisis
6
75
Autumn 98
Russian Bonds
50
Sept 01
9/11
Aug 02
Enron
Mid 07
Sub-Prime
º
5.5
Oct 97
Asian Debt
5
25
2000/1
Dot Coms
The “Perfect Calm”
0
4.5
96
97
98
99
00
01
02
03
04
05
06
07
08
09
10
11
12/29/95August-9707/16/98 10/21/99 01/29/01 05/13/02 08/19/0311/22/2004
February- Nove 09/16/2008
12/22/2009
06
mber-07
Source: CBOE VIX (21st May 2010), CB Richard Ellis
Lending drives values … drives lending … drives values!
350
New lending/refinancing, € billion
Capital Values (Index, 2001 = 100)
European Debt Lending
300
160
150
EU All Property Capital Value
250
140
200
130
150
120
100
110
50
100
0
90
2001
2002
2003
2004
2005
2006
Year of loan origination
Source: CB Richard Ellis, De Montfort University
2007
2008
2009
Bank Lending to UK Real Estate
Only includes banks required to report to the Bank of England
250,000
£ million
18%
Lending to real estate, amount outstanding £m (LHS)
Proportion of all bank lending
200,000
15%
Source: Bank of England
Mar-10
Mar-09
Mar-08
Mar-07
Mar-06
Mar-05
Mar-04
Mar-03
Mar-02
Mar-01
3%
Mar-00
0
Mar-99
6%
Mar-98
50,000
Mar-97
9%
Mar-96
100,000
Mar-95
12%
Mar-94
150,000
European CRE debt maturity profile
€ million
€970 billion of debt maturing in the next 10 years
Almost half in the next three years alone
Source: CB Richard Ellis, De Montfort University
European Commercial Real Estate Debt
Total Size: €970 billion
UK
34%
Rest of
Europe
42%
Germany
24%
Source: CB Richard Ellis
Outstanding European Commercial Real Estate Debt
By Year of Issuance
€ Billion
Year of Loan Issuance
Source: CB Richard Ellis, De Montfort Study
Outstanding European Commercial Real Estate Debt
Total Size: €970 billion
Long-term Debt
(post 2015
maturity),
€258 billion, 27%
Old Debt (pre 2005
issuance),
€130 billion, 14%
Good Quality
Property Low
LTVs,
€185 billion, 19%
Poor Quality
Property,
€207 billion, 21%
Source: CB Richard Ellis
Good Quality
Property High
LTVs,
€185 billion, 19%
Segmentation of European Commercial Real Estate Debt
€ Million
Source: CB Richard Ellis
European CRE debt maturity profile
€970 billion of debt maturing in the next 10 years
Almost half in the next three years alone
€ million
200,000
UK
Germany
Rest of Europe
175,000
150,000
125,000
100,000
75,000
50,000
25,000
0
2010
2011
2012
2013
Source: CB Richard Ellis, De Montfort University
2014
2015
2016
Post 2017
Debt Market Outlook: Lengthy Workout
• Large backlog of un-refinanced debt
• Over €200 bn of the most troubling category
•
High initial LTV, Poor quality property
• Support mechanisms will prevent a flood of
distressed property, but…
• Unwinding of bank positions will result in a steady
flow of secondary property on to the market
Question 6 – “Which of the following poses the greatest threat to
the emerging European property market recovery?”
'Double dip' economic
recession
32%
Weak occupier demand
20%
Government funding
deficits
17%
Shortage of debt
finance
13%
Interest rate
rises/inflation
8%
Forced sales by
banks/others
4%
Development/vacancy
4%
Property has become
overpriced
3%
0%
5%
10%
15%
20%
Percent (n = 271)
Source: CB Richard Ellis
25%
30%
35%
European Real Estate Debt
ERES 2010
24th June 2010
Iryna Pylypchuk, Associate Director,
EMEA Research & Consulting, CB Richard Ellis