european real estate debt eres 2010 24 th june 2010 iryna pylypchuk, associate director,
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European Real Estate Debt ERES 2010 24 th 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. 96. 97. - PowerPoint PPT PresentationTRANSCRIPT
European Real Estate Debt
ERES 201024th 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
0
25
50
75
100
12/29/95August-9707/16/98 10/21/99 01/29/01 05/13/02 08/19/0311/22/2004February-06
November-07
09/16/200812/22/2009
4.5
5
5.5
6
6.5
º
The “Perfect Calm”
Oct 97Asian Debt
Autumn 98Russian Bonds
Sept 019/11
Aug 02Enron
2000/1Dot Coms
VIX (Daily Close) and CBRE EU-15 Office Yield
Source: CBOE VIX (21st May 2010), CB Richard Ellis
Sept/Oct 08Lehmans &
Banking Crisis
VIX Prime Office Yield (%)
96 97 98 99 00 01 02 0703 04 05 06 08 09 10 11
Mid 07Sub-Prime
Lending drives values … drives lending … drives values!
0
50
100
150
200
250
300
350
2001 2002 2003 2004 2005 2006 2007 2008 2009
90
100
110
120
130
140
150
160
European Debt Lending
EU All Property Capital Value
Source: CB Richard Ellis, De Montfort University
New lending/refinancing, € billion
Year of loan origination
Capital Values (Index, 2001 = 100)
Bank Lending to UK Real Estate
0
50,000
100,000
150,000
200,000
250,000
Mar
-94
Mar
-95
Mar
-96
Mar
-97
Mar
-98
Mar
-99
Mar
-00
Mar
-01
Mar
-02
Mar
-03
Mar
-04
Mar
-05
Mar
-06
Mar
-07
Mar
-08
Mar
-09
Mar
-10
3%
6%
9%
12%
15%
18%
Lending to real estate, amount outstanding £m (LHS)
Proportion of all bank lending
Source: Bank of England
Only includes banks required to report to the Bank of England
£ million
European CRE debt maturity profile
€970 billion of debt maturing in the next 10 years Almost half in the next three years alone
€ million
Source: CB Richard Ellis, De Montfort University
Germany24%
Rest of Europe
42%
UK34%
Total Size: €970 billion
European Commercial Real Estate Debt
Source: CB Richard Ellis
Outstanding European Commercial Real Estate Debt
Source: CB Richard Ellis, De Montfort Study
€ Billion
Year of Loan Issuance
By Year of Issuance
Long-term Debt (post 2015 maturity),
€258 billion, 27%
Poor Quality Property,
€207 billion, 21% Good Quality Property High
LTVs, €185 billion, 19%
Good Quality Property Low
LTVs, €185 billion, 19%
Old Debt (pre 2005 issuance),
€130 billion, 14%
Total Size: €970 billion
Outstanding European Commercial Real Estate Debt
Source: CB Richard Ellis
Segmentation of European Commercial Real Estate Debt
€ Million
Source: CB Richard Ellis
European CRE debt maturity profile
0
25,000
50,000
75,000
100,000
125,000
150,000
175,000
200,000
2010 2011 2012 2013 2014 2015 2016 Post 2017
UK Germany Rest of Europe
€970 billion of debt maturing in the next 10 years Almost half in the next three years alone
€ million
Source: CB Richard Ellis, De Montfort University
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?”
32%
20%
17%
13%
8%
4%
4%
3%
0% 5% 10% 15% 20% 25% 30% 35%
Property has becomeoverpriced
Development/vacancy
Forced sales bybanks/others
Interest raterises/inflation
Shortage of debtfinance
Government fundingdeficits
Weak occupier demand
'Double dip' economicrecession
Percent (n = 271)
Source: CB Richard Ellis
European Real Estate Debt
ERES 201024th June 2010
Iryna Pylypchuk, Associate Director, EMEA Research & Consulting, CB Richard Ellis