Credit Suisse is selling a $2.8 billion portfolio of soured commercial property loans to Apollo Management LP for $1.2 billion in one of the largest bank sales of distressed real estate loans since the downturn, according to people familiar with the matter.
The properties backed by the loans include apartment buildings in Germany and hotels in Denmark, Sweden and France, many of them of lower quality and in hard-hit locales, the people say.
Since the 2008 financial crisis, expectations of a worldwide wave of defaults by landlords and fire sales by banks have tantalized private-equity firms. In the early 1990s, some of these same firms generated handsome profits after buying big loan portfolios from the government as it took over failed thrifts.
This time around, fire sales by banks have been few and far between. Banks have been wary of taking big losses on their boom-time loans, and regulators have encouraged banks to restructure many of their commercial mortgages rather than foreclose.
Now some buyers say the spigot is starting to open. Renewed banking profits have made losses on bad loans easier to swallow.
Signs of a stabilizing real estate market and demand for distressed assets from private-equity funds have pushed up the prices that buyers are willing to pay. Loan sales could help healthier banks clean up their balance sheets as they look to grow with an economic recovery.
"We're starting to see loans in the marketplace at more realistic prices," said Paul Fuhrman, an executive at Colony Capital LLC, which has been buying distressed-loan portfolios. "We are definitely seeing the banks loosen up."
Major loan-sale advisers say they, too, have seen a large uptick in business. Brian Stoffers, an executive at CB Richard Ellis Group Inc., said last month that the real estate brokerage's loan-sale activity was up nearly 90% in 2010.
The loan-sale advisory firm Debt Exchange Inc. has sold commercial realty loans on behalf of 38 financial institutions since early October, compared with 19 in the last three months of 2009, according to Chief Executive Kingsley Greenland.
"Many banks are getting more aggressive," Greenland said. "Not only are they marking the assets appropriately but they're actually moving to dispose of the assets."