Over the last several months, risks have been rising across the Eurozone. The recent announcements to stabilize conditions could raise optimism in Europe. Yet, at the same time, regulatory initiatives will require institutions to recapitalize their balance sheets. As history has shown, events such as these can provide opportune moments to achieve outsized performance by investing in opportunistic investments. More specifically:
The growth in debt over the past cycle has led to a significant amount of loan maturities over the near term which may total as much as €400 billion over the next three to four years. In addition, recent reports indicate that default rates have risen to 10.9 percent on commercial real estate loans with European banks already holding €151 billion of defaulted loans.
Contributing to these defaults is the debt funding gap. This gap represents the shortfall between maturing debt secured by property and the capital available to refinance it. The debt funding gap for Europe over the next three years is estimated at $118 billion and there is an imminent need to source financing from non-bank lenders such as insurers.
Source : RREEF