NEW YORK (TheStreet) -- European banks will sell an estimated $380-$760 billion in commercial real estate (CRE) loans over the next five years, leading to investing and lending opportunities for several U.S. players, according to a Morgan Stanley report published Friday.
Banks in the European Union have already announced plans to unload $380 billion of that total, including some $50 billion in U.S. exposure, Morgan Stanley's analysts estimate.
|Wells Fargo leads U.S. banks with more than $50 billion in capacity for new loans, Morgan Stanley estimates.|
While U.S. companies won't be able to sop up all the excess lending capacity as Europe's banks deleverage, some have already been taking advantage of the dislocation and are expected to continue. Here are three best-positioned U.S. stocks for the Great European CRE selloff.
3. Wells Fargo (WFC) has a slight edge over JPMorgan Chase (JPM) when it comes to expected CRE lending capacity, according to Morgan Stanley's analysis which includes current capacity plus expected new capacity generated by earnings over the next five years. Both banks are expected to have CRE lending capacity in the mid-20 billion dollar range in a bear case and in the high 30s in a bull scenario. The banks bought some $5 billion in U.S. CRE loans between them from Irish lenders in 2011.Wells far exceeds JPMorgan when it comes to total current lending capacity across all types of loans, however. Wells has more than $50 billion of total capacity, with JPMorgan at under $38 billion. 2. Simon Property Group (SPG) The giant U.S. mall operator has already been an active buyer in Europe, which currently accounts for 3% of its portfolio. Simon recently bought 29% of Klepierre, a French mall real estate investment trust (REIT). Simon financed the acquisition in conjunction with a U.S. portfolio purchase, raising a total of $3.1 billion in debt and equity, while paying an interest rate of just 3.4% for 15-year unsecured debt. "As the result of favorable financing, the acquisitions were immediately accretive and management increased 2012 earnings guidance by 2%," Morgan Stanley analysts point out. Overall, they believe U.S. REITs "have the capacity to absorb up to $150 billion of CRE over the next five years." 1. Blackstone Group (BX) The private equity giant "looks uniquely positioned to benefit from dislocation in global real estate given significant firepower at its disposal, with $48 billion of real estate [assets under management] including $13 billion of dry powder. [Blackstone] currently has north of $10 billion of commitments for its latest flagship global real estate fund," according to Morgan Stanley. Blackstone's $13 billion of "dry powder" compares to $8 billion at Lone Star Funds, the second best-positioned private equity player, and leaves Goldman Sachs (GS)'s private equity arm a distant third with $3 billion to invest. -- Written by Dan Freed in New York. Follow this writer on Twitter.
Select the service that is right for you!COMPARE ALL SERVICES
Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.
- $2.5+ million portfolio
- Large-cap and dividend focus
- Intraday trade alerts from Cramer
- Weekly roundups
Access the tool that DOMINATES the Russell 2000 and the S&P 500.
- Buy, hold, or sell recommendations for over 4,300 stocks
- Unlimited research reports on your favorite stocks
- A custom stock screener
- Upgrade/downgrade alerts
Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.
- Diversified model portfolio of dividend stocks
- Alerts when market news affect the portfolio
- Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.
- Real Money + Doug Kass + 15 more Wall Street Pros
- Intraday commentary & news
- Ultra-actionable trading ideas
Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.
- 100+ monthly options trading ideas
- Actionable options commentary & news
- Real-time trading community
- Options TV