When it comes to non-performing mortgage loans, we tend to mix the good with the bad, with reference not only to the different types of mortgaged assets (see also “Very special servicing”, this issue will be deepened detail in the next posts), but also – and especially – to the position of these properties.
Those who consider the so-called “special situations” and examine individual operations instead of large areas are inevitably looking for opportunities. Considering 100 NPLs 50 are granted by properties located in the provincial territory, 40 in the hinterland, 10 in the centre of Milan: well, all (or almost all) bet on the latter.
This results is a “professional synecdoche”, which means that in the long run the players will identify the NPL market with residential properties situated in the centre of Milan, which represent, for example, all the properties located in dynamic and attractive locations.
Then, what happens to the remaining 90%?
Based on the updated data (source: BKIT) 75% of the gross distress is associated with companies, 75% of which is linked to non-residential properties.
In short and simple terms, about 60% of NPLs comes from sheds and shopping centres. Evidently, this problem is far from the centre of Milan.
The remaining 90% of non-performing mortgage loans will probably take one of these paths:
– it will be included in a multi-billion securitisation and will be recovered through judicial action at 30% – 40% (on average) of its nominal value;
– it will be redeemed by the owner or the user of the property;
-it will be purchased or transferred by virtuous companies looking for opportunities in places not explored yet;
– it will be refurbished or converted by credit managers, with the purpose of enhancing and selling it more quickly at a higher price, although in Italy the earnings capacity is not recovering yet.
Emanuele Grassi
