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A big wave of American investors is looking at distressed opportunities in Europe, according to Jos Short, executive chairman of Internos Global Investors.

The investors includes players like Oaktree and Varde but also Blackstone. ‘Blackstone has said that Europe is where it’s going to play. For vendors of loan books this is good news,’ Short said.

He made the comments at the PropertyEU Distressed Investment & Workout Briefing hosted in London last week by law firm SJ Berwin. Besides the Americans, Asian investors are also showing more appetite, Mathieu Roland-Billecart, partner real estate corporate finance at Ernst & Young, said. ‘Asia is coming in quite strongly. For Japanese investors who can get only 1% yields on bonds in Japan, 6% returns sound quite sexy. Even pension funds are looking at some single-asset situations. The market is getting deeper and broader.'

In terms of sources, Roland-Billecart believes the UK and Ireland will generate 80% of the NPL deals coming through in 2013. NPL opportunities will not feed through in Spain until 2014, he predicted. ‘It is taking so long for Sareb (Spain’s bad bank, ed) to set up. There will be opportunities before then, but it will be another 12 to 18 months before it starts going in a big way.’

During his introductory presentation, Roland-Billecart singled out four key pools of potential opportunities for distressed real estate: bank loans, maturing CMBS structures, overleveraged borrowers and corporate insolvency.

In terms of opportunities, Short has his sights firmly fixed on the European hotel sector. His company, which was formed in 2008 and bought GPT Halverton for €2 in 2009, now has 80 staff managing €2 bn in assets. Internos also manages portfolios on behalf of American investors:

But while the NPL sector does offer some attractive opportunities, investors need to proceed with caution, Short warned. ‘A health warning comes with the NPL sector. The question investors need to ask is: how are the early deals performing for the buyers? Good assets tend to trade out pretty quickly and there’s a lot of secondary and tertiary product that has been starved of capex. The structures are typically distressed, so the issues are in the structures, particularly in Europe. But that makes it difficult to get out of them. For some of the earlier buyers, it’s not going as well as they had hoped.’