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3 top U.S. stocks for the great euro real estate selloff Add to ...

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 has a slight edge over JPMorgan Chase 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 range in a bear case and in the high $30-billion range 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

The giant U.S. mall operator has already been an active buyer in Europe, which currently accounts for 3 per cent of its portfolio.

Simon recently bought 29 per cent 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 per cent for 15-year unsecured debt.

"As the result of favorable financing, the acquisitions were immediately accretive and management increased 2012 earnings guidance by 2 per cent," 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

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' private equity arm a distant third with $3-billion to invest.

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