MIPIM: excessive volatility spooking the debt market

Excessive volatility is spooking the real estate sector and creating real problems in the market, experts agreed at Real Asset Media’s MIPIM Investment Track – European Debt Finance & Investment briefing, which took place in Cannes yesterday.

“Volatility is killing us,” said Duco Mook, head of treasury & debt financing EMEA, CBRE Investment Management. “It is not the increase in interest rates but the volatility, which makes it difficult to underwrite debt terms and is a real dealbreaker.”

There is liquidity in the market, but lenders are more cautious and the loan size tends to be smaller.

“The markets are shaky and there is less investment activity than we are used to,” said Barkha Mehmedagic, global head of institutional sales and group treasury, Commerz Real. “Banks analyse each asset more and the size of the loans has decreased. I hope there will be less volatility in the months ahead.”

The shifts that we have seen will have a lasting impact, said Karolis Adlis,executive director European investments, WP Carey: “I’m bullish on the investment market but I am very bearish on the economy. The world will be very different.”

Germany presents a particular problem because alternative debt providers with relatively little experience have boomed in the last few years and now face a reckoning, that is likely to lead to an increase in NPLs.

“In Germany banks are being complacent and we expect alternative lenders’ NPLs to reach EUR 16 billion. Together with the estimated EUR 38.1bn from the banks we expect a total German NPL volume of ca. EUR 54.1 in 2024.”, said Oliver Platt, Managing Partner, Arcida Advisors. “NPLs are set to explode, but no one seems to be noticing the gathering storm in the German banking sector”.