Crisis being handled well as professionals find solutions

When the going gets tough the professionals get going, experts agreed at Real Asset Media’s Trends 2023: European Debt, Finance & Investment briefing, which was held in Frankfurt recently.

“My positive take on the current crisis is that there are a lot of good professionals in the market, people are calm and willing to find solutions,” said Norbert Kellner, head of syndication, Berlin Hyp. “We’re much better prepared this time round, there is a different approach and I can’t see a situation like 2008 happening again.”

Solutions are needed, he said, because “being realistic, we won’t see a big improvement by the end of the year”.

After over a decade-long positive cycle few were expecting such a sudden change for the worse with high inflation, rising interest rates and falling demand. Deal flow has reduced to a trickle, investors are in wait-and-see mode and developers are rethinking their plans.

“But everyone is handling these situations in a very professional way,” said Mike Danielewsky, partner, Bryan Cave Leighton Paisner. “It’s very encouraging to see the way the current crisis is being handled, although a bit more creativity on the part of the banks would be welcome.”

The “keep calm and carry on” mantra is being taken on board: despite the speed of the change, there is no panic.

“It is so positive that people are keeping calm and negotiating, even though they know that every portfolio will take a hit,” said Kellner. “As long as this continues, I’m optimistic that we can cope.”

The other side of the coin is that after over 10 years of low interest rates, rising prices and high demand many people working in the business have never had to face a scenario like the current one.

“I wouldn’t say there is a skills gap, but we haven’t seen these situations for a very long time,” said Kellner. “Some of the mezz lenders, some of the players with younger teams have professional experience but they’ve never had to cope with a crisis like this so it’s much more difficult for them to make the right decisions.”

The good old times of investors buying something, sitting back and waiting for the price to go up are definitely over, but the positive aspect is the current market needs real expertise.

“Now more than ever you have to choose assets and sectors very carefully,” said Anders Hemmingsen, managing director, European investment team, Strategic Value Partners. “We’re entering a more normalised environment in many respects, where being a skilled investor is paramount. I think that important aspect had got a bit lost over the last few years.”

In the current difficult market conditions there will be a process of natural selection with quality rising to the top and the most capable surviving.

“Now you need asset management capabilities, a team with brains and skills to work on the deal and get lending from the banks,” said Oliver Platt, managing partner, Arcida Advisors. “This is a polycrisis and substance is hip again.”