A ‘wave of restructurings’ likely to hit Germany in early 2024

Things in Germany might get worse before they get better, experts agreed at Real Asset Media’s Debt Finance and Investment briefing, which took place recently at Ashurst’s offices in Frankfurt.

Transaction volumes are down, especially in the office market, values have fallen and there is a big question mark over the viability of developments.  

“My feeling is that the wave of restructurings is still to come, and that it will come at the beginning of 2024,” said Derk Opitz, partner, Germany, Ashurst.

Developers have been hit by multiple negative factors recently, from higher financing costs to supply chain issues, from the spike in energy prices to more expensive labour and materials, so insolvencies are to be expected.

“There will be a lack of capacity to deal with difficult situations, because most banks have reduced their restructuring departments as they were not needed in the last ten years,” said Opitz.

It is not just developers who will face difficulties, said Tobias Dichtl, co-head of market intelligence and foresight, Colliers: “Many alternative lenders are in the firing line because they’ve been very active in the last couple of years investing in development.” Some will have a tough time staying active in the market.

“As an alternative lender we still look at development but we are way more defensive”, said Etienne Naujok, associate director, Edmond de Rothschild. “Some alternative lenders have not been disciplined with their underwriting recently. But we’ve made the loan structuring much tighter than a couple of years ago, the filtering process is more rigorous and we ask for more equity in the deal. You want to bet on the right horse.”

It could be double crunch time as the demand for restructuring spikes but capacity to deal with it is limited.

“Alternative lenders are preparing for what they know is coming in the next 12 months,” said Anna Kreuter, associate director, CBRE Loan Services. “They are hiring a lot of underwriters.”

Lenders are playing the extending game, so there is not a lot of distress or non-performing portfolios in the market yet.

“Lenders are trying to push loan maturities out to 2025 if they can,” said Naujok. “They hope interest rates will be better and refinancings will be easier.”