Debt briefing: no light at the end of the tunnel until 2025

The market is getting used to the new reality on the ground but the recovery is slipping further into the future, experts agreed at Real Asset Media’s Debt Finance & Investment briefing, which took place recently in Franfkurt, hosted by Ashurst.

The panel in Frankfurt: from left to right: Filip Kurkowski, Fabienne Hartmann, Norbert Kellner, Matthias Thomas, Hans Vrensen.

“I think the light at the end of the tunnel will not be seen at the end of 2024, as the optimists said, but more towards the end of 2025 or even into 2026,” said Norbert Kellner, head of syndication, Berlin Hyp.

The acquisition market has shrunk as interest rates went up, valuations went down and financing has become harder to obtain.

“The market has been very restricted in the last few months as lenders have asked for more collateral, and it will take time to heal,” said Fabienne Hartmann, vice president real estate financing, Loanboox real estate. “It will be a matter of years rather than months.”

There was an expectation at the beginning of the year that there would be a series of interest rates cuts in quick succession, but these expectations have been disappointed. Inflation is still a concern, ECB interventions will be more gradual and the recovery will take time.

On the positive side, market players have worked together to find solutions, whether by adding some equity, leverage to an existing loan or more amortisation.

“It has been a challenging time over the last 12 months, but everyone was expecting a lot more distress than we are seeing,” said Kellner. “There has been strong discipline in the market. People have worked things out, restructurings have taken place, solutions have always been found. If I look ahead, I’m rather optimistic that we can continue to find solutions.”

Despite the challenges, there is a strong sense of a return to normality after a long period of unrealistically cheap money.

“After 12 years of positive cycle we’ve had a hit with refinancing costs going up and values decreasing, and the hit has been across markets and across asset classes,” said Kellner. “Now whatever happens, financing costs will be substantially higher. We’ll have to wait a bit longer for the recovery.”