Germany to see surge of distressed sales, says Corestate

Over the next two years, Germany is likely to see a surge in the sale of distressed real estate assets both in number and in transaction volumes with financial experts anticipating a heightened willingness from banks to dispose of distressed real estate loans.

According to Corestate and EBS-REMI’s latest survey, which was sent to nearly 50 executives in the banking sector, banks are expected to pursue a more cautious approach and demand increased debt servicing obligations from their borrowers.

'It is safe to deduct from these findings that, as the volume of distressed real estate debt rises, an increasing number of real estate portfolios will be put on the market whose situation, while principally sound in real estate economic terms, may become distressed due to limited access to debt capital,' said Ralph Winter, Founder and Chairman of Corestate Capital. 'This situation will cause prices to soften as the gap between core and non-core continues to widen.'

The research reveals a rift in the financing landscap with some banks stepping up the expansion of the provision of new finance to the German market, while other institutes are drastically scaling back their activities. Private commercial banks in particular are intensifying their lending activity, while the majority of state-owned banks and credit cooperatives are expecting lending volumes to increase over the next two years.

According to the IW German Economy Institute in Cologne, savings banks substantially increased their exposure to commercial real estate backed loan portfolios after the 2008 banking crisis. Commercial banks, by contrast, have steadily reduced their loan books during this loan period.