Prime properties may be in short supply in Germany amid the battle for assets, but there are still plenty of distressed properties hanging over the market, PropertyEU's Outlook Briefing in Frankfurt heard at end-November.
Prime properties may be in short supply in Germany amid the battle for assets, but there are still plenty of distressed properties hanging over the market, PropertyEU's Outlook Briefing in Frankfurt heard at end-November.
'There’s still a lot of distressed stuff out there but it’s sort of covered up by low interest rates,' said panellist Daniel Mair, a partner in EY’s German restructuring practice. 'We saw quite a number of large NPL transactions at the beginning of the year which gave hope to more banks cleaning up problematic asset classes. There has been no follow-up to this trend but I’m convinced that there are still a lot of banks sitting on problematic assets that should be sold to opportunistic funds.’
Bad banks in Germany have been slow to work through their distress, he continued: ‘There’s still triple-digit billions [of euros] in the FMS and EAA. The US and UK have been faster to work out their distress while continental European banks have been kicking the can down the road for the past eight years. Some like Commerzbank have been more active in divesting certain non-core parts. For the distressed investor there’s still stuff to come in the coming years but no one’s in a rush.’
Insurers move into lending
On the financing side, competition among investors and lenders alike is intense, said Derk Opitz, a partner with law firm Ashurst who specialises in real estate and asset finance. ‘We’re seeing more players on the debt side – not so much debt funds, they are too expensive in the German environment – but insurers who coming into the market en masse with low interest rates.’
At the same time banks are moving into areas they haven’t been active in before, he said. Opitz cited the example of a traditional pfandbriefbank funding a minority participation in a property company. ‘We’re also seeing asset classes that we haven’t seen before like student housing.’
Peter Schreppel, CEO Germany at CBRE, agreed that financing is readily available. ‘LTVs are moving up, we can see them reaching 75% but that’s with the underlying sponsor and asset being very stable. Financing is more of an issue in situations where the sponsor is new or dodgy or the asset is not fully let and in a secondary location.’