GERMANY TRENDS AND DEVELOPMENTS Contributed by: Carsten Loll, Otto von Gruben, Torsten Volkholz, Frank Grell, and Sebastian von Hornung, Latham & Watkins
Latham & Watkins LLP Reuterweg 20 60323 Frankfurt am Main Germany Tel: +49 69 6062 6000 Fax: +49 69 6062 6700 Email: Raffaela.Schamboeck@lw.com Web: www.lw.com
Introduction Current market situation
The situation has also worsened as the German real estate sector deals with a rising number of insolvencies. This increase has created a critical challenge for everyone involved, from property owners to investors, as they work to find solu - tions and keep the market stable. The industry is at a turning point, needing strategic decisions to overcome these challenges. The current period marks a crucial effort to solve problems, and the complex situation will create good opportunities for PE funds and other investors to invest, as prices are at a level that could not have been foreseen even a year ago. Capitalising on these opportunities, however, comes with its own risks. A sound investment requires considering and analysing the nuances of insolvency law-related issues. This article will explore the most critical issues of insolvency law that investors must address in order to struc - ture investments that are not only robust, but also poised to thrive in the post-crisis real estate landscape. Factors to consider in distressed real estate transactions Real estate transactions in a distressed situation typically follow a tight timeline due to the finan - cially tense situation of the target/selling entity. An out-of-court solution may be found only if the management of the selling entity (or the sold
As of January 2024, the European Central Bank (ECB) has maintained its key interest rates unchanged, with the primary refinancing rate (ie, the rate at which commercial banks can borrow money from the ECB) set at 4.5% per annum. This decision comes against the backdrop of a medium-term inflation outlook that, while showing signs of a declining trend in underly - ing inflation, still faces upward pressures, par - ticularly from energy-related sectors. The ECB’s steadfast approach reflects its ongoing efforts to dampen demand through tight financing condi - tions, thereby aiding in the gradual reduction of inflation towards its 2% target. Europe’s biggest real estate market, Germany, showed very little transactional activity in 2023. Brokers’ reports show that the total transaction volume in Germany was down by more than 50% compared to the year before, making 2023 the worst investment year since 2011. Demand for office space is still stalling and the occupan - cy rates, not only in Germany but throughout Europe, are still substantially lower than the pre- pandemic rate of approximately 70%. While the overall vacancy rate has been rising since 2020, it still remains in the single digits for the major German cities, and many market participants expect the vacancy rate to peak in 2024.
297 CHAMBERS.COM
Powered by FlippingBook