Real debt investing sees sharp rise due to lack of alternatives

Independent Berlin-based capital structure consultant Flatow Advisory Partners (FAP) said recently that it was seeing a sharp increase in real debt investments in Germany this year, with investors getting a lot more interested in alternative investment opportunities such as direct real estate debt investments and mezzanine funds.

Founder and CEO Curth-C. Flatow said "In the German market, we are seeing institutional investors being increasingly active in the mezzanine sector. Insurers and pension funds in particular want to diversify using these investments, and these also offer significantly higher returns."

Based on the initial figures for 2017, FAP said it expects a significant increase in the segment over the entire year. The mezzanine returns, averaging 11% for development projects and 6% for existing properties, are admittedly much lower than in neighbouring countries.

However, the low risk of investing in Germany as a whole is factored into the pricing, suggested Flatow. Margins will probably come under pressure here, for example due to the amount of available capital. Furthermore, the spread between first-tier financiers with up to 200 basis point margins and the subordinated capital is still very high.