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Germany’s commercial real estate market is facing a financing shortfall, but it is not triggering a crash. Instead, alternative lenders are moving in to fill the capital gap left by increasingly selective banks. For institutional investors, the opportunity lies not in distressed assets, but in structured credit.
Refinancing requirements are substantial. Between €100bn and €140bn in commercial property loans will need refinancing by 2028, according to BaFin and HIH Invest. The projected shortfall is at least €20bn—a gap increasingly seen not as a looming crisis but as a structural opportunity. FAP Group estimates the refinancing wave will reshape funding dynamics across all asset classes, creating long-term entry points for institutional capital. Bank LTVs have compressed to 50–65%, and many borrowers lack the equity to refinance. The European Banking Authority (EBA) reports €9.7bn in commercial real estate NPLs at German banks, up from €6.2bn a year earlier.
Debt funds filling the void left by cautious banks
Private debt managers see a clear opening. Aukera has launched a €500m Luxembourg-based senior debt fund, its third since 2020, structured as an S.C.A. SICAV-RAIF. The fund is aimed at institutional investors and is backed by an anchor commitment of €50m from HUK-COBURG Asset Management, marking the insurer's first foray into real estate debt since 2019. The fund targets IRRs of 6–7.5% through whole loans at up to 75% LTV, focusing on residential, office, logistics and retail properties in Germany and the Netherlands. Aukera is also open to bridge-to-exit and bridge-to-green loans.
"We are delighted to have gained HUK-COBURG as our first capital partner," says Lars Armgart, CEO of Aukera. "They share our conviction that the best time to invest in alternative real estate financing is now."
Patrick Züchner, CIO, adds: "We reviewed €2.7bn of transactions in the first quarter alone, with five deals already in due diligence or closing. This market requires real selectivity and experience. We are building a portfolio diversified by location, asset class and loan maturity."
Maximilian Cosack, Head of Private Assets at HUK-COBURG, says the commitment fits their €700m real estate debt portfolio: "We engaged in very intensive discussions with Aukera. The basis of trust is solid, and we believe they are a professional partner in the right asset class at the right time."
Loan sizes will typically range from €10m to €30m, with flexibility to go up to €50m. Most loans will run three to five years, and the fund will recycle capital through repayments, particularly for short-term bridge financings.
“We’re solving problems banks can’t price. That’s our edge,” says CIO Züchner, . “There is capital looking for a home, and borrowers looking for answers.”
REInvest has launched a whole-loan fund focused on prime offices, fully placed before launch. The fund, managed under Luxembourg law, offers ticket sizes of up to €20m and emphasises predictable cashflows and calculable risk. 'This is a logical extension of our strategy,' says Hans Stuckart, Managing Director. 'The market requires precision and flexibility, and our investors are focused on stable returns rather than opportunistic spikes.'
Caerus Debt Investments is also expanding, focused on bespoke mandates for institutional clients. “The refinancing gap is no longer abstract. For our investors, it’s a strategy,” says Caerus CEO Michael Morgenroth. FAP Group, which always tracks the refinancing shortfall closely, reports increasing investor interest in credit strategies.“Debt capital is there—but underwriting discipline has returned. Borrowers need to recalibrate expectations,” says Curth-C. Flatow, Founder and Managing Partner at FAP Group.
Structures evolve as capital returns
Deal structures are adapting. Mezzanine financing, a staple of the last cycle, is in retreat. Funds now favour whole loans or stretched senior structures. Bridge loans are widespread—either to buy time for an asset’s repositioning or to hold it until market conditions improve. “We are seeing bridge-to-exit and bridge-to-transition deals where borrowers just need time,” says Züchner. “Banks can’t always accommodate that.”
On the investor side, a Kommalpha/Pfandbriefbank survey shows 46% of institutional investors are already active in real estate debt. Most favour indirect exposure via funds, especially those offering stable cashflows and modest risk. “Debt now offers better risk-adjusted returns than direct real estate. That’s not a fleeting phenomenon,” notes Dr Pamela Hoerr of PBB. Senior debt now offers 300–500 basis points above swap, attractive in a high-rate environment. Fund structures are preferred for regulatory and operational reasons.
Basel IV, due to come into effect in 2025, will raise capital requirements for development loans and constrain bank activity further. ESG-related capex and residual uncertainty around valuations also complicate underwriting. Banks continue to dominate core transactions—thanks largely to the Pfandbrief model—but are increasingly absent elsewhere.
Distress deferred—but restructuring underway
While many fund managers expected more distressed dealflow by now, it has yet to materialise. “I thought we’d be seeing more distressed situations… but the banks are hoping rates will fall,” says David Arzi of Starz Real Estate. Few NPL portfolios have come to market. The sale by pbb Deutsche Pfandbriefbank of $1bn in performing international loans to Blackstone was the year’s most visible disposal—but had little to do with German CRE.
“The mezzanine is probably wiped out, so the question is: what is the level of infringement on the senior?” said Andrew Newton of Incus Capital. “A lot of these situations will need structured solutions.”
International funds are positioning carefully. Starz, Apollo, M&G and Incus Capital are all active or expanding their reach in Germany, although several note that the volume of actionable deals remains thin. For Apollo, the pullback by local mezzanine lenders has opened space for moderate-leverage senior and hybrid transactions. M&G is looking at larger mid-market deals banks are unwilling to take on.
German asset managers step up with localised credit platforms
Meanwhile, a number of German players are building debt platforms that focus on conservative, asset-backed lending. Albulus Advisors, Beach River Capital and Owusu Capital Partners all report activity, particularly in refinancing, recapitalisations and transition finance. “There are lots of complicated problems to be solved,” says Eugene Owusu. “Clients are looking for joint venture partners, because debt is not going to solve the problem in some of these cases.” Daniel Sander of CBRE notes that many project developers are seeking new senior debt or preferred equity to cover refinancing gaps. “They’re in a tough place. LTVs have reset, and the equity just isn’t there,” he says.
The market is not witnessing forced selling on a broad scale. But the capital stack is being slowly restructured. For deals signed in 2019–2022, rising rates and updated valuations mean existing debt structures are often no longer viable. Many sponsors face equity shortfalls and rising financing costs, particularly in offices and development projects.
In the current cycle, the largest opportunities may not come through distress, but through structured solutions—bridge lending, recapitalisations, and conservative senior debt. The most active funds remain those able to underwrite complexity and act quickly.
Germany is not shifting to a US-style lending model, but it is no longer a one-bank show. The shift may be incremental, but the market will look very different by the time the 2025–2026 refinancing cycle peaks. Real estate credit is becoming a shared space. Senior debt, once viewed as too plain to attract attention, is now the core of a serious investment strategy.