In addition to the challenges faced by the German property market, several major players in the industry are now grappling with significant losses. Deutsche Pfandbriefbank (PBB), a German property lender, is facing its own crisis as its shares have plummeted this year due to short sellers betting against the bank. PBB has reassured investors that it has enough funds to handle a major downturn in the US commercial real estate market, but the situation remains challenging [eee5e043].
PBB's troubles stem from its expansion into the US market and its recent announcement of a significant increase in risk provisions related to financing of US offices. The bank has assured investors that it has enough capital to withstand the crisis, but its shares have fallen sharply as short sellers target the bank. PBB's timeline of events includes its expansion into the US market, its listing on the Frankfurt stock exchange, and its recent announcement of increased risk provisions [eee5e043].
German landlord LEG has also been affected by the property crisis. The company has reported a loss of US$1.7 billion, which is significant. The loss is a result of the ongoing property crisis in Germany, although the article does not provide specific details about the crisis or the reasons behind it. The loss is a setback for LEG, but the article does not provide information about the timing of the loss or any specific events leading up to it [c4eadb37].
Aroundtown, one of Germany's largest listed landlords, has also posted a massive loss due to the German property crisis. The company reported a loss of 2.436 billion euros in 2023, which is down 431% from the previous year. This loss comes amidst Germany's worst real estate crisis in decades. Despite the challenging market conditions, Aroundtown managed to meet its guidance for FFO I, landing at 332 million euros [82324a5a].
Germany's largest landlord, Vonovia, predicts an increase in bankruptcies in the real estate industry. CEO Rolf Buch warns of an extreme number of bankruptcies over the next few months or years. The German property sector has been in crisis for three years due to rising interest rates and inflation. Vonovia has already sold off properties and cut the value of its portfolio by almost 11 billion euros in 2023. The recent rate cut by the European Central Bank has sparked hopes of a revival, but some executives remain cautious. Germany is the largest real estate investment market in Europe. Transaction volumes have risen 10% in the first half of 2024. The collapse of Signa and weakness in commercial real estate in the US and China have also impacted the sector. Rents have been climbing steeply due to high demand and limited supply of homes. Vonovia targets mid- and low-income earners with affordable rents, but CEO Buch expects the market for apartments to worsen [733751bc].
Meanwhile, in the US, the office loan pain is only starting to ramp up. Deutsche Bank AG and Blackstone Inc. mortgage trust are facing challenges in the US office sector. New York Community Bancorp's shares have plunged due to provisions for losses. Over $94 billion of US commercial real estate is currently distressed. Lenders and borrowers will face difficulties as a $1.5 trillion wall of loan maturities hits over the next two years. Private credit providers see an opportunity to profit as borrowers approach maturity walls. Credit investors remain comfortable that the turmoil from commercial real estate will be contained. Forward curves suggest borrowing costs will keep business property values 20% to 40% below their 2021 high. The headwinds buffeting the commercial real estate market will result in a materially slower recovery than that seen after the global financial crisis [824f812e].