Credit: Adobe StockGermany’s real estate lending inertia amid “amend and extend” strategy
Industry experts weigh in on the "culture clash" between local developers and international alternative lenders as the market seeks a path to liquidity
January 9, 2026Real Estate
Written by:Helen Richards
Key Takeaways
- German developers face a culture clash as they transition from traditional relationship banking to the rigorous, highly standardised documentation required by international alternative lenders.
- A critical staffing shortage of experienced restructuring experts within German banks is inadvertently prolonging the "amend and extend" phase for underperforming loans.
- The market is experiencing a bifurcated liquidity landscape where large international whole loans are available, but a substantial funding gap remains for mid-market mezzanine tickets.
As the German real estate market grapples with a significant funding gap, the traditional reliance on domestic bank financing is being challenged by a new wave of international capital.
At the recent GRI Institute German Economic Series roundtable, senior leaders from across the debt and development spectrum met to dissect the realities of mezzanine lending, the "amend and extend" phenomenon, and the hurdles facing the country’s mid-market developers.
This shift represents more than just paperwork; it is a fundamental professionalisation of the debt stack. The "easy” mezzanine loans of the past, often secured with simple contracts at 6% IRRs, have largely vanished. In their place are sophisticated international players with rigorous reporting requirements and different risk appetites.
However, the reality for many is a two-fold crisis: decreased market values coupled with lenders reducing their loan-to-value (LTV) covenants. This has left a specific void in the market for smaller mezzanine tickets between EUR 5 million and EUR 15 million, as international providers largely seek a minimum entry point of EUR 20 million to EUR 25 million.
Industry experts highlight a critical barometer for a borrower's standing: as long as a company maintains a dialogue with its familiar relationship managers, its position remains relatively secure. High risk territory is typically when these relationship managers are replaced by a single specialist from a restructuring unit.
Notably, the banking sector is currently facing a significant staffing deficit within these departments, as many veterans of the 2008 financial crisis have reached retirement age. It is suggested that this lack of experienced personnel has inadvertently hindered the ability of financial institutions to decisively "pull the plug" on underperforming loans.
For opportunistic investors, the current market is fundamentally bifurcated into distinct risk profiles and strategies. Regarding new developments, land acquisition has become exceedingly difficult unless land values effectively turn negative to offset the prevailing financing costs.
Meanwhile, those targeting special situations with high-return requirements of 15% IRR or more are finding very few deals capable of supporting such costs without shifting their involvement toward the equity side.
This gap has created space for alternative lending, where UK-based debt funds are increasingly active, offering whole loans at up to 80-85% LTC, though these often carry interest rates nearing 10%.
A primary objective for the upcoming year is to resolve German real estate’s debt obligations and stabilise the lending landscape. The capital is available, particularly from abroad, but the bridge between traditional German banking relationships and the requirements of modern alternative debt has yet to be fully built.
At the recent GRI Institute German Economic Series roundtable, senior leaders from across the debt and development spectrum met to dissect the realities of mezzanine lending, the "amend and extend" phenomenon, and the hurdles facing the country’s mid-market developers.
Culture Clashes
The perception of alternative lending is evolving, with some arguing there is a distinct "culture clash" occurring. German real estate developers, long accustomed to streamlined local bank forms, are now encountering 150-page LMA-standard documents in English from international funds.This shift represents more than just paperwork; it is a fundamental professionalisation of the debt stack. The "easy” mezzanine loans of the past, often secured with simple contracts at 6% IRRs, have largely vanished. In their place are sophisticated international players with rigorous reporting requirements and different risk appetites.
The Refinancing Wall
Germany’s funding gap also remains a point of contention among market players. While some estimates suggest a looming refinancing wall of billions, others view these as “alarmist” figures, suggesting that the market is currently in a state of mediation and moderation rather than a total freeze.However, the reality for many is a two-fold crisis: decreased market values coupled with lenders reducing their loan-to-value (LTV) covenants. This has left a specific void in the market for smaller mezzanine tickets between EUR 5 million and EUR 15 million, as international providers largely seek a minimum entry point of EUR 20 million to EUR 25 million.
Current German market stability is maintained by "amend and extend" strategies, where a relationship-driven dialogue prevents banks from decisively foreclosing on underperforming loans. (Credit: Adobe Stock)
Amend and Extend
Currently, the primary mechanism keeping the market stable is the "amend and extend" approach. Borrowers are advised to stay in close, transparent communication with their banks, as many lenders are currently willing to extend loans to avoid the stigma of failure or the complexities of insolvency.Industry experts highlight a critical barometer for a borrower's standing: as long as a company maintains a dialogue with its familiar relationship managers, its position remains relatively secure. High risk territory is typically when these relationship managers are replaced by a single specialist from a restructuring unit.
Notably, the banking sector is currently facing a significant staffing deficit within these departments, as many veterans of the 2008 financial crisis have reached retirement age. It is suggested that this lack of experienced personnel has inadvertently hindered the ability of financial institutions to decisively "pull the plug" on underperforming loans.
Distress and Opportunity
While mass insolvencies have not flooded the market, a rise is anticipated in 2026 and 2027, with current market participants considered the "survivors" of the last two and a half years of stagnation.For opportunistic investors, the current market is fundamentally bifurcated into distinct risk profiles and strategies. Regarding new developments, land acquisition has become exceedingly difficult unless land values effectively turn negative to offset the prevailing financing costs.
Meanwhile, those targeting special situations with high-return requirements of 15% IRR or more are finding very few deals capable of supporting such costs without shifting their involvement toward the equity side.
This gap has created space for alternative lending, where UK-based debt funds are increasingly active, offering whole loans at up to 80-85% LTC, though these often carry interest rates nearing 10%.
German Lending Inertia
It is suggested that, unlike international peers who may take a more unemotional view of market corrections, German institutions are often seen as hesitant to commit to write-offs or discounts. However, a hope note or discount might eventually be necessary to move the market momentum forward.A primary objective for the upcoming year is to resolve German real estate’s debt obligations and stabilise the lending landscape. The capital is available, particularly from abroad, but the bridge between traditional German banking relationships and the requirements of modern alternative debt has yet to be fully built.
These insights were shared during GRI Institute’s German Economic Series roundtable, with participation from Guido Gerstner (Prime Capital AG), Curth C. Flatow (FAP Group), Jannik Heß (Adler Group), and Mechtild-Maria Siebke (GSK Stockmann + Kollege).