2024 Outlook: Need of Alternative Finance & Sale of Non Strategic Assets

We look forward to a year full of achievements and would like to share our outlook for 2024 with you:

Where is Real Estate headed Next?

The real estate industry is facing tectonic changes: inflation, interest rate increases and technological shifts. As technology changes, the demand for certain properties changes. Advances in artificial intelligence may reduce even further the demand for office space. In big city centers, it might be challenging to convert office buildings into residential without demolishing the buildings. To some extent, that will be a way to redefine city centers.

The institutionalization of non-institutional sectors are underway and investors move into sectors such as data centers, student housing and mico appartements where the credit profile and operators are much less established. However, these extended sectors are desired because of the rent-growth expectations.

Banks have so far well dealt quite well with the increases in interest rates and are highly profitable at the moment. This profitability might be used to increase their resilience i.e. sufficient capital and liquidity provisions to cover up unrealized losses.

Distressed Situation Management

The risk return in the equity market is not attractive anymore. This opens the door to less regulated debt funds who are currently absorbing the increasing market volatility. More resilient whole loans are absolutely critical today in order to reposition and keep assets attractive after the storm. Based on their core competences and resources, property owners are currently sorting out which assets should be recapitalized and which are not strategic anymore. A capital stack restructuring will be the ultimate capital protection for core assets. Non strategic assets will silently be transferred to suited market players in order to provide a solid basis for strategic realignment. A value based management of distressed situations offers the opportunity to real estate players to focus again on their expertise.

Given the context, TCP Brokerage recommends property owners and developers to recapitalize the assets with a bright future. For the remaining assets, it’s a chance to find a consensual solution: banks and junior lenders might also want to sell non-strategic loans. TCP Brokerage provides both solutions silently.