Matan Kesler

Capitalizing on Real Estate Finance Turmoil: A Golden Opportunity for Investors

The current global atmosphere in the finance world can be a goldmine for those who know where to look. I know it’s quite a strong statement, but at the moment, it’s safe to say that the finance landscape is undergoing a period of major upheaval and transformation.

Just in the past two weeks, the banking sector left a lot of people questioning the rest of 2023, especially with US and European banks putting out fires left and right. As some financial institutions thought they had caught up with the latest events, more schemes are being proposed for lenders to grapple with—and it’s investors that stand to benefit from this current climate of turmoil in real estate finance.

In my opinion, one of the markets that are interesting to watch right now is the Non-Performing Loans (NPLs) and the resulting trend in debt buy-off. Yes, it’s a shark move, but such is the harsh reality of business – someone else’s trouble is someone’s opportunity. On that note, it’s also safe to say that the current state of the finance market doesn’t really resemble 2008. crisis mainly due to one huge factor at play – there is a significant amount of capital in the private sector ready to roll out.

And it seems to be an abundance of it; real estate investors are actively seeking opportunities and are actively calling banks to take advantage of the situation. Even with the looming Non-Performing Loans (NPLs) in sight and debts waiting for buyoff, now seems to be the time for those with capital to swoop in and invest strategically, keeping an eye out for safer waters and brighter prospects at the end of this dark tunnel we’re all sailing through.

It may be risky, but savvy investors understand that such financial turmoil creates opportunities for them to turn a profit and portfolio expansion especially leaning on long-term investments in NPLs.

What Non-Performing Loans (NPLs) Mean for Investors

In short, there are three main premises to understand here:

  • Funds, companies and private investors are raising money for buying off debts and expanding their investment portfolios.
  • The current finance turmoil has led to a surge in demand for distressed assets and debt buyoff in the real estate industry in general (commercial and residential alike).
  • The assets under NPLs are purchased at a cheaper value than the initial investment and, in most cases, ensure a double-digit return on investment.

Furthermore, hotels are particularly attractive in these times as they can often be acquired at significant discounts since most hoteliers have already cut their losses or declared for bankruptcy. Therefore, if you’re on the hunt for a bargain and want to invest, don’t forget to include non-performing loans on your radar.

Just recently, there were such examples coming out of Greece. In January this year, aggregated loan exposures were bought off of a hotel group, totaling 1500 units and valuing over €130 million. While it seems like a regular deal in the hotel industry, look at the bigger picture. Tens of such deals are actively happening all across Europe, not to mention other markets. Aggregate numbers make you wonder what opportunities lie ahead, right? Just to put things into perspective, similar deals have been made in Spain, France, and Switzerland alike, as per recent industry reports.

As for those wondering why to pursue such opportunities, I’d like to state the following – it’s simple math. Deal like these, with expected tourism bounceback, allows for the realistic potential for double-digit returns on investment (ROI). The reason these deals can be found is that oftentimes, sellers are driven into a corner where they must either accept back their loan money or leverage the offer provided through a bank. While this is unfortunate for the seller, it allows investors to swoop in and take advantage of the momentum.

Low-risk opportunities:

Proactively considering alternative solutions when buying a loan to better fit your investment portfolio and financing options can be an excellent way to ensure profitability; it’s just a matter of raising money and moving it. Exploring opportunities beyond what traditional banking offers, such as private capital or mezzanine financing, could give investors the flexibility they need.

It’s known that private capital moves faster and has less bureaucracy than banks, while mezzanine financing is often used when borrowers are looking for more complexity and need different levels of equity risk. In either case, hospitality, and real estate investors should not simply ride with the same old funding strategies — trying something new could work wonders. Keeping closer relations with your financers, could help get closer insights with such deals.

By conducting thorough analyses and searching creatively in the distressed debt market or non-performing loans and debt buyoff auctions, investors can identify areas that have growth potential without increasing their portfolio’s risk profile. The key to success lies in taking advantage of these unique investment opportunities and managing them properly. Like most downshifts in a greater scale economy, the time for seizing opportunities is now.

About the Author
Math may not make you rich, but understanding it surely will! I am Matan Kesler, CEO of Voyage and a finance professional providing financial services and solutions for real estate groups and individuals with cross-border assets and portfolios across Europe. My team and I specialize in providing a range of financial instruments, including traditional bank loans, mezzanine loans, convertible notes, strategic partnerships, and credit lines. With a track record of 750 million euros in successful transactions with leading banks, funds, and institutions across Europe, our clients can trust our experience and expertise. I bring my financial background to my role as CEO of Voyage, constantly seeking out new and innovative ways to drive growth and success for the company.
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