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Restructuring as an opportunity for the real estate industry
Executive Education / 11 June 2024
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Head of Real Estate Institute, Frankfurt School of Finance & Management
Prof. Dr. Kerstin Hennig has been Professor of Practice in Real Estate Management at the Frankfurt School, Head of the FS Real Estate Institute and Academic Director of FS Real Estate Executive Education since November 2023.

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These are turbulent times for the real estate world: after more than a decade of almost unbridled growth, the property industry has now been painfully reminded of its close ties to the capital market, as it was in 2008. An unprecedented and unpredictable rise in interest rates is threatening the profitability of many projects and often even the very existence of real estate companies. However, unlike the 2008 financial crisis, this time the real estate industry is facing multi-causal changes: digitalisation, sustainability, demographic shifts and changing user behaviour are gaining momentum. In addition, the Covid-19 pandemic as well as the war in Ukraine and its consequences have created unprecedented geostrategic tensions for the real estate industry. To overcome these challenges, real estate companies are having to fundamentally rethink their business models and processes. In this scenario, restructuring can become a valuable guide to help companies reinvent themselves and prepare for the future. It offers the opportunity to optimise processes, reduce hierarchies and speed up decision-making.

Challenges as Catalysts for Innovation

The challenges facing the real estate sector are also launching pads for innovation. Digital solutions optimise processes, sustainable construction methods conserve resources, and demographic change demands new solutions – including the integration of AI. Companies that embrace these changes as an opportunity will be able to reposition themselves and develop forward-looking services that meet the needs and changes of the property market.

Restructuring: Setting the pace for transformation

Restructuring is the driving force behind this transformation. It allows companies to adapt their structures and processes to new challenges and opportunities. Inefficiencies are eliminated, costs are reduced, and new business areas are developed. However, restructuring is not a sure-fire success; it is a complex process that needs to be managed with care and sensitivity. It requires a deep understanding of current trends, a clear vision for the future and the ability to implement the necessary changes in a focused and valuable way.

Like a dancer on a tightrope, the real estate sector must find the right balance between preservation and innovation. You have to let go of the old in order to try something new. Employees need to be involved and barriers must be overcome. At the same time, it is important to strengthen core competencies and preserve the identity of the company.

Success factors for the restructuring dance

Companies have various restructuring tools at their disposal to successfully manage change. These can be divided into four categories:

 

Financial Restructuring: Adjusting the capital structure and reducing debt are among the key tasks. The financial stability of the company must be ensured in order to guarantee its long-term ability to survive. This can be achieved through measures such as restructuring loans, raising new equity, forming joint ventures or selling assets.

Strategic Restructuring: The objective of strategic restructuring is to redefine the business model and strategic direction. In this phase, the company is realigned and adapted to the changed framework conditions. This can be achieved through measures such as the development of new products or services, by tapping into new markets or by selling or adding business areas.

Legal Restructuring: Adapting the company’s legal structure to the new circumstances and providing legal protection for the restructuring measures are the tasks of legal restructuring. The aim is to minimise legal risks and put the restructuring process on a solid footing. This can be achieved through a variety of reorganisation measures, whereby insolvency does not mean the end of the company, but rather, if done correctly, can be a new beginning.

Operative Restructuring: The optimisation of processes and cost structures is at the heart of operational restructuring. The aim is to increase the efficiency of the company and make better use of its resources. This can be achieved through measures such as streamlining organisational structures or by improving project and asset management.

 

Restructuring as an Opportunity for Innovation

Restructuring is not only a method of overcoming crises, but also an opportunity for innovation. Companies that actively and creatively embrace change can reinvent themselves and become the winners of the future.

The intensive Real Estate Restructuring Seminar is modular in structure and provides you with valuable insights into the world of real estate restructuring through four practice-oriented modules (Market Situation, Company Perspective, Financing Perspective, Processes). The seminar offers an in-depth insight into the issues and challenges faced by companies undergoing or about to undergo restructuring. It provides knowledge on highly complex topics and has been specifically designed to meet the needs of the property and finance industry.

 

Co-Autor

 

Dr. Alexander Goepfert
1st chairperson of the Frankfurt School Real Estate Institute (FS REI)

 

 

 

Prof. Dr. jur. Alexander Goepfert is a lawyer and honorary professor of real estate law. As one of the founding sponsors of the FS Real Estate Institute, he has held the position of 1st Chairperson of the Practical Advisory Board of the FS Real Estate Institute since November 2023. Previously, he was a co-founder and for many years Chairperson of the Board of Trustees of the Real Estate Institute at EBS University, where he headed the Competence Centre for Real Estate Law and Capital Markets. From 1986 to 2011, he worked as a lawyer and partner at Freshfields Bruckhaus Deringer LLP in Düsseldorf and from 2011 to 2018, he was a partner at Noerr Partnerschaftsgesellschaft mbB as head of the global Real Estate Investment Group. Until January 2021, he was Senior Advisor at Apollo Global Management and until recently CEO of DEMIRE AG. Prof. Goepfert has been regarded as one of the most important figures in the German real estate industry for many years. He advises international investors and developers on major real estate projects in Germany and Europe, and specialises in the structuring of complex real estate transactions with a particular focus on financial, tax and planning aspects. He has been significantly involved in many major private equity investments, including for Apollo, Blackstone, Lone Star and Morgan Stanley. He is also Vice President of the Institute of the German Real Estate Industry (iddiw), a member of a number of advisory and supervisory boards of listed and unlisted companies, and co-editor and author of the standard work “Immobilienwirtschaftslehre – Recht” (Real Estate Management – Law).

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