Europe’s Property Firms Reshape Debt

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European real estate companies have stepped up efforts in 2025 to buy back their own high-coupon bonds, seeking to repair balance sheets strained by years of rising interest rates and falling property valuations. According to Bloomberg data, the sector has launched nearly 90 bond tender offers this year, including a record number of hybrid instruments, marking an unprecedented wave of liability management across Europe’s property market.

Why buybacks have accelerated

The strategy is straightforward: replacing expensive legacy debt with cheaper funding while pushing repayment schedules further into the future. Lower interest rates, improved access to credit and early signs of stabilization in commercial real estate have created an unusually favorable environment for issuers. Landlords, many of whom expanded aggressively during the era of ultra-low rates, are now using these conditions to reduce interest costs and regain financial flexibility.

Hybrid bonds have been a particular focus. Because rating agencies partially treat them as equity, managing this layer of the capital structure allows companies to support credit ratings while avoiding immediate asset sales.

Hybrid bond tenders reach a record

In 2025, European property firms offered to repurchase 25 hybrid bond issues, the highest annual figure on record. Investors have responded positively, selling back an average of 44% of their holdings in first-time hybrid tenders, reflecting both attractive pricing and confidence in issuers’ improving fundamentals.

Tender offers typically include a premium over market prices to incentivize participation. Investors who decline often retain their bonds in anticipation of potential early redemption or improved outcomes later in the bond’s life.

Aroundtown’s balance sheet reset

Aroundtown SA, one of the largest real estate owners in Germany, has been the most active issuer in the market this year, launching tender offers on 17 bonds. A recent transaction covering nine issues is expected to save around €50 million annually in coupon payments.

The company’s approach reflects lessons learned during the sharp rate hikes of 2022, when refinancing options became constrained and Aroundtown opted not to call a hybrid bond due to prohibitive costs. Since 2024, it has been exchanging older hybrids for new ones to restore equity credit. In 2025, the company refinanced €4.6 billion of bonds and perpetual notes, according to its chief financial officer Jonas Tintelnot, broadening its funding base and improving maturity profiles.

Stabilization, not full recovery

Market participants note that fundamentals have begun to stabilize, particularly for residential-focused landlords benefiting from housing shortages and rising rents. Office-exposed names have also performed better than expected, despite lingering concerns over demand.

However, challenges remain. Some issuers are genuinely reducing leverage through asset disposals and stronger operating cash flow, while others are relying heavily on favorable market conditions without fully addressing structural balance sheet weaknesses. As a result, bond buybacks alone are not yet a definitive sign of sector-wide health.

Outlook for the bond market

Barclays strategists expect European real estate bond issuance to rise to around €50 billion next year, up from roughly €35 billion in 2025. Issuers are likely to favor longer-dated bonds to lock in current spreads, refinance upcoming maturities and prepay expensive bank debt. Increased merger and acquisition activity may further shape funding needs across the sector.

As International Investment experts report, the surge in bond buybacks marks a critical phase in the recovery of Europe’s property sector. While these transactions ease short-term financial pressure and improve balance sheet flexibility, long-term stability will ultimately depend on sustained asset value recovery, disciplined leverage reduction and resilient cash flows rather than market-driven refinancing alone.