Europe’s Property Firms Want to Buy Back Expensive Bonds

(Bloomberg) — European real estate companies have been buying back junior bonds like never before, seeking to get their balance sheets in order after a tumultuous few years.

The region’s property firms have offered to repurchase a record 25 hybrid bonds from investors this year, based on data compiled by Bloomberg. When senior bonds are included, companies in the sector have made almost 90 tender offers in 2025, the data show.

Buying back bonds with higher coupons — often issuing new debt with a lower rate at the same time — saves money and shifts repayments further into the future.

It’s an opportune time for this kind of liability management as interest rates have come down, helping all borrowers but particularly landlords, which fueled their growth with a debt binge during the era of low rates. A robust credit market and green shoots in commercial real estate as workers return to the office are also helping.

“The fundamentals for issuers have stabilized and started to improve,” said Julian Marks, head of corporate hybrid bonds at Nomura Asset Management. “Residential-focused companies look safer and have been fairly solid,” while office-exposed names have done better than some people expected, Marks said.

Aroundtown SA, a sector bellwether which invests in residential and commercial real estate in Germany, has been the most prolific buyer of its own debt this year, with tender offers on 17 bonds. One recent deal, including nine bonds, was expected to save the company around €50 million ($58.6 million) in coupon payments on an annualized basis, according to a statement.

The landlord is one of many seeking to get their borrowings in order after rapid rate hikes from 2022 led to tricky refinancing decisions for the debt-laden sector. Aroundtown made the unusual move of skipping a first call option on a hybrid bond that year, saying it was too expensive to issue new debt.

From last year, the company started exchanging old hybrids with new in order to regain equity recognition and support its credit ratings. Hybrid debt is partly recognized as equity by rating firms. Now, with the market — and the company — on firmer footing, Aroundtown has been ramping up tender offers to cut its borrowing costs and rearrange debt maturities. A representative for Aroundtown didn’t respond to a request for comment.

Jonas Tintelnot, Aroundtown’s chief financial officer, said in a statement last week that the company had refinanced €4.6 billion of bonds and perpetual notes in 2025, helping to diversify the company’s funding mix and provide flexibility.

In a typical tender offer, a company offers to buy back bonds at a predetermined price or at a level determined by auction. Investors are not obliged to sell, which is why firms often dangle a sweetener in the form of price premium over prevailing market levels to lure them in.

This year’s offers have been relatively popular. Of the hybrids that were tendered for the first time in 2025, investors sold back 44% of their holdings on average, according to data compiled by Bloomberg. Those that don’t participate hold on to their bonds, effectively betting on a better outcome if borrowers end up exercising early repayment options.

Opportunistic Move

“It’s obviously an opportunistic move, but investors usually appreciate being exposed to issuers that act smartly and proactively,” said Andreas Meyer, founder and chief investment officer at Fountain Square Asset Management, which has exposure to some names in the sector.

“With the market having been open for a while now and spreads having tightened materially, tendering old high-coupon hybrids and replacing them with cheaper capital makes sense,” Meyer said.

To be sure, property companies aren’t out of the woods. Globally, the momentum for further monetary easing is fading, while valuations for some real estate assets are still under pressure. In Germany, demand for commercial buildings and offices has remained subdued amid persistent economic struggles, although residential has fared better — helped by a nationwide housing shortage that has been fueling rents.

“Some issuers are genuinely de-levering through disposals and stronger operating cash flow, while others are relying more on favorable market conditions to paper over structural balance sheet issues,” said Fountain Square’s Meyer. “The tender activity is welcome, but it’s not yet a universal sign of health.”

The sector is expected to remain active in the bond market next year, with Barclays Plc strategists Neeraj Kumar and Melissa McCallum predicting around €50 billion in real estate bond sales, up from around €35 billion this year.

Landlords are likely to issue longer-dated debt to lock in attractive spreads, the strategists wrote. They expect borrowers in the sector to not only refinance maturities but replace and prepay expensive bank debt, and also see increased potential for M&A activity.

Mary Pollock, head of real estate at CreditSights, also anticipates more opportunistic liability management.

“Balance sheets are still recovering from the reflation cycle,” Pollock said. “Management teams should be proactive accessing the bond market when it’s accommodative and finding opportunities to clear out front-end bonds, reduce debt and manage interest costs.”

–With assistance from Libby Cherry.

(Updates with Aroundtown CFO statement in ninth paragraph.)

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