(Bloomberg) -- Interest rate hikes have upended residential real estate markets across Europe but no where is the wave of distress more evident than in Germany, according to Bob Faith, Chief Executive Officer of Greystar Real Estate Partners. 

“Germany is probably the most distressed in Europe right now, we are very closely looking through some interesting situations,” Faith said in an interview on Bloomberg Television. “I think there will be some investors that took too much debt when it was cheap.”

Prices soared and rental yields on German residential properties were squeezed to record lows during the zero-interest-rate era as investors poured into real estate in search of returns. Landlords and developers were also levering more aggressively, with German banks often willing to extend senior loans worth more than 80% of a building’s value, compared to about 60% in countries like the UK, according to research from Bayes Business School. 

With investors now adjusting their return expectations in the face of rising bond yields, real estate prices are falling. As a result, cracks are starting to emerge, with developers filing for insolvency, landlords taking huge writedowns and lenders provisioning for credit losses. 

That’s creating opportunities for private equity firms with capital to invest as landlords look to offload properties to reduce their debt burdens. 

Vonovia SE, which has earmarked as much as €13 billion ($14.3 billion) of property it intends to sell, has already agreed multiple deals with funds managed by Apollo Global Management Inc. 

“We are fortunate, we are a lower leverage investor and we have longer time frame to move through,” Faith said. “Actually often, times of distress are our times of greatest growth.” 

Shares in Aroundtown SA, a landlord with a large German portfolio, fell as much as 11% Wednesday after reporting a €1.4 billion loss in the nine months through September, thanks to plunging valuations. Adler Group SA, the embattled German apartment landlord, also reported a €971 million operating loss Tuesday. 

Still, the shifting rates environment means many developers have paused or halted construction, likely making future housing shortages worse and driving rents higher, Faith said. 

“There is a shortage of housing in every great city around the world,” Faith said. “Institutional investors see that, they want to allocate more capital to residential investment.”

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