Vibrant yet vigilant: Inside Malta's property bond market

Francesco Grasso, George Vella and Josef Cutajar

Justin Mizzi

Corporate bonds have become a cornerstone of capital raising in Malta, especially for property development. From shopping malls to hotels and mixed-use projects, real-estate issuers dominate issuance and trading. Yet alongside oversubscriptions and steady secondary demand, 2025 has brought sharper investor scrutiny, isolated stress cases, and a market that is pricing risk more precisely. To take stock, Justin Mizzi, partner, real estate advisory and valuation at QP, speaks with Josef Cutajar, financial analyst at MZ Investments; Francesco Grasso, corporate finance advisor and chartered accountant; and George Vella, partner and head of advisory at Grant Thornton Malta.

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Josef, let's begin with you. Since our last article ('From Bricks to Bonds', published in the MONEY 2024 Finance Edition, Issue 82), how has the local real estate bond market evolved?

JC The previous article (which has a cut-off date of 28 June 2024) offered a snapshot of the influence of real estate on Maltese investments and the central role this asset class plays within the local capital markets. Since then (considering between 01 July 2024 and 23 September 2025), real estate has remained a cornerstone of market activity, underpinning some notable corporate developments.

Although investor sentiment across the equity market remained fragile, reflected in persistently weak trading volumes and subdued share prices when compared to underlying net asset values, a handful of interesting initiatives emerged. Chief among these were the conditional voluntary takeover bids launched by Hili Ventures Group for Tigné Mall p.l.c. – which was subsequently delisted in February 2025 – and Hili Properties p.l.c. More recently, BMIT Technologies p.l.c. shareholders approved the acquisition of 49% of Malta Properties Company p.l.c. ("MPC") for €25.32 million, equivalent to €0.51 per share. The consideration represents a premium of approximately 50% to the prevailing market price but is almost 9% below MPC's reported net asset value as of 30 June 2025.

Other strategic initiatives in the real estate sphere included PG p.l.c. 's €19 million acquisition of a showroom and adjoining land in Lija, covering approximately 13,100 sqm, along with its 60% shareholding in db Gauci Shopping Mall Limited. The latter holds a promise-of-sale agreement over a property that will host a shopping mall comprising retail outlets, a supermarket, catering establishments, and a car park forming part of the €260 million db St George's Bay project in St Julian's, scheduled for inauguration in 2026.

In the hospitality segment, International Hotel Investments p.l.c. ("IHI") expanded its portfolio with the opening of the Corinthia Grand Hotel Astoria in Brussels (50% owned), alongside two luxury properties in Bucharest and New York, both managed by its subsidiary Corinthia Hotels Limited. In the United States, IHI also entered a partnership with Kuwait-based Action Real Estate Company to explore development opportunities for luxury hotels and high-end real estate. The first move involved two neighbouring hotels in Beverly Hills and the lease of an adjacent 3,250 sqm office block. Separately, IHI has also been engaged to provide its services for a landmark mixed-use 102-storey development in Dubai, owned by Dubai General Properties LLC. This development will comprise two linked towers occupying approximately 320,000 sqm of floor area, along with a luxury 120-room Corinthia Hotel, which will provide branding and services to the residences in the towers.

Closer to home, the Verdala Wellness Hotel, owned by AX Real Estate p.l.c. and forming part of AX Privilege, opened its doors in August 2025 as Malta's first fully-fledged wellness hotel. VBL p.l.c. announced a long-term lease agreement with Ruby Hotels for the Silver Horse Building, whilst Malta International Airport p.l.c. ("MIA") unveiled a near €350 million investment programme partly dedicated towards strengthening the retail and property arm of the company. In fact, MIA's project includes the extension of the La Valette Lounge terrace, the complete refurbishment of the VIP Terminal, the expansion of Park East, and the development of SkyParks Business Centre II. This 70,000 sqm complex will incorporate the first business hotel on the airport campus together with several office, retail, and dining facilities.

Meanwhile, debate continued over the future of MIDI p.l.c. 's Manoel Island project. The company remains in discussions with the government as it seeks an equitable settlement that would see the voluntary termination of the concession.

In the corporate bond market, activity remained vibrant, underpinned by encouraging trading volumes and several corporate actions. Year-to-date, just over €89 million worth of corporate bonds changed hands on the secondary market, reflecting continued investor appetite for fixed-income instruments despite the evolving interest rate environment and the numerous new bond issues.

“The clear trend has been the continued dominance of property-related financing.”— Josef Cutajar

One significant feature during recent months was the prevalence of bond buybacks, with real estate issuers taking the lead. Plaza Centres p.l.c. absorbed €0.25 million, whilst Best Deal Properties Holding p.l.c. and GAP Group p.l.c. repurchased €1.17 million and €2.49 million of their respective bonds. Melite Finance p.l.c. bought back the entire €9.25 million of its outstanding bonds well ahead of their redemption date of 23 November 2028, following years of financial distress partly attributable to the lingering effects of the COVID-19 pandemic. In aggregate, real estate issuers accounted for €13.16 million in bond buybacks, equivalent to 86.34% of the overall total of €15.24 million.

Primary market activity was equally robust, with 20 new issues raising a total of €671.30 million. Of this amount, €196.80 million was purely linked to real estate companies. Noteworthy offerings included Hal Mann Vella Group p.l.c. 's €23 million secured issue maturing between 2031 and 2034, Mercury Projects Finance p.l.c. 's €20 million secured bond due 2034, Agora Estates p.l.c. 's €9 million tranche of its 2036 secured series, and VBL p.l.c. 's €10 million secured issue maturing between 2030 and 2034. Other significant real estate financings comprised TUM Finance p.l.c. 's €12 million secured callable issue, Excel Finance p.l.c. 's €50 million secured bond due 2031, Best Deal Properties Holding p.l.c. 's €7 million unsecured bond due 2032, JD Capital p.l.c. 's €40 million secured issue maturing in 2035, and QLZH Holding p.l.c. 's €6.80 million callable secured issue. Two separate ACMUS p.l.c. secured issues, each for €9.50 million, further broadened the sector's debt footprint.

Additional property-related issuance included IHI's €35 million unsecured bond maturing in 2035, MM Star Malta Finance p.l.c. 's €35 million callable secured issue due between 2029 and 2031, and Golden Triangle p.l.c. 's €42 million secured bond maturing in 2030. Taken together, these transactions reaffirmed the central role of property-linked financing within the Maltese capital markets, both in terms of scale and in the diversity of geographic exposure and property type.

The period also witnessed redemptions amounting to €116.05 million, of which €23.71 million related to real estate issuers. These comprised Hal Mann Vella Group p.l.c. 's €7 million in 5% secured bonds, the redemption of Best Deal Properties Holding p.l.c. 's €1.24 million 4.25% secured bonds, and the early repayment of €15.47 million of GAP Group p.l.c. 's 3.9% secured bonds initially due between 2024 and 2026. Such redemptions not only released liquidity back into the market but also created scope for reinvestment into the new offerings highlighted above.

Overall, the corporate bond market demonstrated resilience and depth, characterised by healthy trading activity, buybacks, a buoyant issuance pipeline that included new entrants to the market, and timely redemptions. The clear trend has been the continued dominance of property-related financing in shaping market dynamics. This development is likely to remain a defining feature of Malta's capital markets in the near term.

George and Francesco, why do you think more developers are tapping the bond market?

GV Several factors are driving this shift. First, bank financing for commercial real estate has become more selective. The Central Bank's Financial Stability Report highlights that since 2021, banks have adopted a more prudent stance on commercial real estate lending, with heightened sensitivity to vacancy risk, asset quality, and leverage. Commercial real estate loans tend to be large and concentrated, which raises risk for lenders and makes capital markets funding an attractive alternative.

Second, regulatory clarity has improved. The MFSA's Capital Markets Rules were recently amended in February 2025, which continue to classify admissibility and ongoing obligations, including specific requirements for property companies and Financial Analysis Summaries. This stable and transparent framework provides issuers and advisers with confidence to utilise bonds as a reliable funding channel.

Finally, from a financial perspective, bonds can enhance equity returns. For long-lived, cash-generating assets, locking in term debt at predictable costs optimises capital structure. When a project's internal rate of return exceeds the bond coupon rate, the result is an improved return on equity. This point is often highlighted in local market commentary as a key reason why firms refinance via bonds.

FG In the context of real estate bonds, most issues finance either property developments intended for sale or assets to be retained for rental income and operational purposes. However, for relatively small development-for-sale projects, a bond may not be the most suitable instrument, as the shorter project timeline does not align well with a longer-term bond structure. Additionally, such projects typically require a sinking fund over the life of the bond, further increasing the overall cost of financing.

"Security helps, but it's not a panacea for weak cash flows." — Francesco Grasso

Historically, bond issuance has been concentrated in commercial properties or large-scale developments. However, over the past 12 months, we have seen the emergence of bond funding for residential projects intended for rental. One key advantage of bonds in this segment is that leverage parameters are generally less restrictive than those applied by banks due to Directive 16 of the Central Bank of Malta. Given the strong demand for residential property in Malta, this asset class is regarded as relatively lower risk, provided leverage is maintained within acceptable limits.

For larger projects, a combination of both bank loans and bonds often provides the most efficient capital structure. For smaller developments, bank loans tend to be more feasible, as they are generally less expensive and easier to implement.

Let's turn to the recent headlines that have created more awareness of the risk of defaults in capital markets, which were recently discussed in Parliament. Are these isolated cases, or signs of something broader?

GV These appear to be issuer-specific challenges rather than systemic problems. For example, MIDI plc introduced uncertainty in June 2025 when it announced it was open to discussions with the government about reverting the Manoel Island concession, while committing to protect shareholders and bondholders. This is a project-specific situation, though it has raised questions about financing plans.

Central Business Centres faced challenges in late August when it sought more time to repay a short-dated, zero-coupon instrument and continues to deal with low occupancy at some sites. Similarly, MMH Finance, linked to the Mediterranean Maritime Hub, had its trading suspension extended earlier this summer due to delayed financials. The group is seeking strategic investors and has postponed publishing accounts, though it has maintained its interest obligations.

"Banks remain selective on CRE, keeping bonds a credible alternative." — George Vella

While these situations have garnered attention, they are concentrated cases tied to individual business models and circumstances, rather than a reflection of systemic stress across the market.

FG Real estate-backed bonds provide a degree of credit risk mitigation, supported by the long-term appreciation and relative stability of property values. Conversely, issuers with limited or illiquid collateral and elevated leverage are more vulnerable to financial distress.

Listed entities must also recognise their responsibilities as public companies and towards their investors. They are expected to implement safeguards that ensure full compliance with bond terms, along with internal controls to prevent actions that could be detrimental to bondholders.

Additionally, credit protections may be embedded within bond structures to safeguard investors further. The introduction of financial covenants, for example, can require issuers to operate within predefined thresholds, with ongoing compliance serving as a condition for the bond's continued validity.

Josef and George, can you expand on investor sentiment and bond performance?

JC Investors have continued to view the local corporate bond market positively, as evidenced by the strong support for new bond issues in recent months. That said, there is today greater sensitivity to credit risk, with market participants showing heightened awareness of the ability of certain companies to honour their obligations, particularly in cases where sizeable redemptions are due in 2026.

This increased sensitivity and selectivity have also been reflected in the performance of the Malta Stock Exchange Corporate Bonds Total Return Index. After advancing by 3.25% in 2023 and a further 1.88% in 2024, following eight consecutive quarters of positive returns, the trend shifted in 2025. Indeed, the Malta Stock Exchange Corporate Bonds Total Return Index eased marginally by 0.07% in Q1 2025, declined by 1.36% in Q2, and edged further lower by around 0.20% in Q3 2025.

The recent drops in the Index are particularly striking against the backdrop of a declining interest rate scenario in the euro area, which would ordinarily be expected to support bond valuations. This more subdued performance highlights the repricing of several bonds, even as the bond market continues to attract steady demand for well-structured offerings from issuers with sustainable business models and strong fundamentals.

GV The past year has been marked by stability and steady activity in the corporate bond market. As Josef mentioned, the MSE Corporate Bonds Total Return Index finished the 12 months to the end of 2024 in positive territory. On the primary market side, activity has remained substantial and diversified, with continued momentum this year across various sectors, including banking, gaming, logistics, hospitality, and property. The market's total size stood at approximately €2.8 billion as of the end of 2024.

Investor interest has stayed firm, and the past twelve months confirm it. New admissions have spanned various industries, including banking, hospitality, gaming, and property. Josef earlier mentioned recent examples in the property sector, and it is worth noting that Bank of Valletta's €150 million 5% subordinated issue was taken up in full, with the overallotment exercised, which is a clear indication of demand.

Trading has been selective rather than one-way, which is what a healthy market looks like. Higher-quality or more transparent structures are holding around, or just above, par. Recent board marks indicate that Golden Triangle 2030 is nearing one hundred, Excel Finance 2031 is slightly over one hundred, International Hotel Investments 2035 is above one hundred and two, GPH Malta Finance 2032 is also above one hundred and two, and Lidion Bank 2030–2035 is around one hundred and two. By contrast, credits with execution or refinancing questions are priced below par. That is issuer risk being priced, not a blanket verdict on the asset class.

Under the hood, published metrics indicate a clear split. Stronger names are presenting better interest cover and moderate leverage, which helps explain their resilience on screen. On the property side, investors have also been drawn to issues where security and cash flows are well-defined. Excel Finance's prospectus details Q Hub in Qormi, which has signed leases and a ring-fenced security package, and Golden Triangle's documentation sets out first-priority security over two Beverly Hills hotels and an adjacent office property. Where visibility is weaker, pricing is accordingly more cautious.

The net result is that new issues are being absorbed across sectors, secondary pricing is discriminating on fundamentals, and the health of issuers is visible in the numbers they publish and the spreads they trade at. That is the kind of market backdrop that sets up your outlook section well.

Looking ahead, what do you all expect for the bond market and real estate issuers?

JC I believe that the prospects for the local corporate bond market remain positive for the remainder of 2025 and into 2026. More companies are expected to consider the bond market as an attractive source of financing, which in turn should sustain issuance activity, offering investors a continued pipeline of opportunities.

Beyond the financing dimension, there is a significant opportunity for investment to drive the upgrading of Malta's property and infrastructure base. This spans not only aesthetic improvements but also enhancements in sustainability and efficiency, the development of technology-enabled buildings, and the introduction of disaster-resilient construction methods such as earthquake resistance. The scope is broad, extending across both the public and private sectors, and underscores the strategic role that capital markets can play in financing long-term development.

That said, there is room for improvement in further strengthening investor awareness and education. Whilst security features such as collateral provide comfort, they can never be viewed as an absolute safeguard against failure. A more mature market, where investors are equipped to evaluate risks with greater sophistication, will enhance both resilience and confidence, ensuring that growth in the bond market is built on a sound and sustainable footing.

GV The outlook remains constructive. On the primary market side, we expect continued issuance, both for refinancing and new money, as bonds mature and developers align projects with set interest rates. Pipeline indicators point to a healthy calendar across multiple sectors, not just real estate.

Investor demand should stay supportive. Retail appetite for fixed income remains strong, as evidenced by the 2024 index gain and the oversubscription of 2025 deals. That said, selectivity could remain high, with investors continuing to reward quality assets.

On the funding side, bank lending to commercial real estate is still selective, which keeps bonds as a credible alternative. Overall, the market fundamentals suggest a steady flow of activity, provided issuers maintain transparency and sound financial structures.

FG Looking ahead, Malta's property and bond markets are expected to remain active, supported by steady demand for real estate and continued appetite for bond financing across both commercial and residential projects.

My primary concern, however, is that a default in the bond market could undermine investor confidence and reduce participation in new issues, potentially triggering a ripple effect across the market. To safeguard resilience, it is important to maintain prudent borrowing levels and strengthen transparency for investors.

Closing thoughts

Malta's real estate bond market stands at a crossroads: vibrant and resilient yet shadowed by recent red flags. For investors, the message is clear - discernment matters. For Issuers, the challenge is equally clear — transparency, prudence, and sound structures are essential. If these lessons are heeded, the coming years could see Malta's capital markets play an even greater role in financing the island's property future.

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