In the crisis on the real estate market, the wave of bankruptcies among project developers continues. The project developer Gerch, which specializes in office properties and residential areas with projects worth billions, has filed for bankruptcy for four companies.
The turbulence in the industry thus requires the next victim: within a few weeks, several project developers have already filed for bankruptcy, including the luxury real estate developer Euroboden and the Nuremberg Project Real Estate Group with planned projects of 3.2 billion euros. The cases have far-reaching consequences: More homebuyers are worried about their homes, savers about fund investments and craftsmen about open bills.
Due to imminent insolvency, an application was made to the Düsseldorf district court for a judicial restructuring process in self-administration, Gerch said. The court agreed to the application and ordered provisional self-administration.
Nine projects on 790,000 square meters
According to Gerch from Düsseldorf, he is developing nine projects with an area of 790,000 square meters and a total volume of around four billion euros. Among them is the Laurenz Carré of residential and commercial properties at Cologne Cathedral and a building ensemble on the site of the old police headquarters in Frankfurt.
business operations continue
“Business operations at Gerch continue without restrictions,” the company announced on Thursday. “Our primary goal is to implement all real estate projects and place them on the market despite the current crisis in the construction industry,” explained CEO Mathias Düsterdick. A comprehensive reorganization and restructuring program is planned for this purpose. The parent companies Gerchgroup, Gerch Development, Marathon Beteiligungsgesellschaft and Gerch Beteiligungen are initially affected by the application for self-administration, but not the individual real estate project companies of Gerch.
Project developers market entire districts of apartments or commercial properties – from buying a plot of land to selling or renting out the finished property. The business is complex, but high profits lured in the long real estate boom. Not only companies with projects worth billions are active in the industry, but also many small and medium-sized companies. “The market is fragmented,” says Michael Voigtländer, real estate expert at the German Economic Institute (IW).
Interest rates make new buildings more expensive
While low interest rates and rapidly rising prices helped the real estate boom, the environment has turned around completely. With higher material costs and the rise in interest rates for loans, new construction has become much more expensive, while project developers are encountering little demand for sales. “Sometimes they only sell a tenth of the objects they did a few years ago,” says Voigtländer. In addition, the crisis on the real estate market lasted longer than many in the industry had hoped, but the costs continued to accrue – in extreme cases until liquidity ran out. “Time is against the companies.”
The crisis of project developers is now hitting numerous private homebuyers. According to the insolvency administrator, Project from Nuremberg is in charge
projects all over Germany
The construction projects of the insolvent Project-Immobilien-Group are spread all over Germany, with a focus on metropolitan areas such as Berlin, Hamburg, Düsseldorf, the Rhine-Main area and Munich. Some houses are nearing completion, it said.
Apartment buyers who are affected by the developer’s bankruptcy in the middle of construction can hope that another company will continue the project, says IW expert Voigtländer. In the current crisis on the real estate market, however, this is difficult. If a new site manager or new craftsmen have to be found, the costs usually also increase.
Not only homebuyers, but also savers are worried about Project from Nuremberg, reports the “Handelsblatt”: Around 30,000 private investors have entrusted around 1.4 billion euros to the funds of the Project Investment Group. However, the funds set up to finance the projects have stopped paying out to investors for the time being.
Voigtländer from the IW believes that the crisis among project developers will continue. The bankruptcies are just examples of some large industry companies. “Right now we’re just seeing the tip of the iceberg.”
