Raging creditors fight for German real estate gem - BNN BloombergBNN: Creditors Fight for German Real Estate Gem

Not long ago, Aggregate Holdings SA's purchase of the Fuerst project in Berlin, which aimed to create 2 million square feet of space on the busy Kurfuerstendamm, was a display of ambition. Now it is just a testament to the German real estatedeveloper's plight.

The project's senior creditors, including London-based fund Fidera Group, are backing a plan to restructure debt related to one of the last precious last assets of Aggregate's shrinking portfolio, which once totaled 8.3 billion euros ($8.8 billion). Under the plan, new major shareholders would be appointed and only senior creditors would remain largely unchanged.

In parallel, a group of inferior creditors, including Swiss bank Bank J Safra Sarasin, is trying to have the megaproject bankrupted. A Luxembourg court will consider whether Safra Sarasin has succeeded on Friday.

High construction costs and debt repayments have left Aggregate, owned by Austrian investor Günter Walcher and run by longtime partner Chevdet Janer, with a budget deficit and led to a halt in construction. The troubles in Berlin, where offices, a hotel and stores were planned by the end of next year, epitomize the spectacular rise and fall of German real estate, where a long period of low interest rates has been followed by 10 consecutive increases by the European Central Bank.

The Fuerst project was bought by a subsidiary of Vivion Investments Sarl of Israeli trader Amir Dayan for about 540 million euros in December 2019 and sold to Aggregate just 18 months later for about 850 million euros, subject to a complex financing arranged by Corestate Bank. It was valued at about half that in June, according to documents reviewed by Bloomberg.

The bitter refinancing battle also shows how lenders are taking the gloves off as they struggle to limit losses from the global real estate market crisis. Safra Sarasin, a minor creditor whose risks could be deeply undermined by the proposed debt restructuring, is suing companies linked to the Fuerst project in the Luxembourg courts. Other creditors further down the repayment queue have similar complaints. "We strongly believe that the success of any project is best achieved through a harmonious partnership between all stakeholders," a Safra Sarasin spokesman said.

In addition to Fidera, the other senior lenders to the project are Germany's largest public pension scheme Versorgungsanstalt des Bundes und der Laender. "The current proposal includes significant resources and capital, including new money, from Fidera and other senior lenders to complete construction," a Fidera spokesperson said. "We are committed to aligning the interests of all stakeholders and continue to be on the lookout for an acceptable solution." Aggregate did not respond to requests for comment.

Fuerst's June 2021 purchase came at the peak of Aggregate's popularity. A little later, the company was criticized in a short seller's report on Adler Group SA, another German real estate company in which it was the largest shareholder. Janer is the subject of an investigation by German authorities for falsified accounting at Adler. The short seller's report, as well as the whistleblower's complaint to Adler's creditors, started a chain of events that included the collapse of Aggregate's portfolio, with creditors claiming prestigious projects in Berlin and Portugal and the company forced to divest stakes in several European companies in an attempt to raise money.

According to the latest annual report, Aggregate's assets had already shrunk to €4.7 billion by the end of last year, even before lender activity began.

Other creditors below Safra Sarasin include a fund managed by loan specialists Orchard Global, according to sources familiar with the situation. Their own cases will be heard in Luxembourg on Oct. 27, the court's press office said.

Aggregate has already had its list of assets significantly reduced this year. In June, it was forced to hand over the keys to the QH Track project, also in Berlin, to Oaktree Capital Management after overspending. Initially, Aggregate expected to be able to complete the project by refinancing it with Oaktree's expensive debt. Aggregate had previously ceded control of another part of its precious Quartier Heidestrasse (QH) project to Vivion to pay off debt associated with the Fuerst deal. In March, it also ceded control of its Portuguese unit Vic Properties to a group of lenders including AlbaCore Capital and Mudrick Capital.

It is not the only German developer experiencing difficulties. Gerch Group, Project Immobilien and Euroboden have filed for bankruptcy proceedings in recent months. "We are starting to see more financial distress," Maud Wisshedijk, an international partner in Cushman & Wakefield's debt and structured finance team, said in an interview at ExpoReal in Munich earlier this month. "We're going to see a lot more of these cases in the next 12 months."