German developer Munich goes bankrupt, hitting the German real estate market.

Construction sites in Frankfurt, Germany, were photographed on July19,2023.

"The company Euroboden GmbH, which is based in Munich, stated on Friday that it has applied for bankruptcy proceedings at a local court, marking the latest indicator of tension in the German real estate market. Euroboden GmbH still has €115 million ($126 million) in bond obligations and a potential credit rating downgrade."

The company said in a statement that negotiations to sell the property had collapsed, hurting its financial position. It also canceled a meeting with bondholders later this month at which it had hoped to restructure its debt.

“The market outlook for project developers continues to be negative,” Euroboden said, citing high construction costs and interest rates, declining demand and difficulty in obtaining credit.

Germany has long enjoyed an era of cheap money that fueled a boom in the real estate market, but the sector is now facing serious problems. The issuance of building permits and construction itself have fallen sharply as residential real estate prices fall and job growth in the construction industry stagnates.

Euroboden was founded in 1999 and expanded to Berlin and other cities during a decade-long real estate boom.

Earlier this week, Development Partner said it also filed for bankruptcy, and Centrum Group, a real estatedeveloper, filed its own petition in July, citing a “toxic triangle” of rising costs, rising interest rates and difficulty investing.

Real estate problems have also arisen in the United States and Sweden. Germany is Europe's largest economy and the largest real estate market on the continent. The real estate sector accounts for about one-fifth of Germany's economic output and one-tenth of jobs.

In an investor presentation in July, Euroboden said it hopes to extend the bond terms by three years and switch to its core business in Munich and Berlin after closing its Frankfurt office. ($1 = 0.9092 euros)