Angry Creditors Are Fighting Over a Crown Jewel of German Real Estate

The lender showdown over Aggregate’s Fuerst project in Berlin highlights the perils of over-leveraged property developments.

(Bloomberg) — Just two years ago Aggregate Holdings SA’s purchase of Berlin’s Fuerst project, a plan to create 2 million square feet of space on the bustling Kurfuerstendamm, was a statement of vaunting ambition. Now it’s merely evidence of the German property developer’s beleaguered state.

Senior creditors of the project including London fund Fidera Group are backing a debt restructuring plan for what’s one of the remaining jewels in a shrinking Aggregate portfolio that once boasted €8.3 billion ($8.8 billion) of assets. Under the plan, new majority shareholders would be put in place and only senior lenders would be left more or less unscathed.

In parallel, a group of lower-ranking creditors including Switzerland’s Bank J Safra Sarasin is trying to push the mega-project into insolvency. Luxembourg courts will rule on Friday whether Safra Sarasin has succeeded.

High construction costs and debt payments have left Aggregate — majority owned by Austrian investor Guenther Walcher and run by long-time associate Cevdet Caner — with budget shortfalls and brought building work to a halt.

The travails of the Berlin site, which is slated to include offices, a hotel and shops and was due for completion by the end of next year, encapsulate the spectacular boom and bust in German real estate where a long period of low interest rates has given way to 10 straight hikes by the European Central Bank.

The Fuerst project was bought by a subsidiary of Israeli tycoon Amir Dayan’s Vivion Investments Sarl for about €540 million in December 2019 and sold to Aggregate just 18 months later for roughly €850 million, facilitated with a complex financing arranged by Corestate Bank. It was valued at about half that in June, according to documents seen by Bloomberg.

The bitter refinancing battle also shows how creditors are taking the gloves off as they fight to limit losses from the global property meltdown.

Safra Sarasin, a subordinated lender whose claims risk being deeply impaired by the proposed debt restructuring, is filing applications against firms linked to the Fuerst project in the Luxembourg courts. Other lenders further back in the repayment queue have similar gripes. “We firmly believe the success of any project is best achieved through a harmonious partnership among all stakeholders,” a Safra Sarasin spokesperson said. 

Alongside Fidera, other senior lenders to the project include Germany’s largest public-sector supplementary pension scheme, Versorgungsanstalt des Bundes und der Laender. “The current proposal includes Fidera and other senior creditors investing substantial resource and capital, including new monies, to finish construction,” a Fidera spokesman said. “We’re seeking to align all stakeholders and remain committed to finding an acceptable resolution.”

Aggregate didn’t respond to requests for comment.

Awkward Timing

The Fuerst purchase in June 2021 came at a high point for Aggregate. Shortly afterward it was rocked by a damning short-seller report on Adler Group SA, another German property firm, in which it was the biggest shareholder. Caner is the subject of a German probe regarding false accounting at Adler.

The short-seller report, alongside a whistleblower complaint to Adler’s lenders, was the start of a chain of events that has included the unravelling of Aggregate’s portfolio, with creditors claiming prize projects in Berlin and Portugal and the company forced to give up stakes in several European companies as it’s raced to raise cash.

Aggregate’s total assets had already dropped to €4.7 billion by the end of last year, even before creditors moved in, according to its latest annual report.

Under the restructuring plan supported by most senior creditors, Fuerst would receive more than €150 million of new senior financing with these lenders able to participate. Out of the existing capital structure only the senior debt would remain, with maturities extended, according to a press release Monday.

The project’s holding company chose to enact the restructuring under English law “to achieve these objectives within the necessary short timeframe,” the statement said. In the UK, judges are well-versed in a legal mechanism dubbed a “cross-class cramdown,” which can let such proposals go ahead even if a group of creditors disagree.

“This matter should be resolved in Germany, not by the UK courts,” Safra Sarasin’s spokesperson said.

Other lenders ranking below Safra Sarasin include a fund run by credit specialist Orchard Global, according to people familiar with the matter. They have their own cases which will be heard in Luxembourg on October 27, according to the court’s press service.

Lost Jewels

Already this year Aggregate has seen its roster heavily depleted. In June it had to hand over keys to its QH Track project, also in Berlin, to Oaktree Capital Management after cost overruns. Aggregate initially gambled that it could complete that project by refinancing with pricey Oaktree debt.

Previously Aggregate handed Vivion control of another part of its prized Quartier Heidestrasse (QH) development, to settle debts related to the Fuerst deal. It ceded control too of its Portuguese unit Vic Properties in March to a group of creditors including AlbaCore Capital and Mudrick Capital.

It isn’t the only German developer to struggle. In recent months Gerch Group, Project Immobilien and Euroboden have filed for insolvency proceedings.

“We’re starting to see more distress,” said Maud Visschedijk, an international partner in Cushman & Wakefield’s debt and structured finance team, in an interview at Munich’s ExpoReal earlier this month. “We’ll see much more of that in the next 12 months.”

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