Germany's Vivacon In Liquidity Crisis

Allan Saunderson is managing editor of Property Finance Europe and a contributor to GlobeSt.com.

COLOGNE, GERMANY-Locally based property group Vivacon has announced that against the background of the ongoing capital market crisis and the difficult market environment, it has encountered an acute liquidity crisis. It is currently negotiating with creditor banks on extension agreements and the opportunity for an extrajudicial restructuring aimed at prolonging financings coming due this year.

The concept and planned restructuring envisage short-term fund-raising by sale of assets and possibly investments, as well as further cost reduction measures. Against this background, thecompany has cut the number of board members and applied for a segment change on the Frankfurt Stock Exchange to the General Standard from the Prime Standard – a move that means it canomit quarterly reporting.

The group will henceforth publish interim statements. The publicationdate of 2008 consolidated financial statements remains uncertain.

Separately, Vivacon said it has signed a sales contract with aninternational investor on a part of its development business.This should be implemented on 30 June and is conditional,among other elements, on banks approving change of control.The assets encompass five development projects in Berlin, Hamburgand Dsseldorf with a total volume of €345m and around610 units. The disposal is an important part of the ongoing restructuring of Vivacon.

It stands to receive not only the purchase price but to eliminate the drain on liquidity during the construction phase, and trim overheads. Details of the purchase price were not disclosed.Vivacon, which specialises in high-end residential property,historic building refurbishment, and ground lease concepts, tracesits roots back to 1928.

But the modern company was created after the 1996 takeover of building firm Vogtländische Baugesellschaft by Marc Leffin, Erwin Walter Graebner and Timo Herbrand. Leffin left the company last year, and the other two resigned from the board and group in the latest reshuffle.

The company also provides investment property for students, managersand senior citizens, and is a residential real estate asset managerthrough its 80% stake in the Curanis Group, currently managing around 58,000 units worth around €4.5bn. In its last report at the nine-month point in 2008, Vivacon had liabilities of nearly €1.5bn against shareholder equity of €269m.

It earned a consolidated net €34.7m over the first nine 2008 months –earnings per share of €1.75, and up slightly from the prior year- and owned investment property worth €503m.