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

COLOGNE, GERMANY-Four subsidiaries of locally based listed property group Vivacon have filed for insolvency due to a liquidity gap resulting from high vacancy rates of their real estate assets due to their location, the company said. The group itself is also at a high risk of insolvency at the end of this quarter if debt is unable to be prolonged with creditor banks.

All are set up as limited liability companies and are focused solely on residential properties in the cities of Salzgitter and Kassel. Affected are almost 4,000 some 10,000 housing units of the group. The group said the liquidity gap “cannot be bridged in the near term, according to the current forecast of the group’s management.”

Vivacon said the insolvency was filed in the context of its current restructuring efforts and served to safeguard group liquidity. A leading auditing company has been mandated to prepare a restructuring opinion. The company’s shares fell by a sharp 21% after the announcement to all-time lows at €0.56, giving a market capitalisation of just over €11 million.

Vivacon earlier this month signed an agreement to sell part of its development business to an international investor, comprising five development projects in Berlin, Hamburg and Dsseldorf with a total project volume of €345 million. It did not disclose the purchase price.

Vivacon board member Eckhard Rodemer told the Börsen-Zeitung newspaper recently that €59 million of loans expired at end-1Q09 and have not yet been extended or called for repayment. This moratorium ends on 30 June and he sees group insolvency as inevitable if no agreement is reached. The group needs to prolong portfolio financing of a total €116 million that comes due this year. The BZ noted in a survey however that the Vivacon liquidity problems are untypical for residential-focused real estate firms in Germany and none of the competitors are experiencing comparable problems. Despite this, firms such as Colonia, Deutsche Wohnen, Gagfah, Patrizia, TAG Immobilien, and Deutsche Annington have seen their share prices badly hit in the wake of the Vivacon announcements.

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