Insolvency Application for d.i.i. 14 GmbH & Co. Closed Investment Limited Partnership
The current difficult situation in the construction industry has already brought significant economic difficulties to several real estate companies and project developers, including d.i.i. Deutsche Invest Immobilien AG based in Wiesbaden. On March 28, 2024, the company filed for bankruptcy. Additionally, insolvency applications were also submitted for other operational subsidiaries of the d.i.i. group. The Frankfurt District Court opened preliminary insolvency proceedings for the parent company d.i.i. Deutsche Invest Immobilien AG on April 9, 2024 (Case No.: 810 IN 397/24 D).
The insolvency of the parent company does not directly affect the d.i.i. fund companies, but it could indirectly impact the funds. Therefore, private, semi-professional, and institutional investors should be vigilant and use their legal options early to prevent potential financial losses, advises the law firm MTR Legal Rechtsanwälte, which provides counsel in capital market law among other areas. On April 16, 2024, d.i.i. announced that an insolvency application would soon be filed for the fund d.i.i. 14 GmbH & Co. Closed Investment Limited Partnership as well.
Insolvency Application for Subsidiaries
d.i.i. Deutsche Invest Immobilien attributed the economic difficulties to the challenging market environment. Sharply increased construction costs combined with planning uncertainties regarding subsidies and a high-interest environment eventually led to liquidity problems. Since discussions with investors had failed, an application for regular insolvency proceedings had to be filed. Insolvency applications were also filed for other operational subsidiaries, d.i.i. reported. The business operations of these companies will continue following the insolvency applications, and the managed assets will continue to be supervised and managed.
According to information on its homepage, the d.i.i. group specializes in residential real estate and handles all services from the acquisition of properties through financing and development to sales on its own. d.i.i. has invested in more than 50 locations, and the managed assets currently have a value of around four billion euros. Both private and semi-professional and professional investors could participate through alternative investment funds (AIFs).
d.i.i. Investment GmbH Responsible for Funds
d.i.i. Investment GmbH is responsible for the development, conception, and management of the funds. It is a 100-percent subsidiary of d.i.i. Deutsche Invest Immobilien AG. Whether an insolvency application has been filed for this subsidiary as well is currently unknown. In a statement from the preliminary insolvency administrator dated April 11, 2024, it was only mentioned that it is being examined whether further d.i.i. companies need to file for insolvency.
Recently, the d.i.i. group also faced a compliance issue where allegedly contractors, with the help of an internal employee, issued significantly overcharged invoices and collected the money. d.i.i. estimates the damage at less than three million euros, according to Handelsblatt. The affected fund companies have reportedly been compensated, with the financial damage being manageable.
Compliance Issue Brings BaFin into Action
The insolvency likely has nothing to do with the compliance issue. However, it prompted authorities to take action, and both the Wiesbaden public prosecutor’s office and the German Federal Financial Supervisory Authority (BaFin) began investigations. As reported by Handelsblatt, BaFin intends to scrutinize the company’s compliance structure and assess its effectiveness.
d.i.i. 14 GmbH & Co. Closed Investment Limited Partnership Insolvent
As d.i.i. Deutsche Invest Immobilien announced on April 16, 2024, it will also file an insolvency application for the fund d.i.i. 14 GmbH & Co. Closed Investment Limited Partnership. The fund includes five project companies. For d.i.i. 14 Neubau E GmbH, the project company for the “Viktoria Viertel” new building project in Wiesbaden, an insolvency application has already been filed, according to the press release. Insolvency applications for the other project companies and for the fund company itself are expected to follow shortly.
Potential Compensation Claims for Investors
The recent developments at the real estate conglomerate from Wiesbaden are alarming for investors. To prevent potential financial losses, they can have their legal options reviewed. This may include the assertion of claims for damages. Private investors, in particular, may have claims for damages due to faulty investment advice. This could be the case if the investment advisor did not properly inform them about the existing risks of the investment. Emission prospectuses must also disclose all factors essential for the investment decision, including existing risks.
While the legal requirements for investment advice are lower for semi-professional and professional investors, compensation claims may still be possible in their cases.
MTR Legal Rechtsanwälte is a law firm experienced in capital market law and advises private, semi-professional, and professional investors of the d.i.i. funds on their options.
Please feel free to contact us.
