Developer and project insolvency: complete or realise?
A half-finished construction project is the most difficult property in any proceedings: purchasers with claims, contractors with security mortgages, secured creditors, outstanding costs to complete and a market that shies away from unfinished assets. We supply the market value in its current state, the cost to complete and the business plan for every option – from a single source.
Why developer insolvency needs figures of its own
With a developer, real estate valuation and corporate planning come together. The land is encumbered, the building unfinished, the purchasers have paid instalments under the MaBV and hold priority notices in the land register, contractors secure outstanding claims for payment through contractors' security mortgages (§ 650e BGB), and the financing bank holds the land charge. Every option – completion by the estate, sale to an investor, completion by the purchasers' association, compulsory auction – distributes proceeds and risks differently.
For this the administrator needs three figures that fit together: the market value in the current state, the remaining cost to completion, and the value on completion together with a sales or letting plan. Only a comparison of the present values shows which option is better for the estate and the creditors – and whether an estate loan for completion is viable at all.
Typical questions we answer
- What is the project worth today – with and without purchaser commitments?
- What cost to complete, construction period and risks does completion involve?
- Do sales proceeds cover the estate loan, the contractors and the secured creditors?
- What would a sale in the current state to an investor achieve?
- How would proceeds be distributed in a compulsory auction?
- What is the effect of purchasers withdrawing or making additional claims?
Four routes – and the figures each one needs
We run every option through the same model. That makes the decision comparable, instead of resting on four different reports and offers.
How we value an unfinished construction project
1. Survey. Construction status by trade and unit on site, reconciled with construction contracts, invoices and the building permit. Outstanding defects, protective measures, winter readiness. Where needed, together with a site manager or building expert from our network.
2. Legal commitments. Purchaser contracts and instalments paid under the MaBV, priority notices, contractors' security mortgages, land charges, the bank's release obligations, guarantees. These commitments determine which value belongs to whom.
3. Values. Market value in the current state (residual method: value on completion less remaining costs, risk and profit), liquidation value for each realisation route, value on completion with a sales or letting plan.
4. Business plan. Completion cash flow with construction schedule, remaining costs, contingencies, sell-off, purchaser payments, estate loan and repayment – as a basis for the decision, the financing and the reporting.
5. Decision paper. Comparison of options with present values, risks and distribution of proceeds – for the creditors' committee, the secured creditors and the estate lender, explained in person on request.
Project developers, general contractors, land-holding companies
The same approach applies to projects without purchasers – land banks with planning permission, commercial and residential projects already under way, and revitalisations.
Residual value based on the development plan, the building permit and market conditions; comparison of a sale as building land against further development.
Pre-lets, forward deals, construction cost risks; continuation with an investor against realisation at shell stage.
Abandoned revitalisation: value in the intermediate state, remaining costs, listed building and grant funding commitments.
Frequently asked questions about developer insolvency
How quickly is a first assessment available?
We deliver a value indication in the current state with a rough estimate of the remaining costs within 5–10 business days of the site visit. The complete package of valuation report, cost estimate and completion business plan usually takes 3–5 weeks – depending on the size of the project and the state of the documents. Where protective measures are urgent (winter, vandalism) we prioritise the site visit immediately.
Who determines the cost to complete?
We prepare the commercial cost estimate on the basis of the construction status, the construction contracts and cost benchmarks. For the technical cross-check – defects, status by trade, risk of variation claims – we work with site managers and building experts from our network, or with the site manager you have already instructed. The result is an estimate of the remaining costs with contingencies shown separately, which is reflected in the business plan as a scenario.
How do you deal with the purchasers?
The purchaser commitments are at the heart of the valuation: instalments paid, priority notices, rights of withdrawal, and the question of whether the purchasers will support completion. We map them unit by unit – who has paid how much, what payment is outstanding, what the unit is worth finished and unfinished. That shows which option is viable for the estate, the bank and the purchasers. The legal treatment of the contracts (§ 103 InsO) remains with the administrator.
Can you convince the estate lender?
Our completion business plan is structured the way banks and mezzanine lenders review project finance: cost plan with contingencies, construction schedule, sales scenarios, security and repayment. On request we present the figures to the lender together with you and answer the follow-up questions.
Complete or realise? We provide the basis for the decision
Tell us about the project, the construction status and your deadlines. Within one business day you receive an assessment of the approach and a fixed price offer.