Bankruptcy of two student residences: also settling accounts with politicians

Two student dormitories in Wiener Neustadt have entered insolvency, marking a significant setback for housing options for students in the region. With over 4,500 enrolled students at local universities, the demand for accommodation has been substantial. The collapse of the Campus Residence Ungargasse and Grünangergasse came as a surprise this week, following years of investment and renovation. The two properties were renovated in 2019/2020, transforming into 129 fully furnished apartments. However, the onset of the coronavirus pandemic disrupted operations. In early 2020, the university shifted to online instruction, leading to the suspension of programs for international students. This decision resulted in losses exceeding one million euros, according to business manager Patrick Volkert. Despite efforts to maintain profitability, financial challenges persisted. The firms were established just before the required deadline for restructuring, missing out on favorable fixed interest rates. Subsequently, rising interest rates and operational costs further strained finances. A costly legal battle emerged when a local attorney and lecturer, along with students, filed a claim for reduced rent. Although the case is still ongoing, the associated expenses have added to the financial burden. Occupancy levels remained high, with all apartments fully rented. Despite this, the companies faced negative cash flow after accounting for all expenses and financing costs. An immovable property appraisal revealed that the value of the assets fell below their financial obligations, triggering insolvency proceedings. While the companies are not technically insolvent, they hold more than half a million euros in liquid assets. According to Creditreform and AKV Europa, total liabilities exceed ten million euros, affecting eleven and ten creditors respectively, alongside five employees. Plans for continued operation include ceasing long-term rentals and focusing solely on short-term leases. Volkert questions the viability of the current business model under existing legal conditions. He criticizes political authorities, stating that the companies have sought support from both city and regional governments for funding or better financing terms. These requests were met with references to empty state coffers. Looking ahead, the company hopes that the bank will accept its rehabilitation plan during the insolvency process, allowing for continued operation. The situation highlights broader issues surrounding student housing and the impact of economic and regulatory pressures on private providers.