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Residential district in Berlin: living up to social responsibility
Photo: FILIP SINGER / EPA
The promotion of the Vonovia superiors was finally successful.
The two largest German real estate companies want to join forces.
Vonovia wants to offer the shareholders of Deutsche Wohnen a total of around 18 billion euros, as both companies announced.
It is not the first takeover attempt, but this time Deutsche Wohnen, which has been courted for a long time, does not seem averse. "Mr. Zahn and I, the supervisory boards and all committees support the deal, that is a significant change," said Vonovia boss Rolf Buch during the joint press conference with Deutsche Wohnen boss Michael Zahn and the governing mayor of Berlin. Michael Müller, in the Red City Hall. Sometimes things take a little longer. In addition, according to the verdict of the Federal Constitutional Court on the Berlin rent cover, there is a certain degree of security. In April, the court declared the Berlin law, which had been in force for more than a year, to be null and void.
The news of the merger of the real estate giants is not only causing a stir in the industry, tenants are also unsettled.
Is the new corporate giant now ensuring that rents rise again and that displacement on the housing market gains momentum again?
Answers to the most important questions.
What kind of group is it that is emerging?
Together Vonovia and Deutsche Wohnen own around 550,000 apartments, which are currently worth more than 80 billion euros.
The stock market value of the entire group would amount to around 48 billion euros.
The US asset manager Blackrock and the Norwegian sovereign wealth fund are among the largest shareholders with a stake of around ten percent each
In the first attempt five years ago, Deutsche Wohnen boss Zahn had vehemently opposed the sale.
Now Zahn is behind the planned takeover: "Both companies have clearly moved strategically towards each other," said the manager, who will become Buch's deputy after the takeover.
"The culture is not hostile, but based on partnership." He is very certain that, as requested, more than 50 percent of the shareholders will sell their papers to Vonovia.
Many large investors are involved in both companies.
The transaction should be finalized by August.
Vonovia is planning an eight billion euro capital increase to partially refinance the takeover.
What significance does the merger have for the German housing market?
Vonovia / Deutsche Wohnen would be by far the largest real estate group on the German market.
Since around 70 percent of the Deutsche Wohnen portfolio is located in Berlin, where rents have been rising sharply for years, the major merger would have significant effects there: Vonovia currently owns 40,000 apartments in the capital, Deutsche Wohnen 110,000.
Together that is around nine percent of all 1.67 million rental apartments in the city.
Vonovia sees the takeover as a new start in the discussion about high rents and housing shortages, especially in Berlin.
"In Berlin in particular, we pay attention to stable conditions," said CEO Buch in an interview with SPIEGEL.
"There we will limit the regular rent increases to one percent annually over the next three years."
At the joint press conference, too, both managers promised to live up to their social responsibility.
"We pacify this city," said Deutsche Wohnen boss Michael Zahn.
With their combined forces, the two largest private housing groups in Germany want to make more money for renovation measures and new buildings.
The merged group wants to offer the state of Berlin 20,000 units for a good two billion euros for sale, as the governing mayor Michael Müller (SPD) said.
What should the merger bring?
Vonovia hopes the takeover will generate synergy effects of 105 million euros per year.
»We have some big issues that affect our industry, especially climate change, that is, CO2 reduction in the building sector.
It just doesn't make sense for us to do research separately in Berlin and Bochum, ”said Buch in the SPIEGEL interview.
"We should do this together, we can then apply the result to the larger housing stock."
In addition, one expects cost advantages through the joint purchase of services, but also with the expansion of the inventory.
"If number one and number two appear together, we have advantages when it comes to refinancing new buildings or climate protection investments," added Zahn.
It will take some time, however, before the savings actually become noticeable in the balance sheet.
Because according to the company, costs of around 600 million euros will initially be incurred.
Around a third of this is needed to initiate synergies.
Could the new housing giant push its competitors to the wall?
Vonovia is unlikely to have any concerns about antitrust law.
The vast majority of rental apartments in Germany are in the hands of private owners - or they belong to the state or local authorities.
Vonovia's market share in Germany is just 1.5 percent.
In contrast, Deutsche Wohnen is primarily active in the Berlin market, where it has a share of around six percent.
Nevertheless, even the city of Berlin has more than twice as many apartments as Vonovia and Deutsche Wohnen together.
The market power of a merged group would be great, says Harald Simons from the Bonn consultancy Empirica.
"But not so overpowering that the Cartel Office would intervene."
The head of the German Institute for Economic Research, Marcel Fratzscher, sees it differently: "A merger of the two largest private real estate groups in Germany is problematic, as it should result in less competition and the market power of the new group will be even stronger," he told the Reuters news agency .
The plans have not yet been registered with the Cartel Office.
What do tenants have to prepare for?
The tenants' association warns of the burdens on tenants due to the merger.
But first of all, they are protected by the broad tenant protection, which remains unaffected by the merger.
In this respect, the merger would have no consequences for them.
Theoretically, however, the new real estate giant could use its market power to raise rents across the board and thus influence the rent index.
Currently, however, both corporations assert exactly the opposite.
Will Vonovia / Deutsche Wohnen now become a social giant?
Rarely have two CEOs in the run-up to a merger emphasized their social awareness in such a demonstrative way instead of emphasizing the profit prospects to their shareholders.
The advertising message is aimed primarily at Berlin, where displeasure about rent increases in recent years has provoked great resistance from the population.
"Berlin has had a development in which rents have grown at a rate in recent years that overwhelmed people," admitted Buch.
In addition to the promise to cap rent increases in Berlin in the coming years, the costs for the energetic renovation of the housing stock should only be partially passed on to the tenants.
Buch also announced that it would build 13,000 new apartments in the city.
With the 20,000 apartments that the merged company wants to sell to the city, Berlin would come closer to its goal of around 400,000 units in municipal ownership and thus more weight when determining the rent index.
However, it is doubtful whether the transaction, which Finance Senator Matthias Kollatz estimates at more than 2.1 billion euros, will dampen the displeasure of many citizens.
After all, the initiative "Expropriate Deutsche Wohnen und Co." is still aiming for a referendum.
The real estate managers can at least hope for a more pleasant way of dealing with the city representatives.
What do the initiators of the expropriation campaign say?
The activists of the initiative »Expropriate Deutsche Wohnen und Co.« showed themselves to be unimpressed in an initial reaction by the shawm chants from the Rotes Rathaus. You interpret the merger as an attempt to neglect the referendum by changing the name. "We have brought a DAX company to its knees," says Rouzbeh Taheri, spokesman for Deutsche Wohnen & Co. Expropriation. One remains optimistic that the initiative will be successful. “The Berliners will expose this deal as a sham and even more will vote 'Yes' in the referendum”.
Rouzbeh doesn’t give a damn about the proposed “social pact” with the State of Berlin.
The offer to buy apartments at highly speculated market prices is unattractive.
The short-term limitation of rental prices cannot hide the fact that rents are to be increased further in the medium and long term.
Representatives of the party Die Linke also attribute the current developments to the pressure of expropriation initiatives: "The fact that Vonovia and Deutsche Wohnen are prepared to make concessions in view of their planned merger is primarily a result of the strong tenant movements in our city," he said Berlin's top candidate Klaus Lederer.
