Hypo Real Estate

The Hypo Real Estate Holding AG is a holding company based in Munich, Germany which comprises a number of real estate financing banks. The company's activities span three sectors of the real estate market: commercial property, infrastructure and public finance, and capital markets and asset management. Hypo Real Estate is the second largest commercial property lender in Germany.[1]

Hypo Real Estate
Government-owned corporation
IndustryFinancial services
Founded2003 (2003)
HeadquartersMunich, Germany
Key people
Manuela Better (acting CEO), Bernd Thiemann (Chairman of the supervisory board)
ProductsCommercial property financing, infrastructure and public finance, capital markets and asset management
€257 million (2011)
Total assets€236.6 billion (2011)
OwnerSoFFin
Number of employees
1,419 (2011)
Websitewww.hyporealestate.com

The bank originated in 2003 from the real estate financing business of HypoVereinsbank. It employs about 2,000 people and was one of the 30 members of the DAX stock market index of the largest German companies between December 2005 and December 2008, before the shares were demoted to the MDAX. Its shares were further demoted to the SDAX in September 2009. In 2007 it acquired public finance company Depfa Bank.[2] The company remains a legal entity as a wholly owned subsidiary of the Hypo Real Estate Group.

The firm received a bailout from the Deutsche Bundesbank and other German banks in October 2008 in the midst of the financial crisis of 2007–2008, before approving a complete nationalization a year later.

Financial difficulties

Crisis summits

Hypo Real Estate encountered financial difficulties during the financial crisis of 2007–2008, principally due to the heavy debt burden of its Depfa Bank subsidiary.[3] On 29 September 2008, Finance Minister of Germany Peer Steinbrück announced that a €35 billion line of credit would be extended to Hypo Real Estate from the Government of Germany and a consortium of German banks.[3]

After the first crisis summit, the supervisory board members independent from and unaffiliated to JC Flowers and Grove International Partners LLP resigned from the office. As successors, Michael Endres (chairman), Bernd Knobloch, Edgar Meister, Sigmar Mosdorf, Hans Jörg Vetter, Bernhard Walter and Manfred Zaß were appointed to the board.[4]

The deal fell apart on 4 October 2008 after the banking consortium involved pulled out.[1] A second proposed bailout was agreed on 6 October, with German banks to contribute €30 billion and the Deutsche Bundesbank €20 billion to a credit line.[5]

After the second crisis, summit some politicians demanded that HRE's top management resign, among them Federal Minister of Finance Peer Steinbrück who stated that he had been kept in the dark[6] and that it was "unthinkable" to keep dealing with them, especially after they had used lawyers against the government to attempt to evade responsibilities.[7] CEO Georg Funke subsequently stepped down, replaced by Axel Wieandt on 31 October 2008.

Further guarantees

Via several steps, Hypo Real Estate was granted further framework guarantees by the German Financial Markets Stabilisation Fund (SoFFin) in February 2009, taking its total state funding to €52 billion.[8]

SoFFin takeover offer

On 17 April 2009, SoFFin tendered an offer to take over Hypo Real Estate by buying and creating shares that would raise its equity stake to 90%. On 24 April 2009 the HRE governing boards recommended that shareholders approve the offer by the rescue agency.[9] By that date, government support for the company had reached €102 billion. Under a law passed in March, the government could force the sale if shareholders reject it.[10]

Meanwhile, the German parliament formed a committee to investigate the HRE bailout. Opposition parties from the left and right spurred creation of the committee, while the governing centrist coalition abstained.[11][12]

Nationalisation

With the German state (via SoFFin) already owning 90% of HRE, an extraordinary general meeting on 5 October 2009 approved a €1.30 per share squeeze out of the remaining private shareholders,[13] including J.C. Flowers (which a year earlier had taken a 25% stake at €22.50 per share).[14] The decision resulted in the complete nationalization of the firm[13] within a year of it having been a DAX constituent.

Subsidiaries
  • Hypo Real Estate Bank International
  • Hypo Real Estate Bank
  • Hypo Public Finance Bank
  • Hypo Pfandbrief Bank International
  • Depfa Bank
  • DEPFA Deutsche Pfandbriefbank
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References
  1. "Deal to save Germany's Hypo Real Estate fails". NBC News. Associated Press. 4 October 2008.
  2. "Hypo Real Estate buy of Depfa cleared by EU". AFX News. Forbes. 29 August 2007.
  3. Kennedy, Simon (29 September 2008). "Hypo Real Estate's shares tumble after rescue". MarketWatch.
  4. "Changes to the Supervisory Board of Hypo Real Estate Holding AG". November 17, 2008.
  5. Parkin, Brian; Suess, Oliver (October 6, 2008). "Hypo Real Gets EU50 Billion Government-Led Bailout". Property Week. Bloomberg News.
  6. Dougherty, Carter (February 14, 2008). "German Bank Receives Its Third Bailout". The New York Times.
  7. "German Government Under Pressure to Deliver on Crisis Promise". Deutsche Welle. October 6, 2008.
  8. "Troubled Hypo takes more help from German govt". Reuters. 11 February 2009.
  9. "Hypo Real Estate Holding AG issues Statement regarding the Takeover Offer by SoFFin" (PDF) (Press release). Hypo Real Estate Group. 2009-04-25. Archived from the original (PDF) on 2011-07-12.
  10. "German government to take control of Hypo Real Estate". Deutsche Welle. April 24, 2009.
  11. "Inquiry into Hypo Real Estate rescue enters final phase". Deutsche Welle. August 18, 2009.
  12. Gerlach, Marilyn (April 9, 2009). "TIMELINE: Hypo Real Estate's path to nationalization". Reuters.
  13. Maushagen, Peter (5 October 2009). "Hypo Real shareholders howl at Berlin's squeeze-out". Reuters.
  14. Halstrick, Philipp; Nann, Patricia (17 April 2008). "JC Flowers taking stake in battered Hypo Real Estate". Reuters.
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