Hypo Real Estate
Encyclopedia
The Hypo Real Estate Holding AG
is a holding company
based in Munich
, Germany
which comprises a number of real estate
financing bank
s. The company's activities span three sectors of the real estate market: commercial property
, infrastructure
and public finance
, and capital market
s and asset management
. Hypo Real Estate is the second largest commercial property lender in Germany.
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 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
. The company remains a legal entity as a wholly owned subsidiary
of the Hypo Real Estate Group.
The firm was bailed out by the Bundesbank
and other German banks in October 2008 in the midst of the global financial crisis, before approving a complete nationalisation
a year later.
subsidiary
. On 29 September 2008 Finance Minister of Germany Peer Steinbruck
announced that a €
35 billion credit line
would be extended to Hypo Real Estate from the government and a consortium
of German banks.
After the first crisis summit, the supervisory board
members independent from and unaffiliated to J.C. Flowers & Co.
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.
The deal fell apart on 4 October 2008 after the banking consortium involved pulled out. A second proposed bailout was agreed on 6 October, with German banks to contribute €30 billion and the Bundesbank
€20 billion to a credit line.
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 and that it was "unthinkable" to keep dealing with them, especially after they had used lawyers against the government to attempt to evade responsibilities. CEO Georg Funke subsequently stepped down, replaced by Axel Wieandt on 31 October 2008.
) in February 2009, taking its total state funding to €52 billion.
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.
on 5 October 2009 approved a €1.30 per share squeeze out
of the remaining private shareholders, including J.C. Flowers (which a year earlier had taken a 25% stake at €22.50 per share). The decision resulted in the complete nationalisation
of the firm within a year of it having been a DAX
constituent.
Aktiengesellschaft
Aktiengesellschaft is a German term that refers to a corporation that is limited by shares, i.e. owned by shareholders, and may be traded on a stock market. The term is used in Germany, Austria and Switzerland...
is a holding company
Holding company
A holding company is a company or firm that owns other companies' outstanding stock. It usually refers to a company which does not produce goods or services itself; rather, its purpose is to own shares of other companies. Holding companies allow the reduction of risk for the owners and can allow...
based in Munich
Munich
Munich The city's motto is "" . Before 2006, it was "Weltstadt mit Herz" . Its native name, , is derived from the Old High German Munichen, meaning "by the monks' place". The city's name derives from the monks of the Benedictine order who founded the city; hence the monk depicted on the city's coat...
, Germany
Germany
Germany , officially the Federal Republic of Germany , is a federal parliamentary republic in Europe. The country consists of 16 states while the capital and largest city is Berlin. Germany covers an area of 357,021 km2 and has a largely temperate seasonal climate...
which comprises a number of real estate
Real estate
In general use, esp. North American, 'real estate' is taken to mean "Property consisting of land and the buildings on it, along with its natural resources such as crops, minerals, or water; immovable property of this nature; an interest vested in this; an item of real property; buildings or...
financing bank
Bank
A bank is a financial institution that serves as a financial intermediary. The term "bank" may refer to one of several related types of entities:...
s. The company's activities span three sectors of the real estate market: commercial property
Commercial property
The term commercial property refers to buildings or land intended to generate a profit, either from capital gain or rental income.-Definition:...
, infrastructure
Infrastructure
Infrastructure is basic physical and organizational structures needed for the operation of a society or enterprise, or the services and facilities necessary for an economy to function...
and public finance
Public finance
Public finance is the revenue and expenditure of public authoritiesThe purview of public finance is considered to be threefold: governmental effects on efficient allocation of resources, distribution of income, and macroeconomic stabilization.-Overview:The proper role of government provides a...
, and capital market
Capital market
A capital market is a market for securities , where business enterprises and governments can raise long-term funds. It is defined as a market in which money is provided for periods longer than a year, as the raising of short-term funds takes place on other markets...
s and asset management
Investment management
Investment management is the professional management of various securities and assets in order to meet specified investment goals for the benefit of the investors...
. Hypo Real Estate is the second largest commercial property lender in Germany.
The bank originated in 2003 from the real estate
Real estate
In general use, esp. North American, 'real estate' is taken to mean "Property consisting of land and the buildings on it, along with its natural resources such as crops, minerals, or water; immovable property of this nature; an interest vested in this; an item of real property; buildings or...
financing business of HypoVereinsbank
HypoVereinsbank
UniCredit Bank Aktiengesellschaft is the sixth-largest private German financial institution, with a strong presence in Bavaria. The company is based in Munich, and together with Deutsche Bank, Dresdner Bank, Commerzbank and Deutsche Postbank, it belongs to the Cash Group...
. It employs about 2,000 people and was one of the 30 members of the DAX
DAX
The DAX is a blue chip stock market index consisting of the 30 major German companies trading on the Frankfurt Stock Exchange. Prices are taken from the electronic Xetra trading system...
stock index of the largest German companies between December 2005 and December 2008, before the shares were demoted to the MDAX
MDAX
The MDAX is a stock index which lists German companies. The index is calculated by Deutsche Börse.It includes the 50 Prime Standard shares from sectors excluding technology that rank immediately below the companies included in the DAX index...
. Its shares were further demoted to the SDAX
SDAX
The SDAX is a stock market index composed of 50 small and medium-sized companies in Germany. These so-called small caps rank directly below the MDAX shares in terms of order book volume and market capitalization...
in September 2009. In 2007 it acquired public finance company Depfa Bank
Depfa Bank
Depfa Bank plc is a Dublin-based German-Irish bank. It provides financial services to the public sector and also provides financing for larger infrastructure projects. The name derivates from Deutsche Pfandbriefbank.- History :...
. The company remains a legal entity as a wholly owned subsidiary
Subsidiary
A subsidiary company, subsidiary, or daughter company is a company that is completely or partly owned and wholly controlled by another company that owns more than half of the subsidiary's stock. The subsidiary can be a company, corporation, or limited liability company. In some cases it is a...
of the Hypo Real Estate Group.
The firm was bailed out by the Bundesbank
Deutsche Bundesbank
The Deutsche Bundesbank is the central bank of the Federal Republic of Germany and as such part of the European System of Central Banks . Due to its strength and former size, the Bundesbank is the most influential member of the ESCB. Both the Deutsche Bundesbank and the European Central Bank are...
and other German banks in October 2008 in the midst of the global financial crisis, before approving a complete nationalisation
Nationalization
Nationalisation, also spelled nationalization, is the process of taking an industry or assets into government ownership by a national government or state. Nationalization usually refers to private assets, but may also mean assets owned by lower levels of government, such as municipalities, being...
a year later.
Crisis summits
Hypo Real Estate encountered financial difficulties during the liquidity crisis of September 2008, principally due to the heavy debt burden of its DepfaDepfa Bank
Depfa Bank plc is a Dublin-based German-Irish bank. It provides financial services to the public sector and also provides financing for larger infrastructure projects. The name derivates from Deutsche Pfandbriefbank.- History :...
subsidiary
Subsidiary
A subsidiary company, subsidiary, or daughter company is a company that is completely or partly owned and wholly controlled by another company that owns more than half of the subsidiary's stock. The subsidiary can be a company, corporation, or limited liability company. In some cases it is a...
. On 29 September 2008 Finance Minister of Germany Peer Steinbruck
Peer Steinbrück
Peer Steinbrück is a German social democratic politician. From 2005 to 2009 he served as German Federal Minister of Finance in the cabinet of Angela Merkel.- Early political career, Minister President :...
announced that a €
Euro
The euro is the official currency of the eurozone: 17 of the 27 member states of the European Union. It is also the currency used by the Institutions of the European Union. The eurozone consists of Austria, Belgium, Cyprus, Estonia, Finland, France, Germany, Greece, Ireland, Italy, Luxembourg,...
35 billion credit line
Line of credit
A line of credit is any credit source extended to a government, business or individual by a bank or other financial institution. A line of credit may take several forms, such as overdraft protection, demand loan, special purpose, export packing credit, term loan, discounting, purchase of...
would be extended to Hypo Real Estate from the government and a consortium
Consortium
A consortium is an association of two or more individuals, companies, organizations or governments with the objective of participating in a common activity or pooling their resources for achieving a common goal....
of German banks.
After the first crisis summit, the supervisory board
Supervisory board
A supervisory board or supervisory committee, often called board of directors, is a group of individuals chosen by the stockholders of a company to promote their interests through the governance of the company and to hire and supervise the executive directors and CEO.Corporate governance varies...
members independent from and unaffiliated to J.C. Flowers & Co.
JC Flowers
J.C. Flowers & Co. is a private equity investment firm, focused on investments in the financial services sector. The firm, founded in 2001, is based in New York City and run by billionaire J. Christopher Flowers, a former Goldman Sachs partner....
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.
The deal fell apart on 4 October 2008 after the banking consortium involved pulled out. A second proposed bailout was agreed on 6 October, with German banks to contribute €30 billion and the Bundesbank
Deutsche Bundesbank
The Deutsche Bundesbank is the central bank of the Federal Republic of Germany and as such part of the European System of Central Banks . Due to its strength and former size, the Bundesbank is the most influential member of the ESCB. Both the Deutsche Bundesbank and the European Central Bank are...
€20 billion to a credit line.
After the second crisis summit some politicians demanded that HRE's top management resign, among them Federal Minister of Finance Peer Steinbrück
Peer Steinbrück
Peer Steinbrück is a German social democratic politician. From 2005 to 2009 he served as German Federal Minister of Finance in the cabinet of Angela Merkel.- Early political career, Minister President :...
who stated that he had been kept in the dark and that it was "unthinkable" to keep dealing with them, especially after they had used lawyers against the government to attempt to evade responsibilities. 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 (SoFFinSoFFin
The SoFFin is a program of the German government with the purpose to stabilize and restore confidence in the financial system...
) in February 2009, taking its total state funding to €52 billion.
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. By that date, government support for the company had reached €102 billion. Under a new law passed in March, the government could force the sale if shareholders reject it.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.
Nationalisation
With the German state (via SoFFin) already owning 90% of HRE, an extraordinary general meetingExtraordinary General Meeting
An extraordinary general meeting, commonly abbreviated as EGM, is a meeting of members of an organisation, shareholders of a company, or employees of an official body, which occurs at an irregular time. The term is usually used where the group would ordinarily hold an annual general meeting , but...
on 5 October 2009 approved a €1.30 per share squeeze out
Squeeze out
Squeeze out is a term referring to the compulsory acquisition of the stakes of a small group of shareholders from a joint stock company by means of cash compensation.-Germany:...
of the remaining private shareholders, including J.C. Flowers (which a year earlier had taken a 25% stake at €22.50 per share). The decision resulted in the complete nationalisation
Nationalization
Nationalisation, also spelled nationalization, is the process of taking an industry or assets into government ownership by a national government or state. Nationalization usually refers to private assets, but may also mean assets owned by lower levels of government, such as municipalities, being...
of the firm within a year of it having been a DAX
DAX
The DAX is a blue chip stock market index consisting of the 30 major German companies trading on the Frankfurt Stock Exchange. Prices are taken from the electronic Xetra trading system...
constituent.
Subsidiaries
- Hypo Real Estate Bank International
- Hypo Real Estate Bank
- Hypo Public Finance Bank
- Hypo Pfandbrief Bank International
- DEPFA Bank
- DEPFA Deutsche Pfandbriefbank