Vonovia is currently among the largest real estate companies in the EU. However, it may become even larger still. For a third time, Vonovia is in discussions to merge with Deutsche Wohnen.
It would officially become the largest real estate company in the entirety of Europe if the merger succeeds.
There are various reasons previous attempts at a merger fell through. Essentially, not enough shareholders considered Vonovia’s initial offers to be fair. In July, Vonovia’s goal was to secure 50% of the shares. The company was only able to secure 47%.
Currently, Vonovia is now offering to take over Deutsche Wohnen for 19 billion Euros. Whether enough shareholders will consider this to be a fair offer for the merger to succeed this time around is yet to be determined. However, it is clear that both companies have an interest in making this deal work in some capacity.
That said, it’s worth noting that shareholder reluctance has not been the only factor that has prevented this merger from happening in the past. BaFin, Germany’s financial regulator, had expressed concerns of Vonovia growing too large for there to be fair competition in the industry.
In response, both companies have made some concessions to appease BaFin. For example, they’re allowing the state of Germany to prevent the new Vonovia from increasing rent until 2026. Vonovia has also pledged to build new apartments and sell certain existing ones to the state if the merger is successful.
There are other parties that have concerns about the merger. Deutsche Wohnen & Co. Enteignen is a citizen’s initiative that has campaigned for discussions regarding whether Deutsche Wohnen should be expropriated. If such a campaign proves successful, it’s unclear as to the degree to which this may limit the possibility of a merger. Specifically, the citizen’s group wishes to expropriate property from landlords who own 3,000 apartments or more. According to some, landlords owning an excessive number of apartments has played a significant role in Berlin’s housing crisis in recent years.
Some members of the group also argue that Deutsche Wohnen has cultivated a reputation for providing tenants with very difficult living conditions. For instance, the company has allegedly been known to provide poor heating.
Some argue the company’s goal when doing so is to drive out tenants. This may seem counterintuitive, but it’s possible they wish to remove tenants so they can renovate the apartments and then charge higher rent. Although Deutsche Wohnen is the main target of the group, they’ve also criticized Vonovia. For example, they’ve stated that Vonovia has attempted to save money by removing maintenance services at times.
There are those who suggest that pledging to build new apartments in an effort to address the housing crisis represents sufficient action on the part of the two companies to satisfy the concerns of many. Still, others feel the number of apartments the companies have promised to build is far lower than it should be.
Regardless, we likely won’t know if the merger is successful until near the end of September. If the merger does succeed, the newly formed company will own 550,000 apartments throughout Europe. Approximately 160,000 of those apartments will be in Berlin.
The existence of this type of large real estate company isn’t necessarily completely unheard of outside of Europe, but it’s certainly less of a major issue in other parts of the world. For instance, in many American cities, a reasonably large number of real estate companies coordinate with various property management companies to offer somewhat flexible housing options to citizens. There are some in Germany who believe that’s a more ideal arrangement.
