From social housing to the DAX:

From social housing to the DAX: The real estate group Deutsche Wohnen
Lufthansa makes room for Deutsche Wohnen in the German share index. Their roots go back to the 1920s and the portfolio also includes architectural sights.
Deutsche Wohnen's portfolio includes the Britz horseshoe settlement in Berlin, which was added to the UNESCO World Heritage list in 2008.
Deutsche Wohnen's portfolio includes the Britz horseshoe settlement in Berlin, which was added to the UNESCO World Heritage list in 2008.
Last fall it hit the industrial group ThyssenKrupp, now it's Lufthansa’s turn: Former icons of the German economy fly out of the German stock index (DAX) because trading turnover and the market capitalization of their stocks have become too low. The DAX, the most important German index, measures the performance of the 30 largest and most liquid listed companies in the country. The Berlin-based real estate group Deutsche Wohnen will move up for Lufthansa on June 22. After the competitor Vonovia, he is the second representative of the real estate industry to make it into the DAX.

Unesco world heritage in the portfolio
But who is this new addition? Deutsche Wohnen AG was founded in 1998 as a subsidiary of Deutsche Bank in Frankfurt and bundled the bank's residential properties; initially, it mainly had housing stocks in the Rhine-Main area and in Rhineland-Palatinate. The company has been listed on the stock exchange since 1999. In 2007, Deutsche Wohnen merged with GEHAG. The group thus also has Berlin roots that go back to the 1920s: The non-profit Heimstätten-, Spar- und Bau-Aktiengesellschaft (GEHAG) was founded in Berlin in 1924.

In response to the housing shortage after the First World War, large modern settlements were built by classical modern architects, who wanted to offer modern, affordable apartments in large numbers and saw themselves as an alternative to the miserable tenements of that era. For example, GEHAG was the owner of the famous horseshoe settlement in Britz, which was built between 1925 and 1930 according to a design by the architect Bruno Traut, and provided accommodation for 5,000 people and was one of the first social housing estates in Berlin. Together with three other Berlin settlements belonging to GEHAG and now Deutsche Wohnen, the horseshoe settlement was included in the Unesco world heritage in 2008 as an important site of Berlin modernism.

Strong in the Berlin area
GEHAG was privatized in 1998. Several changes of ownership followed until the aforementioned merger with Deutsche Wohnen took place in 2007. In 2013, Deutsche Wohnen also took over GSW Immobilien AG, which, like GEHAG, was founded in 1924 as an urban housing association in Berlin. In 2015, Deutsche Wohnen realized a new construction project in Babelsberg-Postdam for the first time in years. In 2016, an hostile takeover offer by Bochum's competitor Vonovia to Deutsche Wohnen shareholders failed, but speculation about a merger of the two apartment giants flares up again and again. In 2017, Deutsche Wohnen moved its headquarters from Frankfurt to Berlin.

Today, Deutsche Wohnen's portfolio comprises a total of around 164,000 units, of which 161,000 are residential units and 2,800 commercial units (at the end of March). Around 70% of these are in the greater Berlin area, but the group is also present in other German conurbations. In 2019, with 3,549 employees (at the end of the year), he achieved earnings after taxes of € 1.6 billion, 14% less than in the previous year. The operating cash flow FFO 1, on the other hand, the key figure in the industry, increased by 11.5% to € 538.1 million. The largest shareholders of Deutsche Wohnen are the financial investors Black Rock and Massachusetts Financial Services, each recently holding around 10% of the voting rights.

Business suffers from rent covers
So far, the corporation has hardly seen itself affected by the corona pandemic. "Neither on the residential nor on the commercial side have we had significant rental losses," said CEO Michael Zahn, speaking at the virtual general meeting on Friday. The Group has set up a Corona aid fund of € 30 million for possible help to tenants and business partners who have run into financial difficulties as a result of the Corona crisis.

However, his business is dampened by the Berlin rental cover that came into force in February, which freezes most rents for five years from last summer's level and in some cases even forces existing rents to fall. Due to the cover, FFO 1 is expected to stagnate at the previous year's level for the current year, said CFO Philip Grosse at the annual general meeting. However, lawsuits against the relevant law are pending.

The rent cap, considered by most economists to be unsuitable, is a reaction to the fact that housing construction has not kept pace with the rapid growth in the population of the capital in recent years. Housing became scarcer and rents, which were once very low, rose sharply. In the course of the debate, Deutsche Wohnen has also been targeted by tenant representatives who accuse the Group of a return-oriented housing and rent policy and are now afraid that the pressure on yields could increase with the rise in the DAX. Deutsche Wohnen counters such allegations that one sees itself in the social responsibility and duty to preserve liveable and affordable housing and to develop new ones.