1Sem.·

A smart idea that won't happen

$VNA (+1,36 %) - I came across the following article today. It argues that it would be much more efficient and smarter to have the federal government buy Vonovia rather than trying to expropriate Berlin’s housing stock. I found it a worthwhile read, and it gives me some satisfaction to know that there are still people out there who can think rationally every now and then.

Economist: Federal Government Should Buy Vonovia: “I Doubt That Expropriation Would Be Cheaper in the End” – n-tv.de https://share.google/Fgg6zm6b0KFvLD08M

For the record: No, I don’t have any investments in Vonovia.

My opinion: Of course, it would be much easier and much better to buy Vonovia than to push through the nonsensical attempt at expropriation in Berlin. You’d get more apartments (including outside Berlin) at a relatively lower price. You also wouldn’t be undermining the foundation of the rule of law. And you’d be buying a company that’s already functioning well and would be able to act immediately (I find it highly questionable whether the Berlin administration—known for its efficiency—is even capable of quickly establishing the structure needed to manage a massive rental housing portfolio. We don’t even need to talk about new construction being handled by the administrative apparatus).

Of course, the federal government’s purchase of Vonovia would be a real shock to shareholders—first I’d drive down the stock price by publicly suggesting expropriation, then I’d buy the company at a bargain price. It’s like a short-seller’s strategy 😉.

13 Commentaires

Fabian Frey@fabfrey98

1Sem.

And who says the shareholders are willing to sell their shares at the current price? 😉

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NichtRelevant@NichtRelevant

1Sem.

@fabfrey98 It certainly wouldn’t be a fair or transparent move on the part of the government. Still, I think a purchase would be much easier and less problematic than expropriation.

Of course, I don’t know what that would look like in practice, since I’ve never planned to—or been in a position to—buy out a publicly traded company. I imagine you wouldn’t just be able to place an order on Tradegate. 😅

I think the “easiest” way, if necessary, would be for project companies, KfW, or various federal agencies to gradually buy up shares below the reporting thresholds on the market over the coming weeks and months, while simultaneously approaching the major institutional owners of Vonovia. Later, an offer would be made to the shareholders, followed by a squeeze-out.

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Fabian Frey@fabfrey98

1Sem.

@NichtRelevant Sure. Nevertheless, the shareholders must be willing to sell their shares at the offered price. In such a situation, that would drive the price up enormously. It won't amount to either a regular purchase or expropriation…

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NichtRelevant@NichtRelevant

1Sem.

@fabfrey98 I also believe—neither one nor the other.

The purchase won’t happen because the state of Berlin doesn’t have the funds, and the new state government also wants the expropriation to serve as a political statement. The primary goal isn’t lower rents or the creation of housing (in which case they would build new units), but rather the “fight against capitalism.” They want to get back at “the rich”—the first step toward socialization in all areas and a return to socialism. The federal government won’t support a purchase either, since this is, after all, a project of the political opposition. The purchase is therefore really more of a thought experiment than a realistic possibility.

In my opinion, the expropriation won’t happen either, but there will be an amateurish attempt! No normal bank will finance an expropriation. No court will approve an expropriation based on arbitrary asking prices.
Even if thousands of apartments in Berlin were actually expropriated: It would only be the expropriation of the apartments; the associated organization would remain Vonovia and wouldn’t be transferred along with them. I’d be very surprised if the State of Berlin could set up a functioning real estate management system—including technical services, billing, and building and tenant management—overnight (especially under legally extremely shaky conditions). That will never work—if it does, it will end in a catastrophe costing billions, the aftermath of which will take decades to resolve.

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MarTheRadi@marda304

1Sem.

As if this were about efficiency and housing. This whole thing is really just about power and ideology.

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NichtRelevant@NichtRelevant

1Sem.

@marda304 That's right. Unfortunately, that's exactly what it's all about (ideology and the fight against "the rich" and capitalism).

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Beeftek@Beeftek

1Sem.

@marda304 Vonovia has failed; quite simply, I wouldn't invest in such a terrible company.

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DividendenPapa@DividendenPapa

1Sem.

@NichtRelevant I find the idea more than questionable. For me, this isn’t just about “ $VNA ” or the housing market in Berlin, but about fundamental issues of legal certainty and Germany’s status as an investment destination.

If investors have to expect that an entire asset class will be exposed to significant risks due to political decisions, this will affect far more than just the companies directly impacted in the long run. It could also weaken the willingness to make future investments in housing.

What particularly bothers me is that, instead of consistently addressing the structural causes of the housing shortage (too little new construction, lengthy permitting processes, high construction costs, and excessive bureaucracy), there is discussion of an extremely expensive government takeover. Whether this is legally viable and how the whole thing is to be financed is far from being conclusively clarified.

And quite frankly, I have little confidence that state ownership alone will solve the problems any better. Deutsche Bahn is certainly not a perfect comparison for the housing sector, but it does show that nationalization and public control do not automatically lead to better results.

Ultimately, we need more affordable housing—not just a different owner for the existing units. To me, it would make more sense to improve the framework conditions for new construction and private investment rather than pouring billions into redistributing the existing housing stock.

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NichtRelevant@NichtRelevant

1Sem.

@DividendenPapa Absolutely correct. There’s really nothing more to add. We need to build more—a simple change in ownership won’t accomplish anything. But if we actually want to restore the housing stock, the purchase option (the federal government buying Vonovia) is a cleaner solution than this nonsense about expropriation.

As you’ve already pointed out, the problems caused by the housing shortage stem from high costs, excessive regulations, bureaucracy, and lengthy approval processes. Tenant protection laws have just been tightened once again, and the discussion about expropriation certainly doesn’t help if the goal is to encourage investors to build apartments.

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Beeftek@Beeftek

1Sem.

@DividendenPapa Ever since humans have existed, there have been wars over food and living space. Why should it be any different now? It’s their own fault if they gamble with basic needs.

Vonovia has built a total of 5,000 apartments, while other companies have built 150,000. Quite simply, Vonovia is a corrupt organization that nobody needs.

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NichtRelevant@NichtRelevant

1Sem.

@Beeftek I don’t know—building 5,000 apartments is better than building none. As a private company, Vonovia doesn’t have a public mandate to build apartments—that used to be the job of municipal housing authorities. The company has taken over a whole range of housing portfolios that cities and municipalities sold off at bargain prices as an easy way to bolster their budgets. It simply isn’t worth building new apartments, since the construction costs of a new apartment are far too high compared to the rent collected.

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der F.@Fabrikarbeiter

It’s pretty impressive to think that the federal government would even try to act as a landlord—and that that would improve anything. I believe Deutsche Bahn is subsidized with 23 billion euros in taxpayer money—many other private railways around the world earn good returns. The belief that some politicians could manage things better is a foolish socialist superstition.

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NichtRelevant@NichtRelevant

@Fabrikarbeiter I don't believe in it either. I'm just saying that having the government buy up the entire company would be the more rational approach if one wants to carry out this plan for "socialization."

Of course, the government can’t do that. If it could (and wanted to), there would be a lot of new apartments under construction. As a private real estate investor, the starting position the government has would be a dream: I could designate building land myself, grant myself the building permit, and have unlimited creditworthiness. It would really be a dream, but people just talk about it and don’t get anything done.

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