How Germany’s property boom went from a war bunker to a tower to a market bust

A prominent German property developer has had a rough year. He hasn’t been able to sell his penthouse on top of a Nazi-era air raid bunker, and just a few weeks ago, his company filed for bankruptcy.

Stefan Hoeglmaier, a developer, and his company, Euroboden, have been hit by two bad things at the same time; this is a reflection of the housing market in Europe’s largest economy, which is going through its worst slump in decades.

Low-interest rates caused a global boom for many years; this made people want to buy German property, which was seen as safe and stable, just like the country.

The run ended when rates increased sharply, and energy and building costs increased even more. Because of this, several companies have gone bankrupt, deals have stopped, and prices have gone down, leading the industry to ask Chancellor Olaf Scholz for help.

“We’re going full speed towards the wall. Tillmann Peeters, a bankruptcy lawyer with FalkenSteg, said, “The first developers have fallen, and more will follow.”

In 2022, the European Central Bank started to raise rates, which made it harder for developers like Euroboden to borrow money and find buyers for their projects.

In a statement, Euroboden’s management said that the company’s market situation had “gotten a lot worse.”

The strength of Germany’s real estate market, Europe’s most significant outside of Britain, is essential because it makes up about a fifth of GDP and provides one in ten jobs. In the first half of the year, almost half as many new buildings went up as in the previous two years.

In 2010, at the start of a long boom, Hoeglmaier bought a run-down above-ground bunker from the government in a lovely part of Munich to turn it into luxury flats.

He and his Eurovision Song Contest star partner, Oscar Loya, moved into the three-story apartment with a music room and gold-leaf walls in the bathroom.

During the next ten years, Euroboden worked with famous builders on projects, made tens of millions of euros in profit, raised millions from investors, and grew to Berlin and other places.

The penthouse was on the cover of Germany’s Architectural Digest, and the couple held “bunker acoustic sessions” with video clips shared on Loya’s Facebook page.

Loya also serenaded staff at the company’s 20th anniversary party in 2019. He has shares in two Euroboden companies.

Last year, when interest rates went up quickly, it surprised many people in the real estate business.

In October, Euroboden sent out a profit warning. Hoeglmaier put his apartment on the market at the end of last year, and Euroboden closed its office in Frankfurt.

Late in July, Euroboden called a meeting to ask investors to rework 92 million euros ($100 million) in outstanding bonds. When the investors refused the new terms, the meeting was cancelled, and the company filed for bankruptcy a few days later.

“It was pretty clear that bondholders wouldn’t accept the proposal,” said Daniel Bauer, head of the SdK association of capital investors, which represents nearly 800 Euroboden investors with 11 million euros in bonds.

Oliver Schartl, who is in charge of the insolvency, said that the case is still in its early stages and is not very simple.

Euroboden has always blamed the pandemic, the war in Ukraine, inflation, and interest rates, which are all part of the same toxic mix that has hurt the whole business.

Hoeglmaier said he didn’t want to be interviewed for this story because he needed privacy to focus on work. Loya did not respond to requests for comment.

Euroboden is one of many places like this. In the past few months, many other German property companies have also filed for bankruptcy.

Gerch, based in Duesseldorf and has projects worth 4 billion euros, is Germany’s most significant loss so far.

Property experts are worried that the downturn in Germany could be worse than in the 1990s when people rushed to buy homes in eastern Germany after the Berlin Wall fell.

“More developers will go bankrupt because building costs are going up, people are working less in offices, and interest rates are going up,” said Christoph Niering, who heads the VID, an organisation for bankruptcy administrators.


Lenders were also slow to act.

In 2020, when the real estate market was heating up, the Bundesbank warned the country’s banks, which had about 70% of their loans tied to real estate, of the risks. In August, it said again that property prices were still too high, even though they had gone down recently. It expressed hope, though, that most borrowers would be able to keep up with loan payments because unemployment was low.

Germany and Sweden are the countries in mainland Europe that have been hit the hardest by a global real estate crash that has pulled in Chinese homebuilders like Evergrande and Country Garden.

In the early 1940s, Hoeglmaier built his bunker to protect people from bombs dropped by the Allies. After the war, the land around it was used as a jail for Nazis and a camp for refugees. Hairdressers and hotels in the area asked permission to put ads on their bullet-holed facades.

Germany has sold about 320 bunkers since 2005.

The 380-square-meter penthouse, which is 4,090 square feet and is on the fifth through seventh floors, was initially offered for just under 13 million euros. It has a rooftop terrace. Early this year, the price dropped to 11 million, but it is still one of the most expensive flats in Germany.


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