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Germany’s property sector is in the dumps. Should we care?

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Germany's property sector is in the dumps. Should we care?

Germany has long benefited from an era of cheap money that fuelled a decade-long boom in real estate, but now the sector is grappling with a major turn of fortune.

In the latest signs of stress in the sector, Germany’s largest real estate group Vonovia posted multi-billion euro losses and write-downs, and job growth for construction workers has stagnated.

Here are some key questions as the crisis unfolds:

Weakness in real estate has also emerged in the United States and Sweden, but Germany is significant because it is Europe’s largest economy and the biggest real estate investment market on the continent.

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The property sector makes up roughly a fifth of economic output and one in ten jobs, according to the German Property Federation.

New construction plummeted in Germany during the first half of the year, dropping 47 per cent compared with the average of the past two years, and new building permits plunged 27pc during the first five months.

Home prices also declined in the first quarter by the most since Germany’s statistics office began keeping data, down 6.8pc from a year earlier.

In September, data will show to what extent the trend is continuing and shed light on the state of construction jobs.

“The current crisis will certainly continue for a while yet,” said Sven Carstensen, chief executive of Bulwiengesa, a property consultant and analysis firm.

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The main factor has been a sudden and rapid rise in interest rates by the European Central Bank as it clamps down on the highest inflation rates in decades, but there’s more to it.

Building costs have also soared, and the demand for offices and retail space has waned after the pandemic. The Ukraine war has also made German property seem riskier for foreign investors.

“If you are an investor from the Middle East, Germany seems to be quite close to Ukraine. They say, ‘I want to allocate money to the US and Asia and not to Germany,’” said Florian Schwalm, a consultant with EY.

Germany, whose population has recently grown as millions of migrants and refugees from Ukraine flock to the country, aims to build 400,000 apartments a year but is struggling with its goals.

Politicians, ministries and the property industry will convene with Chancellor Olaf Scholz on Sept. 25 to try to find solutions, and some are already jockeying with proposals to rejuvenate the sector.

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Last week, Klara Geywitz, Germany’s housing minister, called for additional tax breaks for writing off the costs of construction for new residential buildings.

The president of the German Property Federation, Andreas Mattner, is pressing the government to temporarily suspend a property sales tax and is demanding a low-interest rate credit program to support new residential building.

Tim-Oliver Mueller, head of the German Construction Industry Federation, is pushing for an emergency package of measures that would include the cut-price sale of public land for building rentals.
 

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Star Entertainment says Hard Rock-led group weighs bid, shares surge

Star Entertainment says Hard Rock-led group weighs bid, shares surge

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Star Entertainment says Hard Rock-led group weighs bid, shares surge

Star Entertainment (SGR.AX), opens new tab said on Monday a consortium led by Florida-based Hard Rock Hotels & Casinos is considering a bid for the cash-strapped Australian firm, sending its shares 20% higher.

A potential takeover by entertainment giant Hard Rock would provide a much-needed financial lifeline to Star, which has been plagued by a regulatory inquiry into its flagship Sydney casino operation and an executive exodus.

Star, which had a market value of A$1.29 billion ($863.66 million) as of Monday’s close, said it has been approached by a consortium of investors which includes Hard Rock Hotels & Resorts (Pacific).

The company said it understands Hard Rock Hotels is a local partner of Hard Rock.

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Earlier in the day, Star said it had received “inbound interest from a number of external parties” but flagged none of them had yet resulted in “substantive discussions”.

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Red Lobster seeks bankruptcy protection with $100 mln in financing commitments

Red Lobster seeks bankruptcy protection with $100 mln in financing commitments

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Red Lobster seeks bankruptcy protection with $100 mln in financing commitments

U.S.-based restaurant chain Red Lobster has filed for Chapter 11 bankruptcy protection in a Florida court after securing $100 million in financing commitments from its existing lenders, the company said on Sunday.

The company listed its assets and liabilities to be between $1 billion and $10 billion, according to a court filing.

Red Lobster said its restaurants will be open and operate as usual during the bankruptcy proceedings, and plans to reduce its locations as well as pursue a sale of substantially all its assets.

The restaurant chain also said it has entered into a “stalking horse” purchase agreement to sell its business to an entity formed and controlled by its existing term lenders.

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“This restructuring is the best path forward for Red Lobster. It allows us to address several financial and operational challenges and emerge stronger and re-focused on our growth,” said Jonathan Tibus, CEO of Red Lobster.

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BMW imported 8,000 vehicles into US with parts from banned Chinese supplier, Senate report says

BMW imported 8,000 vehicles into US with parts from banned Chinese supplier, Senate report says

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BMW imported 8,000 vehicles into US with parts from banned Chinese supplier, Senate report says

German automaker BMW (BMWG.DE), opens new tab imported at least 8,000 Mini Cooper vehicles into the United States with electronic components from a banned Chinese supplier, a U.S. Senate report released on Monday said.

A report by Senate Finance Committee Chairman Ron Wyden’s staff said BMW imported 8,000 Mini Coopers with parts from a Chinese supplier banned under a 2021 law and that BMW continued to import products with the banned parts until at least April.

BMW Group said in an email it had “taken steps to halt the importation of affected products.”

The company will be conducting a service action to replace the specific parts, adding it “has strict standards and policies regarding employment practices, human rights, and working conditions, which all our direct suppliers must follow.”

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Congress in 2021 passed the Uyghur Forced Labor Prevention Act (UFLPA) law to strengthen enforcement of laws to prevent the import of goods from China’s Xinjiang region believed to have been produced with forced labor by members of the country’s Uyghur minority group. China denies the allegations.

“Automakers’ self-policing is clearly not doing the job,” Wyden said, urging the Customs and Border Protection agency to “take a number of specific steps to supercharge enforcement and crack down on companies that fuel the shameful use of forced labor in China.” Customs and Border Protection did not immediately comment.

The report found that Bourns Inc, a California-based auto supplier, had sourced components from Sichuan Jingweida Technology Group (JWD). That Chinese company was added to the UFLPA Entity List in December, which means its products are presumed to be made with forced labor. 

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