Aareal Bank is entering the second century of its history with a clear prospect of sustainable, dynamic growth, and is looking to the future with confidence.

For a human, reaching the age of 100 would be an occasion to look back over a successful and fulfilling life. However, Aareal Bank is mainly looking to the future. The growth course it is pursuing will further significantly strengthen Aareal Bank's position as a leading international provider of property financing and of software, digital solutions and payment services. The aim is to generate considerably more value for the Bank and in particular for its clients.

Financial investors support future strategy

The prospective new owner of Aareal Bank, Atlantic BidCo GmbH, fully supports Aareal Bank's strategy. Aareal Bank Group's risk-conscious growth will be continued in all business segments, the range of services will be expanded and innovative capacity will be increased. Atlantic BidCo GmbH is a bidder company indirectly held by funds managed and advised by Advent International Corporation and Centerbridge Partners as well as CPP Investment Board Europe S.à.r.l., a wholly-owned subsidiary of Canada Pension Plan Investment Board, and other co-investors. The regulatory approvals for the completion of the takeover are still outstanding.

Farewell to the DAX index family

In connection with the takeover by Atlantic BidCo, Aareal Bank left the DAX index family on 19 September 2022, as the proportion of shares that were freely floated had fallen significantly as a result of the takeover bid. That meant that it no longer made sense for the Bank to remain in the DAX index family, despite a strong share performance. Aareal Bank AG has been listed in the MDAX and SDAX on the Frankfurt stock exchange since 2002 and since then has enjoyed a remarkable success story – with expansion on three continents, a loan portfolio worth over € 30 billion and over 4,000 business clients today in the housing, energy and property industries.

While coronavirus brought the world to a standstill, the software subsidiary Aareon AG looked set to achieve further growth and to expand and increase in value. The sale of a 30 per cent stake to Advent International provided fresh impetus for this.

With its two shareholders Aareal Bank and Advent International, one of the largest private equity funds in the USA, the technology company has devised an ambitious value creation and growth programme. Aareon wants to become a "Rule of 40" company by 2025, which means that its combined EBITDA margin and revenue growth should come to more than 40 per cent by that date. As a financial investor with a long-term focus and a proven track record in the sustainable development of the companies it invests in, Advent contributes additional expertise in the technology sector and in mergers & acquisitions (M&A).

Continuation and intensification of dynamic development

Aareon AG, which can trace its roots back to the Bank's first data centre that was inaugurated in 1957 and was ground-breaking even then, has continued the previous decade's dynamic development since 2020. In 2021, it successfully carried out six acquisitions across Europe and achieved significant increases in sales in international business (almost 12 per cent growth year on year) and in digital solutions (23 per cent growth compared with 2020). The technology company also achieved a historic record result (adjusted EBITDA) of almost € 67 million, despite the pandemic.

Aareon is already the leading provider of ERP software and digital solutions for the European property industry and its partners, and wants to further strengthen its excellent market position in future with the support of its shareholders. Its strategic goals are organic growth, further optimisation of operational excellence and acceleration of M&A activities, to further expand its product range and geographical presence.

The world stopped in 2020, but Aareal Bank remained firmly by the side of its clients. It also took advantage of new opportunities created by the crisis at an early stage.

It first emerged in the provincial Chinese town of Wuhan in late 2019, and just a few months later it had spread over the entire globally connected world: the coronavirus and the new disease that it causes, Covid-19. A pandemic of unimagined proportions was beginning. From spring 2020, lockdowns forced people all over the world to stay at home. Tourism collapsed, with the German tourist trade suffering total revenue losses of almost € 130 billion in 2020 and 2021. Bricks-and-mortar retail hit rock bottom, leading to the permanent closure of around 41,000 shops in Germany alone by the end of 2022. Offices emptied, with up to three quarters of German workers still working from home in 2021, depending on the sector. However, the pandemic did not just have serious consequences at national level, but also internationally. Disruptions to supply chains led to a temporary collapse in global trade, which was down 20 per cent year on year in the second quarter of 2020.

Given the turmoil caused by the pandemic, many people were sketching out dismal future scenarios for the international commercial property market, ranging from permanently deserted city centres, office environments and hotel rooms to the end of globalisation. Aareal Bank had good reason not to share these pessimistic views – and was proved right.

Aareal Bank remained willing to provide financing and took advantage of new market opportunities

Consequently, the Bank remained willing to provide financing to its clients at all times during the years of the pandemic, something that could not be taken for granted. It provided support to its clients quickly and with minimal bureaucracy, deferring repayments and offering liquidity assistance (a nine-figure sum in 2020 alone) to help them manage the crisis. The quality of partnerships becomes particularly evident during difficult times. At the same time, Aareal Bank's business rapidly began to grow again despite the pandemic, as it identified and exploited market opportunities at an early stage. The volume of loans in the Structured Property Financing segment reached the threshold of € 30 billion in 2021, when new business significantly exceeded expectations. The Banking & Digital Solutions segment also significantly surpassed its target, with the volume of deposits rising 10 per cent year on year to € 11 billion – proof that clients in the institutional housing industry trusted their lead bank even (and especially) during the crisis.

New and forward-looking opportunities

As the pandemic subsided and most restrictions were lifted, the basic human need for mobility and social exchange quickly caused pedestrian zones, offices and hotels to fill up again. Europe-wide occupancy rates returned to 2019 levels as early as May 2022. Global trade regained its previous momentum. The property market is also benefiting from promising new usage concepts: offices are becoming exciting venues for meetings and creative exchange, while city centres are being transformed from monotonous retail strips into cultural spaces offering an experience. Moreover, experiences during the pandemic have raised awareness of the importance of a functioning logistics system in a highly networked economy – and thus of the value of suitable infrastructure and properties.

The pandemic intensified existing trends such as digitalisation while simultaneously opening up new, forward-looking opportunities. Aareal Bank sees it as its specific task and strength to exploit these at an early stage and for the benefit of its clients – a significant asset in a complex, dynamic and uncertain world with many and varied challenges.

The sustainable development of the economy and society is a key objective. On its 90th anniversary, Aareal Bank Group presented its first sustainability report. Today, sustainability is in its DNA.

The 2010s were all about the euro and refugee crisis, as well as progressive global warming and destruction of the environment. In the warmest decade since records began, sustainability became a megatrend. In Germany, which began closing down its nuclear power plants in 2011 after the nuclear disaster in Fukushima, the transition to green energy gained momentum: by 2018, 40 per cent of the country's electricity consumption was covered by renewable energies. The number of Germans eating a vegan diet increased 20-fold in just a decade. By the end of the decade, there were 8 million electric cars on the roads worldwide – compared with only about 200,000 at the beginning.

Preserving the resources and choices available to future generations

Aareal Bank Group took a clear position in favour of an economic system that reconciles economic, environmental and social concerns. "Contributing to the sustainable development of the economy and society is a priority for Aareal Bank Group. By doing so, the Company aims to protect the resources and choices available to future generations," the Group's first sustainability report states. This was published in 2013 and set out the sustainability strategy drawn up in the previous year. A strategy that immediately earned the Group "Prime" status in the sustainability ranking of the well-known rating agency oekom research AG (now ISS ESG), reserved for the best in each sector. Aareal Bank Group also signed up to the United Nations Global Compact in 2012 and has since explicitly stated that it will abide by the UN's Ten Principles, which cover the areas of human rights, labour, the environment and anti-corruption.

Doing business sustainably in five action fields

Aareal Bank Group's sustainability strategy at that time defined five areas in which action was required in order to do business sustainably. A few examples of such measures are outlined below.

Clients and products: continuous inspection and valuation of the properties that are financed, not only in accordance with economic, technical and functional, but also sociocultural and environmental criteria.
Employees: promotion of further training, diversity and equal opportunities, as well as work-life balance.
Environment: economical use of resources. Between 2012 and 2022, Aareal Bank Group significantly improved its energy efficiency and continuously reduced the carbon footprint of its business activities.
Society: promotion of education and academic research.
Shareholders: transparent reporting, particularly participation in relevant ratings.

17 per cent "green" properties in the loan portfolio

ESG principles (environmental, social, governance) are now firmly established throughout the organisation. Guided by the international climate protection targets set out in the Paris Agreement and the United Nations' Sustainable Development Goals (SDGs), Aareal Bank promotes sustainable development and the creation of lasting value. The Bank is increasingly focusing on explicitly "green" financing and corresponding refinancing. In the six months up to the end of 2021, almost half a billion euros' worth of new loans were provided for green properties. The Bank had already generated one billion euros in green refinancing funds by that time. An impressive 17 per cent of the entire loan portfolio related to green properties.

In the anniversary year of 2023, all of Aareal Bank Group's own business operations are to become climate-neutral for the first time.

Find our 2022 Non-financial Report here.

The financial crisis that began in 2007 shook the world and the most important asset that banks have: the trust of clients. Thanks to its responsible and risk-conscious business policy, Aareal Bank survived the turbulence largely unscathed.

Globalisation also had its downsides. In 2007, a regional problem, the collapse of the US mortgage market, very quickly grew into a global financial, banking and economic crisis with devastating consequences. The International Monetary Fund (IMF) estimated in spring 2009 that USD 4.1 trillion had been wiped off the value of securities worldwide. European Union member states had to spend € 1.6 trillion (three quarters of which was for guarantees and liquidity assistance) between 2008 and 2010 in order to save their banks, corresponding to 13 per cent of the EU's gross domestic product at the time. 34 million jobs were lost worldwide as a result of the crisis, according to estimates by the International Labour Organization (ILO). Industrial production in the euro zone plummeted by almost 20 per cent between spring 2008 and spring 2009, although it then recovered rapidly. Germany's gross domestic product fell by 5 per cent year on year in 2009 – the biggest drop in the post-war era up to that point.

From a banking crisis to a crisis in the real economy

How did this disaster happen? On the back of speculation that property prices would keep on rising, huge volumes of insufficiently collateralised, second-rate ("subprime") property loans had been granted in the USA and sold on the global market – after being securitised and packaged so they would appear to be first-rate financial products. When the property bubble burst, the value of these products fell dramatically. Millions of misled investors around the globe were left standing – along with the financial institutions that held junk securities on their books. They suffered massive losses due to the necessary write-downs, and more than a few had to fight to survive. The sector as a whole also found itself in a precarious situation. As banks no longer trusted each other, the interbank market (which banks use to obtain liquidity) came to a complete standstill. The subprime crisis became a banking and liquidity crisis and ultimately a crisis in the real economy, as the latter found it increasingly difficult to obtain urgently needed funds on the struggling capital market.

Aareal Bank: a reliable and trustworthy partner, even in the crisis

Defying the severe turbulence on the financial markets, Aareal Bank's responsible, risk-conscious and forward-looking business policy paid off. Even before the crisis, the Bank had significantly reduced loans that were classed as non-performing (some of which were granted for housing construction in the former East German states in the 1990s). At the same time, it had got itself into a very solid position. Aareal Bank's role as the lead bank to the German housing industry also provided stability. As a result, the Bank stayed in the black at all times during the years of the financial crisis, remaining a reliable, trustworthy partner to its clients.

As part of its precautionary approach, Aareal Bank also concluded an agreement in 2009 with the German government's Financial Markets Stabilisation Fund (SoFFin) regarding an unlimited silent participation of € 525 million and a guarantee facility for unsecured bonds of up to EUR 4 billion. The purpose of this agreement was to ensure that the Bank did not suffer any disadvantages compared with competitors that had already received government support. Aareal Bank was the only bank to pay the full interest on SoFFin's silent participation from the beginning, and the first bank to repay parts of the silent participation until it had been repaid in full.

A global player in a globalised world: In the new millennium, Aareal Bank grew into the international structured property financing specialist on three continents.

Many megatrends became established in the 2000s that continue to occupy us today: urbanisation, climate change, digitalisation and globalisation. Since 2007, more people have lived in cities than in rural areas for the first time in human history. In the same year, the awarding of the Nobel Peace Prize to the UN's Intergovernmental Panel on Climate Change (IPCC) and former US Vice President Al Gore increased public awareness of global warming and climate change. Mobile phones, and later smartphones, reached the mass market; the Internet was rolled out across the board and acquired a new, more commercial character with the rise of e-commerce and social networks. Globalisation continued its advance with brief interruptions, and not without criticism. One key driver was China, whose nominal foreign trade volume increased six-fold between 2000 and 2010.

Aareal Bank on the way to becoming a global player

The DePfa Group, from which Aareal Bank emerged in 2001, began a strategic realignment in this globalised world as far back as the 1990s. Aareal Bank ramped up its international business again significantly in the new millennium, with a clear focus on commercial property financing. The foreign branches that the Bank had had in Europe and North America since the 1990s were rapidly followed by further branches, including in Asia. Aareal Bank was now represented on three continents. Its investment paid off. The proportion of international financing commitments in the loan portfolio doubled to over 40 per cent between 1998 and 2003 and then rose to around 70 per cent by the end of the 2007 financial year. The proportion of private housing and construction financing in the overall portfolio had fallen massively by this time, and most of this business was spun off or sold in the following year.

Extensive market- and sector-specific expertise

As part of its strategic realignment, Aareal Bank built up extensive expertise in the various markets and relevant client sectors, such as hotels, shopping centres and logistics and office properties. Since then, it has continuously refined and expanded this expertise – a knowledge advantage that has hugely benefited the Bank and, above all, its clients.

Fit for the future with two strong pillars

Upon completion of its strategic realignment, Aareal Bank presented itself as the future-proofed institution with two strong pillars that it broadly remains to this day: an international structured property financing specialist on three continents, and the lead bank to the institutional housing industry in Germany, with exceptional expertise in innovative digital solutions and services. This second pillar gives the Bank a stable source of funding for its lending business that is largely independent of developments on the capital market, thanks to deposits from the housing industry.

Concentration on core expertise: After about 20 years under the umbrella of DePfa, Bau- und Bodenbank became independent again at the start of the new millennium.

Despite the many doomsday scenarios, the world did not end at the turn of the millennium, and the dreaded "millennium bug" had very little impact. On the other hand, the "dotcom bubble" burst in the first few months of the new millennium, temporarily dampening the general enthusiasm for the Internet and digitalisation. The DePfa Group was unaffected and got itself fit for the future. To enable more targeted and client-focused expansion of core expertise and international operations, the Management and Supervisory Boards decided in November 2000 to split the group into two independent specialist banks. This led to the creation of DEPFA plc for government financing and Aareal Bank AG for property financing and property-related services.

The foundations for this were laid in the previous year, when Deutsche Pfandbrief- und Hypothekenbank AG transferred all of its property operations to its subsidiary Deutsche Bau- und Bodenbank AG. The latter had since traded as DePfa Bank AG BauBoden, and ultimately became Aareal Bank AG.

Shareholders approve strategic realignment

At an extraordinary General Meeting on 15 October 2001, shareholders agreed to the break-up and strategic realignment of DePfa Group. The course was set for Aareal Bank to have a successful future – even though the terrorist attacks of 11 September had cast a shadow over this future just a few weeks previously. They shaped the first few years of the new millennium, along with the global financial crisis from 2007 onwards and the introduction of the euro, which came into circulation as cash from 1 January 2002.

While the Germans had to say goodbye to their beloved Deutschmark, Aareal Bank shares were traded on the stock exchange for the first time – the Bank has been listed since 2002. In the same year, DePfa IT Services AG changed its name to Aareon AG. The IT subsidiary, which at that time was wholly owned and in which Aareal Bank Group now owns a 70 per cent stake, has been an important and very successful member of the Group since the beginning.

A milestone on the way to Aareon AG as we know it today: On the 40th anniversary of its data centre, Bau- und Bodenbank, now Aareal Bank, spun off its IT Services division into an independent subsidiary.

With the advent of the World Wide Web and the introduction of digital mobile networks, the world became permanently interconnected, after personal computers had become established in both private and professional use in the previous decade. For Bau- und Bodenbank and its clients, digitalisation had long been part of everyday life at this point. With its data centre, which it modernised in 1972, and software solutions such as the ERP (enterprise resource planning) system GES, the institution set standards at an early stage for IT services in the housing, property and energy industries.

On the way to becoming the leading technology company for the property sector

The spin-off of the IT Services division was the logical next step in this successful development and paved the way for further growth. BauBoden Systemhaus GmbH was established in 1997; a group with a holding structure was created from it two years later. Initially operating as DePfa IT Services AG and then under its current name of Aareon AG from 2002, the Aareal subsidiary continued its success story in the new millennium and up to the present day. Europe-wide expansion, strategic acquisitions and partnerships (including with SAP and Techem), along with innovative solutions such as the ERP systems Blue Eagle (based on SAP) and Wodis Sigma, helped make it into the leading technology company for the European property sector and its partners. Today, over 12 million residential units across Europe are managed with Aareon IT solutions for around 7,000 clients.

A turning point: the fall of the Iron Curtain and a surge in globalisation ushered in a new era. The privatised Deutsche Pfandbrief- und Hypothekenbank AG and its subsidiary Bau- und Bodenbank successfully exploited the limitless new possibilities.

Barely anyone would have thought it possible, but on 9 November 1989 it became a reality: the Berlin Wall fell, and with it the Iron Curtain that had divided Europe since the end of the Second World War. Two years later, the Soviet Union was also confined to history. The development that had begun in the 1980s with the liberalisation of the economy, trade and financial markets gained full momentum, and the world opened up and became connected, including economically. Between 1985 and 2000, global exports of goods grew twice as fast in nominal terms as global gross domestic product, while cross-border inflows of capital grew four times as strongly – with a significant boost from 1995 onwards.

Successful IPO of Deutsche Pfandbrief- und Hypothekenbank

In the spirit of the new decade of economic liberalism, a new era also began for the parent company of Bau- und Bodenbank (now Aareal Bank). At the turn of the year 1989/90, Deutsche Pfandbriefanstalt became a German public limited company [Aktiengesellschaft]. In March 1991, it finally floated on the stock market as Deutsche Pfandbrief- und Hypothekenbank AG (DePfa Bank), with the German government (previously the majority shareholder) successfully placing all of its shares.

From a public-sector institution with a national focus to an international bank

The now privatised banking group was open to the world and all its possibilities. It expanded rapidly and successfully beyond its previous geographical boundaries – firstly into the former East German states, then Europe-wide and finally across the Atlantic. As early as 1990, Bau- und Bodenbank concluded contracts with over 100 municipal housing enterprises in central Germany regarding the introduction of invoicing, payment and information systems for around 1.2 million homes. The DePfa Group began to build up and expand its international business a year later, with branches in Amsterdam (1991), London (1993), Rome (1995), Brussels (1996) and the USA and Canada (1998). Within a short time, loans to foreign municipalities accounted for 30 per cent of the Group's entire loan portfolio.

Expansion of financing for commercial property

To broaden its strategic position, the DePfa Group swiftly expanded its new "Commercial Financing" line of business, in addition to its international expansion. In the 1980s, there had been a major focus on private (housing construction) financing. In 1989, the share of commercial properties in the overall volume of loans was just 15 per cent; a year later, it had climbed to 20 per cent, and by 1992 it had reached an impressive 27 per cent. This included a substantial volume of financing in the former East German states. What is particularly remarkable is that, among new mortgage loans, commercial financing exceeded private financing by a factor of 6 as early as 1990.

The successful development of the DePfa Group and its subsidiary Bau- und Bodenbank in the 1990s played a key role in paving the way for the subsequent globalisation of Aareal Bank. Today, the Bank finances commercial property on three continents.

A time of upheaval: Germany's economic miracle ended with the first oil crisis in 1973. Bau- und Bodenbank, today Aareal Bank, embraced the changes and successfully restructured its business under the umbrella of Deutsche Pfandbriefanstalt.

Radical structural change in many sectors, the transition to a service economy and social and political liberalisation ("daring more democracy"): In the late 1960s and early 1970s, developments occurred that are still having an impact today. The post-war era had finally come to an end in Germany. One important turning point was the first oil crisis in 1973 – a painful experience of dependence that was to be repeated decades later.

OPEC drastically cut oil production in the autumn of that year. Within a short time, the price of crude oil quadrupled to 12 dollars per barrel (159 litres). This "oil price shock" also had serious consequences for the Federal Republic of Germany. The inflation rate reached 7 per cent in 1973 and 1974, its highest level for over 20 years, while the economy stagnated in 1974 and 1975 due to falling demand ("stagflation"). Although full employment prevailed at the beginning of the 1970s, the number of unemployed people exceeded one million by 1975, and eight years later it surpassed two million.

Housing market and house building suffer from interest rate shock

A restrictive lending policy rapidly brought inflation under control – but at the price of a fast and sharp rise in interest rates. Interest rates of up to 15 per cent and more on interim loans proved an existential threat to many housing enterprises. During the period of high interest rates, many potential home buyers had banked on a drop in property prices and had postponed their purchases. This disastrous development could not fail to have an economic impact on the highly specialised Bau- und Bodenbank. The Federal Republic of Germany as the main shareholder and the state of North Rhine-Westphalia, also a shareholder, therefore helped the Bank in 1975 by providing loans and guarantees totalling DM 100 million.

Successful realignment with small and private client business

By 1978, Bau- und Bodenbank had got through the difficult phase, partly thanks to economic recovery, and had even achieved net income for the financial year of DM 8.8 million. A year later, the Federal Republic of Germany bundled its property-related banking activities under the umbrella of Deutsche Pfandbriefanstalt, a provider of financial services to the public sector also owned by the government. Bau- und Bodenbank became a subsidiary of Deutsche Pfandbriefanstalt.

The Bank later restructured its lending business systematically and successfully. Construction phase loans for property developers and housing enterprises, which had recently been hit by the crisis, were reduced from 90 per cent in the late 1970s to 25 per cent in 1988. At the same time, business with small and private clients in particular was expanded massively. The Bank always stayed close to its clients, with nine branches and 20 offices nationwide – a successful business principle to which it has remained true to this day.

The digitalisation of all areas of life as we know it today was at most a distant vision in 1957. With its first data centre, Deutsche Bau- und Bodenbank was ahead of its time.

The first computers did not become available for commercial purposes until the early 1950s. Based on tubes and relays, they filled a whole room and weighed a ton. Even by the end of the decade, only 8,000 computers were in use worldwide (and the word "computers" was not used in Germany at that time). One of the first computers came into use at the new data centre of Deutsche Bau- und Bodenbank, now Aareal Bank, in Mainz in December 1957.

Software as a service – over 60 years ago

The Bank hoped that the new IBM 650 model mainframe computer, the world's first computer to go into serial production, would help it process its extensive trust operations, with 150,000 mortgages, more efficiently and cost-effectively. What was really revolutionary, however, was the idea of offering companies in the housing industry a central external data processing service – at a time when cloud computing and software as a service did not exist even as concepts. The new computer-based service was already mapping important business processes in the housing sector: the full accounting system with book keeping for tenants, account management and finally the settlement of payment transactions. This saved clients many time-consuming manual tasks – and the expense of having to set up their own IT infrastructure. The foundations were laid for one of the first ERP (enterprise resource planning) systems in the sector.

A successful new line of business

This service, which was unique in Germany at that time, constituted the new and successful line of business "Services for the housing industry". It would later become Aareon AG, Aareal Bank's IT subsidiary, and what is now the Banking & Digital Solutions segment of Aareal Bank. The many pioneering products and services that have been developed for the housing, property and energy sectors since 1957 include the "Bankkonto 1" (BK 01). First launched 60 years ago, it remains a market-leading solution for automated payment transactions to this day.

The success story in figures: In 1967, around one million homes were managed from the data centre in Mainz. Five years later this had risen to one in five homes in Germany, and the data centre, which was modernised in 1972, had become the largest in the German housing industry. Today in 2023, around 7,000 clients across Europe manage over 12 million residential units with Aareon's software solutions – and some of the original clients from 1957 are still on board.

At the end of the Second World War, Germany was in ruins – but by 1949, there were already signs of a hopeful new beginning. In the young Federal Republic of Germany, Deutsche Bau- und Bodenbank became an important part of this.

In the years immediately following the war, many people lacked even the basic necessities: enough to eat and a home that was fit for human habitation. Food continued to be rationed and shared out until 1950. In the western zones, an "average adult consumer" would have been entitled to a daily ration of just 1,550 kilocalories in late 1946. The amounts actually given out were often much smaller. 13.7 million households had to share the 8.2 million homes left standing after the destruction of the war. With almost 10 million refugees also pouring in, the country was in distress.

Distress and destruction – but the first glimmers of hope, too

Bau- und Bodenbank also suffered from the effects of the war. Many of its buildings were destroyed or severely damaged, and many employees were registered as missing. The head office in Berlin was declared a "dormant institution" by the Allies and had to cease trading for the time being. Branches in the zone occupied by the Soviets were permanently closed. The branches in the western zones were allowed to continue operating after a brief interruption, offering a first glimmer of hope.

And things actually did get better – for the country and its people and for the Bank. The currency reform in 1948 and the foundation of the Federal Republic of Germany in 1949 played a key part in paving the way for Germany's economic miracle. Bau- und Bodenbank also continued its track record of success after transferring its head office to Frankfurt am Main.

Six million homes in ten years – the economic miracle as a construction miracle

Between 1950 and 1970, the annual gross domestic product of the then West Germany increased by a factor of more than 3.5 in real terms, while real wages grew by a factor of 2.5. The social market economy became the model that has shaped Germany's success to this day – even if the promise of "prosperity for all" has not always been kept. The housing shortage was alleviated to a large extent with the construction of six million homes in the decade up to 1960 – most of them government-funded through interest-free loans or loans at reduced interest rates, grants and tax breaks. This was a remarkable success story in which Bau- und Bodenbank played an important part, on one hand because it was one of the selected institutions that were permitted to award government funds for house building, and on the other because it had created a unique selling point on the market (at least temporarily) by offering interim financing for home loans and savings contracts. Construction projects speeded up significantly from that point on, as construction could begin before the home loan and savings contract had been awarded.

Bau- und Bodenbank's proud business record from the post-war decades shows total loan commitments of 7.6 billion Deutschmark from 1950 to 1967. In 1970, in the final phase of the economic miracle, the Bank recorded its highest ever volume of loans thus far, at 1.8 billion Deutschmark.

Germany's first democracy ended on 31 January 1933 when Adolf Hitler seized power. The National Socialists began a period of rule that would last for 12 years. Deutsche Bau- und Bodenbank adapted and came to an arrangement with the new totalitarian regime.

Things got better in Germany from 1925 onwards. Culture and science flourished, while the economy and exports were booming. The young democracy stabilised and people partied – especially in Berlin. However, 'Black Friday' brought Germany's Golden Twenties to an abrupt end. The stock market crash in October 1929 triggered a profound economic crisis in which German industrial production plummeted by 40 per cent. Real earnings contracted by 30 per cent, while the number of unemployed people rose to over 6 million – a rate of around 30 per cent. The Nazi Party particularly benefited from this distress, achieving a record result of over 37 per cent at the parliamentary election in July 1932 and seizing power six months later.

Economic recovery at a high price

The National Socialists kept their promise of economic recovery in the years that followed. However, the price for this was a massive increase in arms production and job creation schemes that resembled forced labour, including in housing construction.

In the context of National Socialist economic, construction and settlement policy, Bau- und Bodenbank, which later became Aareal Bank, initially remained true to its two main areas of business from the 1920s. These were business with interim loans, which were now being used to finance larger apartment buildings as well as small residential estates, and trust business for Reich guarantees, for which it made its management capacity available and massively expanded its branch network. By the end of the war, the Bank had helped to finance one million homes. In addition, it was involved in co-financing for workers' housing estates for the new armaments centres such as Wolfsburg and Salzgitter. It also granted loans of millions to Germany's booming industrial companies, including Daimler-Benz, Ruhrgas and Vereinigte Stahlwerke. Bau- und Bodenbank relinquished its non-profit status in 1935, losing the sociopolitical character that it had had since its foundation.

Existential threats despite a business policy that remained loyal to the regime

After the forcible annexation of Austria in 1938, the occupation of the Sudetenland in 1939, the invasion of Poland in the same year and the conquest of Lorraine, Bau- und Bodenbank expanded its business activities and its branch network to these regions. In the areas of eastern and central Europe occupied by German troops, it also financed National Socialist settlement projects for so-called "Volksdeutsche" [ethnic Germans].

Despite staying loyal to the regime with this business policy, Bau- und Bodenbank faced threats to its survival during the course of the war. The Nazi state had increasingly withdrawn from housing construction in favour of arms production, and stopped its civil construction activities completely in 1940. As it could not offset these losses by granting industrial loans, the Bank's business effectively ground to a halt in late 1944. The head office in Berlin had already been largely destroyed by bombing raids by this time. At the end of the war, the bank counters were closed by the Soviet military administration.

You can find a more detailed account and assessment of the role of Deutsche Bau- und Bodenbank in National Socialism in the anniversary publication for our 90th anniversary, which you can download here.

Crisis and opportunity: the early 1920s were difficult, but also brought a change for the better. The establishment of Deutsche WohnstättenBank AG, which almost 80 years later became Aareal Bank, contributed to this.

With hyperinflation, reparation payments to former wartime enemies and rampant housing shortages in its cities, Germany was facing major economic and social challenges at the start of the 1920s. In Berlin alone, where the population grew by almost half a million between 1920 and 1930, there was a shortage of tens of thousands of homes. In 1923, the year that Deutsche WohnstättenBank AG was founded, the price of a kilo of bread in the German capital rose from 473 mark in May to 14 million mark at the beginning of October and finally 5.6 billion mark four weeks later.

Fundamental and lasting changes

However, this period of crisis and hardship was also a time of fundamental changes, which continue to have a positive impact to this day. The first parliamentary democracy had been established in Germany, even if it did not go unchallenged. In the quiet little town of Weimar, the Bauhaus movement set about revolutionising art and architecture. The construction of social housing was recognised and accepted as a public responsibility. This not only relieved housing shortages, but also led to projects that attained UNESCO World Heritage status, such as the "Berlin Modernism Housing Estates".

In the context of these changes, the Prussian housing companies, Preußische Landespfandbriefanstalt [the Prussian state Pfandbrief institute] and other companies founded Deutsche WohnstättenBank AG in Berlin on 23 June 1923. The housing companies had been set up in the preceding years in response to the urgent housing shortages, in particular to provide homes for returning soldiers and for refugees. The main task of the new specialist bank for housing construction was to provide the building and housing industry with urgently needed loan funds, which were in short supply due to war and inflation – especially in the form of pre- and interim financing until the respective construction projects were completed and obtained long-term financing. It also had the task of holding in trust government funds for housing construction.

Over one million homes financed

Deutsche WohnstättenBank AG, which was renamed Deutsche Bau- und Bodenbank AG in 1926, fulfilled the mission assigned to it very successfully. The volume of loans increased 19-fold in just ten years, from around 13 million reichsmark in 1924 to over 248 million reichsmark in 1933. What is perhaps even more impressive, however, is that the Bank played a part in financing over one million publicly funded homes in the inter-war years, making an important contribution to the alleviation of the housing shortage. The Bank operated with great care and a strong sense of responsibility in a highly risky area of business. A specially developed audit and rating system, which gave equal weighting to financial, housing industry and technical issues for the first time, ensured that funds were repaid without problems and that the Bank experienced virtually no defaults on interest or repayments, including in its trust operations.