East German agricultural land has long been targeted by large investors. Last week, the real estate group Deutsche Wohnen SE entered the business. His subsidiary, Quarterback Immobilien AG from Leipzig, is about to take over an agricultural business in Brandenburg as part of a share purchase. The Röderland GmbH farm owns 2500 hectares of land and about 900 cattle, including suckler cows and dairy cattle. This week, the sale is to be wrapped up. This would mean that an agricultural holding would once again become the property of a non-agricultural investor.

Anne Kokenbrink

Editor in Business

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According to media reports, a farmer had previously offered 8 million euros for the farm, but could not keep up with the 2 million euro higher bid of Quarterback AG. Henrik Thomson, board member of Quarterback Immobilien AG, did not want to comment on the purchase price when asked. For the real estate group as an investor, the business is quite attractive. By buying shares ("share deal"), he uses a loophole. In this case, the Real Estate Transfer Act does not apply, as is usually the case. The buyer does not acquire the land directly, but up to 90 percent of the company that owns the area. The purchase does not have to be displayed or approved, and no real estate transfer tax is due.

East German farmers reacted indignantly to the project. The Arbeitsgemeinschaft bäuerliche Landwirtschaft called for the agricultural structure laws to be adapted quickly in order to protect farms from financially strong investors. The Brandenburg State Farmers' Association takes a similar view. "However, the revision of the Agricultural Structures Act comes 20 years too late. Many businesses have already been completed," says Managing Director Denny Tumlirsch.

In its previous practice of selling state-owned land (BVVG land) to the highest bidder, the Federal Government had opened the floodgates to purely market-oriented sales. Normally, land market law is intended to protect agricultural land from speculation. In its outdated form, however, this is not achieved. Brandenburg's Minister of Agriculture Axel Vogel (Greens) is therefore now working on changes to the law, as a spokeswoman confirmed.

This means that sales of this kind will be notifiable in the future. It would be examined whether the farm should be maintained permanently after the purchase and whether the land should continue to be managed independently. If this is not the case, one can intervene. According to Tumlirsch from the farmers' association, however, it is questionable whether the changes actually promote a fair land market.

The Röderland agricultural business is to be continued after the takeover. This was confirmed by board member Thomson. The 32 employees would continue to be employed for five years. However, the livestock population may shrink. Ground-mounted and agri-photovoltaic systems would be added as new business areas.

This purchase is not an isolated case. Since the financial crisis of 2007, considerable speculative tendencies have been discernible with regard to agricultural real estate. The land available for agriculture is shrinking – and becoming more expensive. At the same time, prices for leased land climbed. Since 2000, the purchase prices for arable land and grassland have roughly tripled. In the wake of inflation, investors, asset managers and fund shareholders are increasingly looking for ways to invest money profitably.

The problem is particularly evident in eastern Germany. Investors such as the Aldi Foundation, the Zech Group and Munich Re have bought up agricultural businesses since reunification and own large areas of land in eastern Germany. There are no official figures. The Thünen Institute estimates the share of investors in large companies (legal entities) in the east at 34 percent in 2017, and the trend is rising.