GSW Says Top Executives Resign After Investor RebukeDalia Fahmy
GSW Immobilien AG, Berlin’s largest residential landlord by market value, said both its chairman and chief executive officer will quit after investors protested how the CEO was hired. The shares rose the most since November 2011.
CEO Bernd Kottmann and Chairman Eckart John von Freyend will leave in July, GSW said in a statement after the market closed yesterday. The decision ends two months of conflict that culminated at a meeting in Berlin last week at which shareholders passed a no-confidence motion against Kottmann and voted to dismiss Freyend. GSW’s supervisory board plans to appoint an independent legal adviser to investigate Kottmann’s hiring, according to a separate statement.
“I respect the vote at the last shareholder meeting and as chairman accept the political responsibility for it,” Freyend said in the statement issued by the board.
The ouster represents a rare show of force by shareholders in Germany, Europe’s largest economy. Corporate-governance rules there lag behind U.K. and U.S. standards, said Peter Papadakos, an analyst with Green Street Advisors in London.
GSW shares rose as much as 5.3 percent to 30.1 euros in Frankfurt trading, increasing the Berlin-based company’s market value to 1.5 billion euros ($2 billion). The shares have declined about 10 percent since Kottmann’s appointment was first questioned by GSW shareholder PGGM NV on May 15. The EPRA FTSE/NAREIT index of German property stocks fell 14 percent during that time.
“It’s good that the company made a swift decision and you can see by the share price reaction that the decision was taken well,” said Hans Op ’t Veld, head of listed real estate companies at PGGM, by phone.
Freyend’s and Kottmann’s replacements will be hired with help from an external adviser, according to the board’s statement. Internal candidates for the CEO job will be considered, and the company will be led by Chief Operating Officer Joerg Schwagenscheidt and Chief Financial Officer Andreas Segal until a choice is made.
GSW, which owns 60,000 apartments in Berlin, said on March 11 that CEO Thomas Zinnoecker would resign and a week later announced that Kottmann would succeed him. PGGM, which owns about 3 percent of GSW, called for votes on the appointment, saying the speed with which Kottmann was chosen raised questions about the thoroughness of the search.
The Dutch pension administrator also criticized Kottmann and Freyend over their tenure at IVG Immobilien AG, a German real estate company that’s lost about 98 percent of its market value since 2008 and is in talks to restructure 3 billion euros of debt.
Freyend repeatedly defended Kottmann’s hire, saying by phone on June 7 that there was a “careful and systematic selection process.”
The search for a CEO began on Feb. 13 after former chief executive Zinnoecker told Freyend that he was considering leaving, Freyend said at the shareholder meeting.
Bafin, Germany’s financial regulator, is investigating why GSW didn’t inform shareholders about the possible CEO change immediately after the search began on Feb. 13, a Bafin spokeswoman said by phone on May 17.
At GSW’s shareholder meeting on June 18, the no-confidence motion against the CEO got 63.3 percent of votes, exceeding the 50 percent required for passage. While the vote represented a rebuke for GSW over Kottmann’s hiring, it didn’t require him to resign. A motion to oust Freyend, who supervised Kottmann’s recruitment, received 69.6 percent of votes, falling short of the 75 percent needed.
GSW’s biggest shareholders are Sun Life Financial Inc., BlackRock Inc. and Singapore’s wealth fund.