Amid stormy debate, the almost 74 percent of shareholders represented at an extraordinary general meeting voted for a €2.95-billion ($4.23-billion) hike, allowing the state to obtain 90 percent of the bank’s shares.
Germany already owned 47.3 percent of HRE’s equity following a public offer for shares in May.
The state also represented a simple majority among shareholders at the general assembly, giving it the power to get the motion approved.
Once it effectively owns 90 percent of HRE, Germany can force remaining shareholders to sell their holdings via a “squeeze out” operation.
It will be Germany’s first full bank nationalisation since the republic’s birth in 1949.
The biggest losers will be some small investors and the former dominant HRE shareholder, US investment fund JC Flowers, which had sought to retain its stake in the troubled bank.
Berlin will not be forced to expropriate shareholders however, an option it held but was reluctant to exercise.
HRE, which has become a symbol of the financial crisis in Germany, has already benefitted since October from €102 billion in mostly public loan guarantees.
Earlier on Tuesday, bank boss Axel Wieandt said there was “no alternative” to nationalisation and stressed HRE would have gone bankrupt long ago without state aid.
Wieandt said in addition to the capital increase, HRE would need still more funds and additional state aid.
Germany decided to nationalise HRE via the government’s financial markets stabilisation fund SoFFin following concerns that the bank’s collapse would trigger financial market chaos.
The situation was likened to that faced by US investment bank Lehman Brothers, which went bankrupt in September, a move believed to have taken the global financial crisis to a far more critical level.
HRE is a pivotal part of Germany’s economy. In addition to its real-estate activities, the bank plays a major role in the issuance of “Pfandbriefe,” bonds in which small investors, savings banks and insurance companies have placed large sums.
Berlin nationalised banks during the 1930s Great Depression, a practice that was continued by the World War II Nazi regime.