TAG Immobilien has acquired the residential branch of state-owned real estate firm TLG after winning a bid that will require a EUR 471 million investment. The sum to be paid as part of this deal, the biggest in the German property sector for 2012, also includes TLG’s outstanding debt.
TAG was one of the favorites of this bid, along with equity investor Lone Star, both competing for the acquisition of two separate portfolios of properties that include 12,000 flats in former East Germany, together with several commercial properties. While TAG acquired the residential portfolio, the commercial property unit is still up for grabs but is expected to be bought soon by Lone Star.
The combined transaction is expected to surpass the second largest one of earlier this year, the acquisition of 22,000 flats by a group led by Patrizia Immobilien from public-sector bank LBBW, valued at EUR 1.4 billion (USD 1.78 billion) . These transactions are part of the German government efforts to divest assets, a goal it has been actively working towards since 2008.
The sale of the commercial arm of TLG is expected to be finalized by the end of the year at the latest. The German finance ministry said the deal is in its final phase and should be completed in a few weeks.
TAG representatives stated on Monday that, in order to refinance the equity purchase price of EUR 218 million and to finance other smaller acquisitions, the company would issue up to 30 million new shares The net debt included in the deal was of EUR 253 million. The estimated worth of the newly issued shares is of about EUR 250 million (based on Friday’s closing share price of EUR 8.39.)
Properties in Germany are currently drawing international investors as they have not been subjected to the same trend of prices going up and down at incredible speeds as it happened in other European countries, such as Spain or Ireland. On the contrary, German property values have seen a stable increase over the past few years.