By Dalia Fahmy - Nov 19, 2012 7:59 PM GMT+0800 BLOOMBERG
The German government agreed to sell the residential arm of TLG Group, a real-estate management company, for about 215 million euros ($275 million) to reduce its deficit.
TLG Wohnen GmbH, owner of 11,350 homes in eastern German cities including Berlin, will be bought by TAG Immobilien AG (TEG), a Hamburg-based landlord that will assume 256 million euros of debt as a result of the deal, TAG said in a statement today. The government plans to choose a buyer for TLG Immobilien GmbH, the company’s commercial-property unit, in the weeks ahead, according to a separate statement.
The government is seeking to take advantage of demand for German real estate as investors look for a safe place to put their money amid the European debt crisis. Investors bought 8.67 billion euros of apartments in the first nine months, more than twice as much as a year earlier, according to data compiled by BNP Paribas SA. (BNP)
TLG replaced Treuhand Gesellschaft, the company that oversaw the sale and restructuring of thousands of companies after the collapse of communist East Germany. Many of TLG Wohnen’s assets are Cold War-era concrete apartment blocks known as Plattenbauten for their prefabricated panel construction.
Barclays Plc (BARC) advised the German government on the sale.
TAG will sell new shares to help pay for the purchase, which will increase the number of homes it owns to 69,000, TAG said. The deal is expected to close in the coming weeks, according to TAG’s statement. In a sales prospectus obtained by Bloomberg, TLG Wohnen was valued at 482 million euros. TLG Immobilien was valued at 1.38 billion euros.
The German government shelved a plan to sell TLG in 2008 because of the global financial crisis. Some German politicians, including leaders of the Linke party, the successor to former East Germany’s ruling communists, said they didn’t want the properties sold to financial investors who might violate Germany’s tenancy laws.
TAG agreed to terms protecting tenants and employees, the government said in its statement.
The Finance Ministry targets a federal deficit of 17.1 billion euros in 2012.