Germany’s Finance Ministry has today confirmed the sale of the 780-strong State-owned TLG Immobilien real estate company for €1.1bn to Lone Star, in the government’s largest privatisation for more than five years.
CoStar News first reported that Lone Star had won the bid to buy the legacy East German-focused property portfolio two months ago, after edging out joint bidders Cerberus Capital Management and Blackstone, which came in second, and third-placed Morgan Stanley Real Estate Funds.
Lone Star will finance the acquisition of TLG with a three-year near €500m corporate acquisition loan provided by Citigroup and Royal Bank of Canada as well as inheriting around €600m in a legacy bank syndicate.
The fresh near €500m Citigroup and RBC loan is expected to fund at the turn of the year, by which point Lone Star will have been able to assess how much of the legacy bank debt needs to be transferred.
The legacy bank syndicate comprises loans from Kreditanstalt für Wiederaufbau, the government-owned development bank, Landesbank Berlin, Deutsche Kreditbank, Bremer Landesbank and Sächsische Aufbaubank.
Germany’s Finance Minister, Dr Wolfgang Schäuble, confirmed Lone Star won the auction process after “an open, transparent and non-discriminatory bidding process” in which there had been “intense competition” adding that the sale reflected “good revenue” for German taxpayers.
Lone Star intends to develop the TLG business into a platform for its German real estate operations.
Barclays Bank has managed the sales process. Citigroup also Lone Star on the acquisition.
This is the second attempt by the German government to privatise TLG, after an attempt four years ago was aborted because of the global financial crisis. The Federal Republic of Germany was obliged to divest the ownership as decreed by the government’s Federal Budget Code.
TLG houses the government’s commercial and residential assets from the former East Germany after the country’s reunification 23 years ago, with large geographic concentrations in Berlin, in Dresden and in Rostock.
CoStar News was also first to report two months ago that TAG Immobilien won the residential TLG Wohnen portfolio, paying around €450m for a portfolio which was valued at the end of 2011 at €482m. TAG beat competition from rival German REIT, KWG Kommunale Wohnen.