Goldman Sachs kicks off an 11-day IPO roadshow today of its majority-owned German residential property company, LEG Immobilien, seeking to raise as much as €1.43bn through the sale of a 57.5% stake.
Goldman Sachs and Deutsche Bank are global co-ordinators and joint bookrunners while Berenberg, Commerzbank, Erste Group Bank and Kempen & Co are co-lead managers.
LEG Immobilien is one of the largest housing companies in Germany, owning almost 91,000 properties in the North Rhine-Westphalia region.
LEG’s entire portfolio was valued at the end of September last year by CBRE at €4.86bn, while on the group’s net asset value, based on an EPRA NAV definition, was €2.37bn, or €44.8 per share.
Goldman Sachs and Perry Capital acquired LEG in 2008 from the State of North-Rhine Westphalia in a deal valued at €3.4bn, financed with around €2bn of senior debt from a syndicate of German pfandbrief banks, which had average maturity of 6.7 years at the end of last September.
Together with €331.7m in government subsidised loans, LEG has total outstanding debt of €2.34bn, which against the CBRE valuation put the LTV at 47.7%, according to the IPO prospectus.
Goldman – which owns 89% of LEG through an affiliate of Whitehall property funds, Saturea B.V. – has set a price range of between €41 and €47 per share, hoping to raise between €1.25bn and €1.43bn if all over-allotment shares are taken up. Perry Capital, the hedge fund, owns the balance of LEG shares.
The 26,481,727 share offering comprises 96% from Goldman holdings and the balance from Perry Capital.
The final offer price will be set on the basis of a book building process, with shares in LEG to start trading on Friday, February 1, 2013 on the Frankfurt Stock Exchange.
“LEG operates in an economically strong market that has one of the highest population densities in Germany,” said Thomas Hegel, chief executive officer (CEO) of LEG. “In order to achieve future growth we constantly screen the market for potential acquisitions. An investment in LEG shares offers the opportunity to invest in a large pure play residential property company with high growth and dividend potential.”
The roadshow for the marketing of the shares is expected to end on Thursday, January 31, 2013.
LEG’s portfolio comprises 89,742 residential units, of which, 32,950 (36.7%) are in the Rhineland, 35,154 (39.2%) are in the Ruhr region and 21,638 (24.1%) are in Westphalia.
The balance of the portfolio includes 988 commercial units and 21,188 parking units in approximately 160 locations across the North Rhine-Westphalia region and 17 outside the region. In the fourth quarter, LEG acquired a portfolio of 1,244 residential and nine commercial units in Bocholt, North Rhine-Westphalia.
In the nine-month period to the end of September, the average occupancy rate of LEG’s residential portfolio was 96.09%, generating an aggregate net rental and income lease of €180.2m, compared with €243.7m for the full year in 2011.
LEG’s strategy includes growth through active property management, reducing vacancy rates and acquisitions of selected portfolios in the North Rhine-Westphalia region. LEG made a €108.2m profit over the nine months to the end of September, compared with a €73m loss for the same period the previous year.
LEG has almost entirely refinanced its debt over the past four years, with an outstanding €75m NordLB loan in the first quarter of this year. The group carries an average interest rate of 3.3%.
The entire €2.34bn group debt is comprised of €331.7m government subsidised loans, with an average interest of 1.4% and an average maturity of 31.7 years, and €2.02bn in loans predominantly provided by German pfandbrief banks, with an average interest of 3.95% and an average maturity of 6.7 years.
The near-term maturity profile of LEG is comprised of: €75m NordLB loan maturing this year, to be financed in the first quarter; €73m maturing in 2014; €42m maturing in 2015; €153m in 2016; €370m in 2017; €523m in 2018.
For Goldman Sachs, this will be the third major disposal by Goldman Sachs since the turn of December, following Highstreet, a consortium which includes Whitehall, the sale of Berlin’s KaDeWe building, and 16 other Karstadt department stores for €1.1bn to Austrian investor Signa. The transaction is expected to close during 2013.
Also last month, Goldman Sachs’ Whitehall Real Estate Funds sold a portfolio of five European Marriott hotels for €440m to Host Hotels & Resorts, the US hotel REIT.