Bloomberg News

Germany Said to Start $2.3 Billion Property Sale Next Month

March 13, 2012

The German government may start the sale of its real-estate management company as early as next month, aiming to raise more than 1.76 billion euros ($2.3 billion) to reduce its deficit, according to three people familiar with the plan.

Barclays Plc’s investment bank will handle the sale of TLG Immobilien GmbH, the company that replaced Treuhand Gesellschaft, said two of the people, who declined to be identified because the timetable hasn’t been made public. TLG, which owns homes, office buildings, hotels and retirement homes in eastern Germany, may attract property companies, private- equity firms, insurers and infrastructure funds, two of the people said.

The government is trying to take advantage of a pick-up in real-estate transactions in Germany, with this year’s deal volume of 1.45 billion euros already half the total for all of 2011, according to Bloomberg data. Chancellor Angela Merkel has slated federal sales of 5.1 billion euros in her 2012 budget that include TLG, Duisburg’s harbor and holdings tied to the European Recovery Program investment fund as she strives to narrow the deficit.

“Real estate in Germany is considered a safe asset for investors and the current market provides a good window for sales because of cheap financing,” said Frank Neumann, an analyst at Bankhaus Lampe in Bielefeld. “The likeliest buyers for property assets being sold by the government and state-owned lenders are real-estate firms because private equity risks a public backlash.”

Profitable Business

Following Germany’s reunification in 1990, Treuhand Gesellschaft oversaw the sale and restructuring of thousands of companies in the country’s six eastern states. TLG, which is based in Berlin, has since 2000 managed the property assets mainly on the Baltic Sea coast and in Berlin, Halle and Leipzig, and in 2010 reported net income of about 20 million euros.

The Finance Ministry in July said it will revive a plan to sell TLG and the company will be split into two parts: TLG Immobilien that contains commercial property such as offices and hotels, and TLG Wohnen that includes the residential properties, to attract more bidders.

A group including Patrizia Immobilien AG (P1Z) agreed in February to buy Landesbank Baden-Wuerttemberg’s real-estate unit for 1.4 billion euros and Bayerische Landesbank is selling its property business after taxpayer bailouts for the two state-owned lenders during the financial crisis. BayernLB’s DKB unit is also selling its property holdings and German real-estate investor TAG Immobilien AG offered to buy the assets on Feb. 29.

Bailout Fund

Merkel’s government is counting on asset sales amid risks to her plan to narrow the deficit. Her government has already decided to re-open the budget later this year to speed up payments into Europe’s permanent bailout fund.

“Fortunately the market situation is favorable, but the pressure is there to sell this year,” said Priska Hinz, the opposition Green Party’s spokeswoman for the budget in the Berlin parliament. Any TLG buyer or buyers must sign a social charter for tenants as a condition of purchasing the company, Hinz said.

TLG’s value was estimated at about 1.76 billion euros in 2010. German law bars the sale of federal assets for less than the market price.

The company’s sale was initially planned for 2008 and was shelved in November of that year because of the global recession. Spokesmen for TLG and the finance ministry declined to comment.

To contact the reporter on this story: Aaron Kirchfeld in Frankfurt at akirchfeld@bloomberg.net; Brian Parkin in Berlin at bparkin@bloomberg.net.

To contact the editors responsible for this story: Frank Connelly at fconnelly@bloomberg.net; James Hertling at jhertling@bloomberg.net.


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