Gagfah SA (GFJ), the third-biggest owner of German real estate by market value, abandoned a plan to sell a unit that owns a quarter of its homes as the company nears an agreement on refinancing a 1 billion-euro ($1.35-billion) loan.
Gagfah, controlled by Fortress Investment Group LLC (FIG:US), will keep 38,000 Dresden apartments that it bought in 2006 using the loan, the company said in a statement today. The refinancing is expected to close “within the next few weeks,” it said.
The deal will be a “significant step towards resolving our 2013 debt maturities,” Chief Executive Officer Stephen Charlton said in the statement.
The loan matures in May and the company, based in Luxembourg, has to pay back 2.1 billion euros in August from a separate borrowing. Fortress is among the private-equity firms facing debt deadlines after buying German real estate with the cheap credit available in the years before the global financial crisis. The New York-based firm owns 66 percent of Gagfah, according to data compiled by Bloomberg.
Gagfah rose as much as 2 percent to 9.34 euros in Frankfurt trading. The shares have gained 131 percent in the past 12 months, making it the best performer on Germany’s MDAX index for medium-sized companies, which has risen 21 percent.
Gagfah’s Dresden homes, valued at about 1.8 billion euros in its third-quarter earnings report, account for about 25 percent of its holdings. Offers for the properties, which are part of Gagfah’s Dresden Woba unit, came in at about where they’re valued, according to the statement.
“Refinancing is the better alternative in spite of attractive bids for the Woba portfolio,” Charlton said.
Two people with knowledge of the matter said last month that Gagfah was on the verge of refinancing the loan, with most of the funding coming from Bank of America Corp. (BAC:US)
Deutsche Annington Immobilien AG, the German property company owned by Terra Firma Capital Partners Ltd., received court approval in December to restructure 3.8 billion euros of debt coming due in July. The commercial mortgage-backed security was valued at 5.8 billion euros when it was issued in 2006, making it Europe’s biggest corporate CMBS.
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