Shareholders happy as Fortress exits Gagfah for last €740m

It’s been all good news for residential housing group Gagfah shareholders in recent years, who are sitting on a six-bagger since the dark days of early 2009. Things were given a fillip last year with the arrival of CEO Thomas Zinnöcker from Berlin housing company GSW Immobilien, and the group’s successful moves to restructure its financing has also been well received. However, the recent complete departure of US private equity investor Fortress from the shareholder roster seems to have caused the most cheer, as uncertainty about future large sales is now removed.

Earlier this month Fortress sold off its remaining 27.6% stake in the Essen-based listed company Gagfah for €740m in a share placing to a wide range of investors handled by Deutsche Bank. The 60m shares were placed at €12.34 each (the current share price is about €13.15), giving Gagfah a €2.8bn market cap, with all shares now in free float.

The placing is the largest ever block deal in the German real estate sector, and the fourth-largest real estate equity capital markets transaction in German history, with only the Deutsche Wohnen/GSW merger and the Gagfah and LEG IPOs being larger.

Fortress bought the firm in 2004 for €3.5bn from German state pension fund BfA (Bundesversicherungsanstalt für Angestellte, now known as Deutsche Rentenversicherung Bund). After a number of acquisitions Gagfah listed on the stock market in 2006. After turbulent years including class action lawsuits and a generous dividend policy largely favouring its majority shareholder Fortress, the group shifted its strategy to get a grip on its financing and overcome the negative image partly caused by underinvestment in capex on its housing stock. Gagfah has 145,000 apartments across Germany.

Fortress started its exit last year, and over the past twelve months has placed shares worth €1.4bn. It sold off a 10% package at €8.85 in July 2013 and another 7% for €10.15 last December. According to a Gagfah spokesman, Fortress’s exit is “the last logical step after a long engagement. Gagfah is now standing on its own two feet with a clear strategy based on the housing economy.”