TAG Immobilien buys 4,000 units, boosts bond issue

Listed German residential investor TAG Immobilien boosted its holdings to over 74,000 units earlier this month when it paid €120.5m to buy 3,985 residential and 26 commercial units in an asset deal.

The properties are located throughout eastern Germany, with a heavy concentration in the state of Thuringia, where about 3,000 of the units are close to the A4 autobahn and in the university towns of Weimar, Erfurt and Jena. The remaining units are mainly in Saxony and Saxony-Anhalt

The rentable area is about 236,000 sqm, generating a current rent roll of around €12.4 million per annum. The portfolio includes around 440 units that are targeted for resale in the medium term. With a vacancy rate of 10.7 % and because it was purchased from a complex ownership structure, TAG said the portfolio has “interesting potential for future development”.

TAG CEO Rolf Elgeti comments on the acquisition: “Like the acquisition of just under 3,000 units we announced in December 2013, this portfolio can be managed entirely using TAG's existing team. We expect the deal to close by mid-year 2014. The regional breakdown fits very nicely with our administrative structure, and the portfolio represents a very interesting extension of our existing inventory.” TAG’s portfolio is focused geographically on greater Hamburg, Berlin, North Rhine-Westphalia, the Salzgitter region, Thuringia, Saxon and Munich.

Separately, TAG’s board said this month that it had increased the corporate bond issued in August 2013 by another €110 million through a private placement. The original volume of the bond, which matures in August 2018 and pays a coupon of 5.125% annually, was €200 million. The bond is traded in the Open Market, the Entry Standard of the Frankfurt Stock Exchange, with participation in the Prime Standard for corporate bonds.

The bond increase was issued at 103% of par value, which is about the current price of the bond. The issue was handled by Close Brothers Seydler Bank, as sole bookrunner for the placement.

TAG said that the proceeds from the bond increase will primarily be used to “further optimise the Company's capital and financing structure, and in particular to pay down higher interest-bearing bank loans without incurring prepayment penalties.” TAG said it expects to save interest of more than €1m annually, starting from this year’s second quarter.