The Düsseldorf-based residential property group LEG is making preparations for its planned IPO early next year, and has now mandated Goldman Sachs and Deutsche Bank as its principal lead managers. Assuming markets remain stable, the flotation is expected to go ahead in the first quarter, a quarter ahead of schedule, and may value the company at close to €5 billion.
LEG is itself owned by Goldman Sachs’ Whitehall Funds, which bought the former state-owned group in 2008 in a privatisation auction for €3.4bn, plus the assumption of debt. It owns and manages 90,000 housing units in North Rhine-Westphalia, Germany’s most populous state. The company’s balance sheet is just under €5bn, of which €2.1bn is equity and the remainder debt. The company is being comprehensively restructured, but has so far made no announcements about the refinancing of its debt burden – a factor which, like fellow IPO candidate for 2013 Deutsche Annington – is viewed by many analysts as a prerequisite for a public listing.
Whitehall is expected to float no more than a third of LEG in the initial phase, and to stagger its exit in a manner similar to that when, along with partner Cerberus, it exited profitably from Berlin housing group GSW Immobilien AG in two steps in 2010. Following flotation, LEG is aiming for an IRR of 6-7% annually and to join the ranks of the top five biggest German housing companies, it said.
Meanwhile, listed Austrian property investor Immofinanz AG said this month that it planned to spin off homes valued at as much as €4.5bn in an IPO now targeted for 2014. The group’s CEO Eduard Zehetner said in a recent media interview that Immofinanz would probably buy more German apartments in advance of a flotation to bulk up the group’s residential offering. “Our plan is to grow our German residential segment to a similar size as the Austrian segment (including housing group Buwog), combine the two elements, and then take the whole unit to market”, he said. The company owns homes valued at about €2.4bn in Austria and €127m of German assets. It has recently expressed strong interest in bidding for the GBW portfolio being sold by Munich Landesbank BayernLB, which is likely what Zehetner meant when he talked of buying fresh stock.
Given the sustained demand at the moment for German residential property, listed groups TAG Immobilien AG and Deutsche Wohnen AG are both tapping the markets for fresh capital in rights issues before the end of the year.