Terra Firma’s Deutsche Annington Said to Aim for Pre-July IPO

Deutsche Annington Immobilien AG, Germany’s largest residential landlord, has chosen banks to market its initial public offering with the aim of listing shares by the end of next month, three people with knowledge of the matter said.

The company, owned by Guy Hands’s Terra Firma Capital Partners Ltd., chose Commerzbank AG (CBK), Deutsche Bank AG (DBK), Kempen & Co. and Erste Group Bank AG (EBS) among its syndicate members, two of the people said. The precise timing of the share sale hasn’t yet been set, they said. All three people asked not to be identified because the information is private.

Terra Firma, which founded Deutsche Annington in 2001, is trying to take advantage of a German property stock rally that may be petering out. LEG Immobilien AG, a German competitor formerly owned by Goldman Sachs Group Inc., raised about 1.3 billion euros in a February share sale that was the largest in the country’s real estate industry.

Deutsche Annington, based in Bochum, owns 186,000 apartments in cities including Berlin and Cologne. The company chose JPMorgan Chase & Co. (JPM) and Morgan Stanley (MS) to manage its IPO, two people with knowledge of the decision said in February.

Spokesmen for Terra Firma and Deutsche Bank declined to comment. Deutsche Annington, Commerzbank or Kempen did not respond to requests for comment.

The FTSE EPRA/Nareit index of German property stocks gained 19 percent in the past 12 months. That includes a 1.5 percent decline since the beginning of the year.

LEG’s Decline

LEG has lost 4 percent of its share price since its IPO. Before that deal, Goldman’s Whitehall Street Real Estate fund owned about 95 percent of the company.

Annington owns more than twice as many apartments as LEG (LEG), though its share sale will probably be smaller because of higher debt, said Torsten Klingner, an analyst at Warburg Research. Annington’s apartments are valued at about 2.7 billion euros excluding debt, he estimated.

On March 5, Terra Firma founder Guy Hands said in an interview with Bloomberg Television the company may sell as much as 40 percent of the company in the IPO. Terra Firma will probably sell all of its stock within two years, Hands said in the interview. A 40 percent share sale would raise about 1.1 billion euros, Klingner said.

In December, Deutsche Annington completed the refinancing of about 3.8 billion euros of debt used to fund acquisitions. It was Europe’s largest commercial mortgage-backed security restructuring.

Under the terms of the agreement, 1 billion euros must be repaid this year and 700 million euros is due in 2014. Deutsche Annington has already raised 700 million euros toward the 2013 maturity. Deutsche Annington must also repay 1.4 billion euros of the debt before paying any dividends, a person with knowledge of the matter said in February.

To contact the reporters on this story: Dalia Fahmy in Berlin at dfahmy1@bloomberg.net; Ruth David in London at rdavid9@bloomberg.net

To contact the editors responsible for this story: Andrew Blackman at ablackman@bloomberg.net; Jacqueline Simmons at jackiem@bloomberg.net

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