Patrizia-Led Group to Buy LBBW Property Unit: Frankfurt Mover

Patrizia Group to Buy LBBW’s Real Estate Unit $1.8 Billion
LBBW is selling its real estate unit after a 5 billion-euro bailout by the company’s owners, which include the state of Baden-Wuerttemberg and regional savings banks, during the financial crisis. Photographer: Hannelore Foerster/Bloomberg

A group led by Patrizia Immobilien AG agreed to buy Landesbank Baden-Wuerttemberg’s real estate unit for 1.44 billion euros ($1.89 billion) in Germany’s biggest property deal since 2008. Patrizia shares climbed 1.8 percent.

The acquisition of LBBW Immobilien GmbH, which owns 21,000 apartments in Germany, will be completed by the end of March, LBBW and Patrizia said in separate statements yesterday. Patrizia is acting as investment and asset manager for a group of insurance companies and pension funds including Sweden’s AP3 fund. Patrizia rose 7 cents to 4.01 euros a share at the close of Frankfurt trading today, the highest since Oct. 28.

Selling the unit by the end of this year was a European Union condition for approving LBBW’s 5 billion-euro bailout by the state of Baden-Wuerttemberg and regional savings banks during the financial crisis. Other German banks are also selling real-estate units and assets as they seek to raise capital and exit less-profitable businesses.

“It’s good for Patrizia,” said Frank Neumann, an analyst with Bankhaus Lampe KG in Dusseldorf who recommends investors buy the stock. “Patrizia can generate fees while keeping their business model stable and not committing too much capital.”

The deal is the largest involving a German real estate company since IVG Immobilien AG agreed to sell 70 underground oil and gas storage caverns to a fund backed by institutional investors for 1.7 billion euros in September 2008, according to data compiled by Bloomberg. That excludes the acquisition of mortgage bank Hypo Real Estate Holding AG by the German state in 2009.

Patrizia Investment

Patrizia said it will probably invest as much as 15 million euros of equity and provide management and property services to the buyers and LBBW Immobilien after the transaction is complete. Patrizia will also invest 25 million euros a year in service and maintenance, Chief Executive Officer Wolfgang Egger said in the statement.

The investors are LVM Versicherung and four other German insurance companies with 40 percent of the company, AP3 and a Swiss pension fund with about 30 percent, three German pension funds with about 25 percent, a Baden-Wuerttemberg savings bank with 3 percent and Patrizia with 2 percent, LBBW said.

The apartments are mainly located in the southern German state of Baden-Wuerttemberg, LBBW said.

“Baden-Wuerttemberg is an attractive real-estate region with growth prospects and there was also interest in the assets from outside Germany,” said Neumann.

Executives at Austria’s Conwert Immobilien Invest SE and Immofinanz AG have said they had considered buying the business.

The transaction is subject to the LBBW subsidiaries selling the business formally accepting the offer and its completion has to be approved by the Federal Cartel Office, Patrizia said.

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