Gagfah SA, Germany’s second-largest property company by market value, is seeking bids for its 38,000 apartments in Dresden to help pay debt due next year.
The residential landlord controlled by Fortress Investment Group LLC aims to sell the homes for at least their book value of 1.8 billion euros ($2.2 billion), Gagfah spokesman Rene Hoffmann said by phone today.
Gagfah acquired the homes in 2006 and they now account for about 25 percent of its portfolio. Deutsche Wohnen AG, Germany’s largest publicly traded residential landlord, may be interested in buying the properties if it can raise financing at the right terms, Deutsche Wohnen Chief Executive Officer Michael Zahn said on a conference call today about the company’s earnings.
“Dresden is certainly one of the most interesting cities in Germany,” Zahn said. “The portfolio has a decent size so that you’d have a significant local position.”
Gagfah was little changed at 8.49 euros at the 5:30 p.m. close in Frankfurt, giving the company a market value of 1.88 billion euros. The stock has more than doubled this year, making it the best performer on the 50-member MDAX Index for medium-sized companies, which has gained about 23 percent. Deutsche Wohnen climbed 14 cents, or 1 percent, to 13.97 euros.
Fortress, based in New York, is among the private-equity firms facing debt deadlines after buying German properties with the cheap credit available in the years before the global financial crisis started in 2008. Gagfah borrowed 1 billion euros to buy the Dresden Woba properties and the loan is due for repayment in May 2013. The company has a further 2.1 billion euros to repay in August 2013, according to Hoffman.
Fortress owns 61 percent of Gagfah, which is based in Luxembourg.
Gagfah Chief Executive Officer Stephen Charlton said in May that the company is considering a refinancing or a sale of the Dresden assets.
Finding a buyer is “Plan A,” Hoffmann said by e-mail today. “If a sale should not materialize, then Gagfah is confident that it will be able to refinance the portfolio.”
Deutsche Wohnen owns 73,000 apartments in cities including Berlin and Frankfurt, after agreeing in May to buy Barclays Plc’s Baubecon portfolio of 23,500 homes in a deal valued at 1.24 billion euros.