Germany Said to Be Close to Selling Properties to Lone Star

The German government is close to selling its TLG Immobilien GmbH real estate unit to Lone Star Funds, three people with knowledge of the plan said. It would be the country’s biggest commercial-property transaction this year.

The German Finance Ministry, which is divesting real estate to reduce the budget deficit, may approve the sale as early as next week, said the people, who asked not to be identified because an agreement hasn’t been reached. TLG Immobilien, owner of shops, offices and land in cities including Berlin and Leipzig, will fetch about 1.2 billion euros ($1.6 billion), one of the people said.

The government is trying to take advantage of demand for German real estate as investors look for a safe place to put their money as economies contract in other countries that use the euro. Last month, it agreed to sell the residential arm of TLG Group, the real-estate management company that includes TLG Immobilien, to TAG Immobilien AG for 215 million euros.

Pavao Vlajcic, a spokesman for Dallas-based Lone Star, declined to comment when asked about a possible deal. The Finance Ministry and Barclays Plc, which is advising the government, also declined to comment.

Loan Deal

Lone Star, a private-equity firm, agreed to buy property loans formerly held by the German arm of now defunct Lehman Brothers Holdings Inc. from the Bundesbank in April. Those loans had a nominal value of 1.4 billion euros, the German central bank said.

TLG Group replaced Treuhand Gesellschaft, the company that oversaw the sale and restructuring of thousands of companies after the collapse of communist East Germany. The government shelved a plan to sell TLG in 2008 because of the global financial crisis.

TLG Immobilien has about 200 employees and manages buildings ranging from a Porsche showroom in Dresden to a factory in Chemnitz.

The German government targets a deficit of 17.5 billion euros in 2013 compared with 25 billion euros this year.

Before it's here, it's on the Bloomberg Terminal. LEARN MORE