Goldman to Raise Up to $1.9 Billion in German Property IPO

LEG Immobilien AG, the apartment landlord owned by Goldman Sachs Group Inc., plans to raise as much as 1.4 billion euros ($1.9 billion) in an initial public offering poised to be the largest by a German property company.

LEG will sell as many as 30.5 million shares for 41 euros to 47 euros each, the Dusseldorf-based company said in a statement today. That’s 57.5 percent of LEG’s shares. The stock will begin trading in Frankfurt on Feb. 1.

Goldman Sachs, which bought the company for about 3.5 billion euros including debt in 2008, is seeking to profit from a boom in German residential real estate. The FTSE EPRA/Nareit index of German property stocks has gained 38 percent in the past 12 months.

“An investment in LEG shares offers the opportunity to invest in a large pure-play residential property company with high growth,” LEG Chief Executive Officer Thomas Hegel said in the statement. “In order to achieve future growth, we constantly screen the market for potential acquisitions.”

LEG owns 91,000 apartments in North Rhine-Westphalia, Germany’s most populous state. Goldman Sachs’ Whitehall Street Real Estate fund holds about 95 percent of the company. Perry Capital owns the rest.

The offer period for the IPO will run from Jan. 21 to Jan. 31. Goldman Sachs and Deutsche Bank AG will be lead managers.

Guy Hands

Deutsche Annington Immobilien AG, Germany’s largest owner of apartments, also plans an IPO this year. Annington, controlled by Guy Hands’ Terra Firma Capital Partners Ltd., has about 186,000 homes.

After the share sale, LEG will be Germany’s second-largest publicly traded residential landlord by properties with 91,000 apartments. The biggest is Gagfah SA, controlled by Fortress Investment Group LLC, which has about 145,000 apartments.

LEG’s profit from its main business of renting apartments was 243 million euros in 2011 and its funds from operations were 111.8 million euros, according to its last annual report. FFO measures a property company’s ability to generate cash.

By comparison, Gagfah generated a rental profit of 419.6 million euros in 2011 and its FFO was 159.5 million euros, according to its annual report.

Active Investor

Goldman Sachs is one of the most active foreign investors in the German real estate market. In April 2011, Whitehall Street and Cerberus Capital Management LP raised 468 million euros in an IPO of Berlin-based residential landlord GSW Immobilien AG.

Whitehall Street also made an unsuccessful bid to buy Baubecon, the residential property portfolio that Barclays Plc agreed to sell to Deutsche Wohnen AG in May in a deal valued at 1.24 billion euros. Whitehall Street agreed to sell its stake in 17 German department stores, including Kaufhaus des Westens, the country’s largest, in December.

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