Deutsche Annington Said to Consider $1.3 Billion CMBS

Deutsche Annington Immobilien AG, Germany’s largest residential landlord, is considering issuing a commercial mortgage-backed security to help pay off debt before an initial public offering, two people with knowledge of the matter said.

Deutsche Annington, owned by Guy Hands’ Terra Firma Capital Partners Ltd., may raise as much as 1 billion euros ($1.3 billion) by selling the CMBS, one of the people said. The Bochum-based company is also weighing other financing options such as mortgages and syndicated loans, the person said. Both asked not to be identified because no decision has been made.

The real estate company plans to use the funds to repay debt maturing this year and next to bolster its balance sheet ahead of an IPO that will probably take place in the fourth quarter, the person said.

A spokesman for Deutsche Annington declined to comment and a Terra Firma spokesman didn’t immediately return calls seeking comment.

In December, Deutsche Annington restructured about 3.8 billion euros of debt in the largest deal of its kind in Europe. The company said in July that a restructuring would allow it to sell shares to the public for the first time.

Property Boom

Under the terms of the restructuring 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, one of the people said.

Terra Firma, which created Deutsche Annington in 2001 after buying 65,000 homes, is planning the IPO to profit from a residential property boom in Europe’s largest economy. The FTSE EPRA/Nareit index of German property stocks gained 31 percent in the past 12 months.

Deutsche Annington has 186,000 apartments in cities including Berlin and Cologne, making it the biggest owner of German homes. Gagfah SA, with 145,000 homes, is the second biggest.