Fortress’s Gagfah Using $2.7 Billion CMBS to Cut Down Debt Pile

Gagfah SA, the German residential landlord that faced more than 3.4 billion euros ($4.5 billion) of debt repayments this year, said it’s issuing a 2 billion-euro commercial-mortgage backed security to pay most of its obligations.

The second-largest owner of German homes, priced the 5-year CMBS at an average interest rate of 2.76 percent, compared with 4.32 percent for the loan being refinanced, the Luxembourg-based company said in a statement today. The German Residential Funding loan had been set to expire in August.

“Refinancing at such attractive terms puts us in a great position and enables us to shift focus on our core business,” Gagfah Chief Executive Officer Thomas Zinnoecker said in the statement.

Gagfah, controlled by New York-based Fortress Investment Group LLC, has for the past year sought to refinance debt taken on during the credit boom that preceded the global financial crisis. The company abandoned a plan to sell a quarter of its apartments to pay a loan used to buy homes in Dresden after it was able to borrow 1.1 billion euros from Bank of America Corp. in February.

Bank of America in May sold bonds backed by that loan in the first public CMBS deal in Europe this year. Gagfah still has another 150 million euros of debt due in October.

Gagfah rose as much as 5.8 percent to 9.70 euros in Frankfurt trading, the most since March 22. The stock was trading at 9.60 euros as of 2:54 p.m.

Fortress owns 66 percent of Gagfah, according to data compiled by Bloomberg. Gagfah owns about 144,000 apartments in cities such as Dresden and Berlin. Deutsche Annington Immobilien AG, Germany’s biggest residential landlord, owns about 180,000 apartments.

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