Terra Firma’s Deutsche Annington Postpones $1.4 Billion IPODalia Fahmy and Ruth David
Deutsche Annington Immobilien SE, Germany’s largest residential landlord, postponed its 1.1 billion-euro ($1.4 billion) initial public offering, citing “persistent adverse market conditions.” It’s the largest European IPO to be pulled this year.
The company, controlled by Guy Hands’s Terra Firma Capital Partners Ltd., announced the delay in a statement after the market closed yesterday without giving a new date. The plan to sell shares for as much as 21 euros each failed because investor demand fell short, people with knowledge of the matter said.
Deutsche Annington “had the bad luck that it set its price range just before the global turbulence with interest rates started,” said Torsten Klingner, an analyst at Warburg Research in Hamburg.
Government bond yields soared from Germany to New Zealand after Federal Reserve Chairman Ben S. Bernanke on June 19 said U.S. policy makers may end bond purchases in mid-2014. That was the same day that Bochum-based Deutsche Annington announced its price range. The Bloomberg Emerging Markets and Europe Real Estate Index has lost more than 5 percent since Bernanke’s statement, partly on concern that fixed-income investors will no longer need to buy real estate to achieve stable returns.
Deutsche Annington would have been the second German property company to list its shares this year. LEG Immobilien AG, a competitor formerly owned by Goldman Sachs Group Inc., raised about 1.3 billion euros in stock sale in February that was the largest in Germany’s real estate industry. The shares have since dropped by more than 7 percent.
“This decision doesn’t impact Deutsche Annington’s strategy,” Chief Executive Officer Rolf Buch said in the statement. “We will focus on driving our operational performance including continuing our investment and modernization program as planned.”
The owner of 180,000 German apartments was prepared to price its shares at the low end of its targeted range because of weaker-than-expected demand, people familiar with the situation said yesterday. Banks managing the sale sent a message to investors yesterday saying there was demand for 80 percent of the share sale.
Deutsche Annington’s decision probably won’t affect two other property IPOs in Frankfurt slated for this year, according to Peter Papadakos, an analyst at Green Street Advisors in London. Cerberus Capital Management LP plans to sell shares in German retail properties in an IPO that may take place in the second half, two people with knowledge of the plan said in April. Austria’s Immofinanz AG plans to list its residential unit as early as November, board member Daniel Riedl said during the same month.
“I wouldn’t read too much into the lack of demand for Annington for the other IPOs,” Papadakos said. “It was a matter of price, rather than structural demand or structure. Annington may well come back at another time and, if the price is fair, it’s likely that it will float.”
In yesterday’s statement, Deutsche Annington said it will continue to evaluate the market regarding a potential IPO. The FTSE EPRA/Nareit index of German property stocks has dropped 8 percent this year, after climbing 33 percent in 2012. The benchmark DAX Index has gained about 2 percent this year.
HD Supply Holdings Inc. and CDW Corp., two U.S. companies backed by private-equity firms, had to price their IPOs below their original targets last month. Votorantim Cimentos SA, Brazil’s biggest cement producer, rescheduled a planned $3.7 billion IPO for September.
JPMorgan Chase & Co. and Morgan Stanley were leading the Deutsche Annington offering. Other banks on the deal included Bank of America Corp., Deutsche Bank AG, Societe Generale SA, Berenberg Bank, Commerzbank AG and Kempen & Co.