UPDATE 1-Germany's TLG sale biggest property deal this year
* Lone Star to pay 1.1 bln eur, including debt
* Lone Star buys TLG's commercial property
* TAG bought TLG's residential properties last month
* TLG's 1.6 bln eur sale price is 2012's biggest deal (Adds detail, background)
By Gernot Heller and Kathrin Jones
BERLIN, Dec 12 (Reuters) - The German government on Wednesday grabbed the top spot in the country's property deals this year by agreeing to sell a portfolio of commercial properties to investor Lone Star for 1.1 billion euros ($1.4 billion).
The sale completes the privatisation of state-owned real estate firm TLG Immobilien, after the government sold its residential properties to real estate group TAG Immobilien last month for nearly 500 million euros.
"From the government's point of view, the current market situation was perfect for the sale of TLG," Finance Minster Wolfgang Schaeuble said.
The size of the combined TLG sale eclipsed the previous record for the year, the 1.4 billion euro acquisition of 22,000 flats by a group led by Patrizia Immobilien from public-sector bank LBBW in February.
Around 800 million euros in proceeds from TLG will flow into government coffers next year. The remainder comprises debt taken on by the new owners, TAG and Lone Star.
"The proceeds are good from the taxpayer point of view," Schaeuble said, adding that Berlin was left with no financing risks.
The finance ministry said Lone Star wanted to continue the business and strategically develop its portfolio.
TLG Immobilien has properties primarily in or near eastern German cities like Berlin or Leipzig. It generated revenues of 237 million euros and an operating profit of 83 million last year.
It was one of many companies meant to be sold or restructured by the government after the collapse of communist East Germany.
Industry observers expect Lone Star to quickly clean up the portfolio by selling off many of the properties.
Lone Star already has a significant presence in Germany, with investments in financial houses IKB, DHB and Corealcredit.
Reuters reported in October that TAG and Lone Star were likely to beat other bidders in the TLG sale. ($1 = 0.7693 euros) (Writing by Madeline Chambers, Gareth Jones and Jonathan Gould; Editing by David Cowell)