UPDATE 1-Cerberus may list German real estate as REIT -sources

Thu Apr 4, 2013 10:43am EDT

* Cerberus may list property assets as early as H2 -sources

* May list as REIT or normal property company -sources

* To decide on how to list later in year -sources

* BofA Merrill Lynch, JP Morgan, G.Sachs to organise listing

* Cerberus, banks decline to comment

FRANKFURT, April 4 (Reuters) - Private equity group Cerberus is mulling listing its German retail property holdings as a real estate investment trust (REIT), in a move that could help it avoid paying corporate tax, two sources said.

Alternatively, the U.S.-based investor could list the buildings, which are valued at roughly 2 billion euros ($2.6 billion), as a normal real estate company, two people familiar with the transaction said on Thursday.

International investors are flocking to the German property market as yields on safe assets such as German bonds vanish and as property is considered the next low-risk asset class.

A decision will be taken later this year when the preparations for the initial public offering (IPO) are gaining pace, said the sources, adding the listing may take place as early as the second half of 2013.

Cerberus declined to comment.

As a REIT, the group could avoid paying corporate level taxes if it distributes at least 90 percent of its taxable income to shareholders in the form of dividend payments.

Germany has not seen REITs being launched since the listing of Prime Office REIT AG in 2011.

Until now, Cerberus' retail properties - comprising mainly Metro wholesale markets and Woolworth retail outlets - have not been grouped together but held in different areas of Cerberus' company structure.

Berlin-based Acrest Property Group, which is not owned by Cerberus, is managing the buildings, which have a combined rentable space of about 900,000 square metres.

Cerberus has hired Bank of America Merrill Lynch, JP Morgan and Goldman Sachs to organise the listing of the German retail properties, the sources said. The banks declined to comment.

German property has been showing a steady rise in value in the last couple of years, contrasting with the boom-and-bust of Spanish and Irish real estate markets.

In January residential property company LEG Immobilien listed on the German Stock Exchange while peer Deutsche Annington, owned by private equity firm Terra Firma , is set to become the next listing later in the second quarter, sources have said.

In the German real estate market, investors can expect yields of about 4.5 percent for the best housing and 6 percent in secondary locations.

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