* Deal's value is 218 mln eur excl net debt of 253 mln
* Says rights issue is for 5 new shares for 17 old ones
* Rights issue subscription price to be set on Dec. 5
* Shares down 1.3 percent
(Adds background, analyst comment)
FRANKFURT, Nov 19 TAG Immobilien won a
bid for the residential arm of state-owned real estate firm TLG,
paying 471 million euros including debt as part of a deal that
may be the German property sector's biggest this year.
The sale of the 11,350 flats, a legacy asset from former
East Germany following reunification, is the latest in a slew of
German real estate deals, as the German government taps a rising
market in its second attempt to divest the assets since 2008.
Germany is selling TLG in two separate portfolios, a
residential and a commercial arm.
The combined transaction will likely be the country's
largest real estate deal this year, surpassing the 1.4 billion
euro ($1.78 billion) acquisition of 22,000 flats that a group
led by Patrizia Immobilien bought from public-sector
bank LBBW in February.
While TAG was widely expected to win the bid for the flats
due to certain tenant rights it committed to, private equity
investor Lone Star is seen as the favourite to buy the
commercial part, which will likely be agreed by year-end,
according to two sources.
"Talks are on a good path," said one financial source.
Separately, the German finance ministry said the sale of the
commercial properties was in its final phase and expected to be
completed in the coming weeks.
International investors are vying for property in Germany,
which has avoided the boom-and-bust prices of Spain or Ireland
and instead seen stable increases in property values in the past
couple of years.
TAG said on Monday it would issue up to 30 million new
shares as part of a rights issue to refinance the equity
purchase price of 218 million euros and for the financing of
additional smaller acquisitions.
The net debt portion of the acquisition price was worth 253
million euros, TAG said.
Based on Friday's closing price of 8.39 euros, the newly
issued shares would be worth around 250 million euros.
It said the rights issue would have a subscription ratio of
five new shares for every 17 old shares, with the price to be
determined on Dec. 3.
As of 1417 GMT, TAG shares were down 1.3 percent at 8.39
euros while the mid-cap index was up 1.4 percent.
Apart from the dilutive effect a capital increase tends to
have on earnings per share, there was some scepticism about the
pace of asset purchases at TAG, which more than doubled rental
income last year. The latest deal brings the number of flats it
owns to 69,000.
DZ Bank analyst Ulrich Greis said in a note to investors
that TAG CEO Rolf Elgeti would "finally" have to prove he can
generate synergies from the scale the company has gained
($1 = 0.7871 euros)
(Reporting by Ludwig Burger, Christoph Steitz and Marilyn
Gerlach; Editing by Helen Massy-Beresford)