October 23, 2012 / 3:55 PM / 5 years ago

TAG, Lone Star set to buy TLG real estate -sources

FRANKFURT, Oct 23 (Reuters) - German real estate group TAG Immobilien and private equity investor Lone Star are likely to buy a portfolio of properties that the German government is selling, two people familiar with the matter said.

TAG looks set to pay around 500 million euros ($653 million) to acquire the 12,000 flats of state-owned TLG Immobilien, while Lone Star is likely to scoop up 300 commercial properties for slightly over 1 billion euros, they added.

The two groups outbid trade rivals like KWG Kommunale Wohnen and investors like Blackstone and Cerberus .

The transaction will likely be the country’s largest real estate deal this year, surpassing the 1.4 billion euro acquisition of 22,000 flats that a group led by Patrizia Immobilien bought from public-sector bank LBBW in February.

International investors are vying for property in Germany, which has avoided the boom-and-bust prices of Spain or Ireland and which has seen stable increases in property values in the last couple of years.

The flats the German government is putting up for sale are all located in eastern Germany, have stable rental income and a low vacancy rate of only 3 percent.

TLG, TAG, Lone Star and Barclays, which is managing the sale, declined to comment.

A spokeswoman for Germany’s Finance Ministry said that talks were ongoing and that the ultimate buyer and price were still open.

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