Gagfah to sell Berlin portfolio for EUR 330m

German listed housing group Gagfah has signed an exclusive agreement to sell a residential real estate portfolio of about 4,800 apartments in Berlin to with GSW Immobilien.

The investment volume comes to EUR 330 mln.

The transaction is structured as a share deal so that the buyer does not have to pay stamp duty.

The sale will generate cash of EUR 65 mln after the repayment of debt attached to the portfolio, Gagfah said in a statement. The parties expect to sign a binding agreement shortly, with closing forecast to take place before the end of the year.

With a portfolio of 155,000 apartments, Gagfah is the largest listed residential property company in Germany. Berlin accounts for 13% of Gagfah's portfolio - the largest exposure after Dresden. The total portfolio in the German capital is valued at EUR 1.2 bn and encompasses 21,845 units, with a vacancy rates of 2.5%, therefore significantly below the portfolio average of 5.3%.

'Given the current discount to Net Asset Value (NAV) of the Gagfah share price, the disposal of assets makes sense in principle and the proceeds should be returned to shareholders or reinvested in higher-yielding opportunities,' said analyst Kai Klose of Berenberg Bank in a note to clients.

According to Klose, Gagfah should use proceeds from the operation to help extend or restructure the EUR 3.2 bn of CMBS bonds due in August 2013.

'The fact that Gagfah is trading at the highest discount to NAV among the German residential peers is primarily due to the company's unfavourable debt structure and the large amount of debt due in less than 24 months,' Klose said.

GSW is funding the purchase with the EUR 115 mln of the proceeds raised through an IPO in April. The company is controlled by Cerberus and Whitehall, which own a combined 40% of the shares.