German state sells in Germany to Whitehall Funds for EUR 3.4b

Germany's largest state, North Rhine-Westphalia, has sold its residential property company Landesentwicklungsgesellschaft NRW (LEG) to Goldman Sachs' Whitehall Funds for about EUR 3.4bn, marking Germany's largest deal since the credit crunch erupted last summer.

The transaction, which includes debt, includes 93,000 apartments in cities such as Bonn and Cologne. The sale is part of North Rhine-Westphalia's strategy of balancing its budget by raising money from asset sales, including property. Other bidders are believed to have included U.K. private equity firmTerra Firma Capital Partners according to those who track the market.

Germany's residential market is considered attractive because it still offers good value for money compared to many other Western European markets. In a further sign that investor interest in the sector is growing, Corestate Capital, a Zurich-based real estate management firm, raised EUR 486mln last month for its real estate private equity fund, Corestate German Residential Limited. The fund attracted interest from large institutional investors such as ING Real Estate Select in the Netherlands and U.K.-based Morley Asset Management

Goldman Sachs - and its Whitehall Funds - have been big buyers of German property since the market rebounded in 2006. In 2006, Goldman Sachs and Arcandor, the retail and tourism group formerly known as KarstadtQuelle, set up a company to buy many of the German retailer's department stores. At the time, the deal was valued at around EUR 4.5bn. Last year, the Whitehall Funds acquired 37 properties from German fund manager Degi's Grundwert-Fonds fund for EUR 2.45bn.