TAG wins TLG resi portfolio with EUR 471m bid

German listed property group TAG Immobilien has emerged as the winner for the TLG Wohnen residential portfolio being privatised by the German state.

TAG said on Monday that the government has accepted its EUR 471 mln bid to acquire TLG Wohnen, the owner of 11,350 residential units with a total floor area of nearly 700,000 m². The purchase price includes the roll-over of TLG's liabilities of EUR 256 mln. The acquisition will be partly financed with the issue of 30 million new shares. The EUR 218 mln capital increase will be managed by a bank syndicate, consisting of Barclays and Credit Suisse in the role of the joint global coordinators and joint bookrunners.

TAG has received a bridge financing commitment in the amount of the equity purchase price from those two banks. Close Brothers Seydler Bank, Kempen & Co and UniCredit Bank are acting as co-lead-managers.

The portfolio, which almost entirely comprises residential units, has a geographic focus on the regions of Berlin, Dresden and Rostock. The package generates EUR 42.2 mln of annual rental income and has a vacancy rate of 4.7%.

Upon completion of the acquisition of TLG Wohnen, which is expected in the coming weeks, TAG will have a residential portfolio of 69,000 units with a total floor area of 4,1 million m² and a value of over EUR 3.6 bn. The operating business of TLG Wohnen will be integrated into TAG's existing operating platform.

The deal will 'significantly' increase TAG's Funds from Operations (FFO), the company noted, as a result of synergies in the amount of a low single digit EUR-million amount per annum, which TAG expects to realise within the next six months. Key drivers for the expected accretion are a significant geographic overlap of the acquired properties with TAG's existing portfolio as well as TLG Wohnen's lack of a centralised management structure.

'We are excited about this very attractive acquisition which is an excellent strategic fit for us,' said Rolf Elgeti, CEO of TAG Immobilien. 'The transaction will significantly increase TAG's FFO and further improves our strong cash flow profile.' Credit Suisse has advised TAG on the transaction as financial advisor.