Goldman Sachs takes LEG public, raises €1.3bn

Goldman Sachs appeared to have set a record today by taking LEG Immobilien public, instantly making it Germany’s largest listed property company.

Goldman, which owns the vast majority of LEG via its Whitehall funds series, and minority owner Perry Capital, have floated a reported 57.5 percent of the company on the Frankfurt stock exchange with trading beginning today at €44 per share.

According to various reports including by Reuters and Bloomberg, the IPO has raised €1.3 billion for the owners, valuing the company at around €2.33 billion. At that level, the company’s market capitalization is fractionally higher than Deutsche Wohnen at €2.3 billion.

It is the relative strength of the public German property companies which appears to be encouraging owners to consider IPOs. Goldman and partner Cerberus Capital Management began the trend by floating a partial stake in GSW Immobilien in April 2011.

Shares in the company have risen almost 40 percent in the past year giving it a market worth of €1.58 billion.
Momentum appears to be building for others to follow suit. This week there have been reports of Cerberus considering floating its German retail property assets.

London-based private equity firm, Terra Firma, is also said to be preparing for an IPO of Deutsche Annington Immobilien this year.

Separately, Gagfah, which is majority owned by Fortress Investment Group and has a market cap of €1.88 billion, has seen its shares rise to a four year high upon speculation that it may receive a takeover approach from Deutsche Wohnen. However, a spokesman for Deutsche Wohnen poured cold water on that claim by saying: “These are rumors arising due to our strength, but there’s nothing to them.”

Goldman Sachs acquired a majority interest in LEG from the German state of Nordrhein-Westfalen (North Rhine-Westphalia) in 2008. According to PERE at the time of the original investment, Goldman agreed to pay €787 million ($1.2 billion) in equity and assume €2.6 billion of debt in the company LEG at an enterprise value of €3.4 billion.

The IPO is part of a ‘harvesting’ programme of assets in Europe by Goldman Sachs as it looks to return capital to investors. Just before Christmas, it was revealed how Highstreet Holdings, in which the Wall Street bank has a 51 percent stake, had agreed to sell a 17-strong portfolio of German assets for €1.1 billion to Austria’s Signa Holding. It has also recently sold a portfolio of hotels in Paris for around €450 million. The investments are spread across different REPIA funds including Whitehall funds with 2005, 2007 and 2008 vintages while Goldman Sachs also has a separate fund for LEG.

LEG owns housing in the economically strong region of North Rhine-Westphalia and made pre-tax profits of €210.6 million last year. In a statement, the company said the “successful transition from a state-owned public housing supplier and urban and project developer to a private housing company serves as the basis for profitable future growth”.

Thomas Hegel, chief executive officer, added: “The LEG management and employees have done a great job during the past few years and successfully paved the way for LEG’s transition from a state-owned public housing supplier and urban and project developer to a private housing company. In doing so, we have shown that we have the ability and capacity to satisfy both tenants and investors. It is on this basis, that we aim to grow profitably in the coming years.”