EUROPE NEWS: Public face of success

On a Wednesday evening last month, Goldman Sachs’ Real Estate Principal Investment Area (REPIA) and Cerberus Capital Management could afford themselves a little pat on the back. Following a 180-day lock-up period since the April initial public offering of their German residential property company, GSW Immobilien, the pair sold another 8.2 million shares of the company – or 20 percent – on top of the 60 percent they already had floated in the IPO. The October 12 offering added another €166 million to the €468 million that the two investors made through the IPO.

The offering also means that Goldman Sachs and Cerberus are now fully enjoying the fruits of their labour, which began in 2004 when they bought GSW for €405 million from the Government of Berlin. The company currently owns more than 49,000 flats and a property portfolio worth around €2.6 billion.

Since the IPO, GSW has been performing well against the EPRA Europe index, which measures the share prices of the largest European public property companies, and Gagfah, the nearest comparable property company to GSW, which is owned by Fortress Investment Group. While shares in GSW have edged up from their initial trading price of €19.50 on 15 April, both the EPRA Europe Index and Gagfah are below where they were on that date. Indeed, in the case of Gagfah, there has been a contrasting tale of difficulties this year.

Bafin, the German financial regulator, is investigating Gagfah after it chief executive officer, William Brennan, sold €4.7 million in shares in February, a few weeks before the City of Dresden announced a €1 billion lawsuit against the company over an alleged breach of contract related to the €1.7bn privatisation of its housing company WOBA in 2006. In turn, WOBA Dresden filed a counterclaim for €800 million against the City of Dresden and finance mayor, Hartmut Vorjohann.

To add to the tale, in September, Gagfah agreed to sell to some 4,800 apartments valued at around €330 million to none other than GSW. While there may be challenges at Gagfah, GSW and its investors – Goldman and Cerberus among them – are enjoying public life so far.