The Federal Republic of Germany accepted the bid of TAG Immobilien AG to acquire TLG WOHNEN GmbH. Thus, TAG succeeded in the bidding process initiated by the German Ministry of Finance for the privatisation of the TLG companies, which are successor entities of the German 'Treuhand' Trust Agency. The purchase price for the acquisition is €471 million and includes the roll-over of liabilities of TLG Wohnen in the amount of c. €256 million.
TLG Wohnen comprises approximately 11,350 residential units with a total floor area of approximately 697,000 m². The annual rental income amounts to approximately €42.4 million. The portfolio, which is almost entirely consisting of residential units, has a geographic focus on the regions of Berlin, Dresden and Rostock. The vacancy level is 4.7%. The transaction documentation agreed with the Federal Republic of Germany includes comprehensive provisions to protect the interests of the residential tenants.
Upon completion of the acquisition of TLG Wohnen, which is expected in the coming weeks, TAG will have a residential portfolio of approx. 69,000 units with a total floor area of 4,166,052 m². Total assets will exceed €3.6 billion and the total annual net cold rent of the TAG group will be approximately €254 million.
The operating business of TLG Wohnen will be integrated into TAG's existing operating platform. The staff of TLG Wohnen will further strengthen the know-how of the local teams, thereby improving TAG's business expertise in East Germany.
The Management Board expects a significant increase of TAG's "Funds from Operations" (FFO), which is a key performance metric in the real estate industry. The improvement includes synergies in the amount of a low single digit -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 the existing portfolio of TAG as well as the fact that TLG Wohnen will be purchased without a centralised management structure.
Today, the management board of TAG, with the approval of the supervisory board, resolved on a capital increase against cash contributions of up to 30 million New Shares, in order to refinance the equity purchase price in the amount of approximately €218 million and for financing of additional smaller acquisitions that complement the existing portfolio and in which TAG is already in advanced negotiations.
The resolution is based on the Authorised Capital resolved at the Annual General Meeting of shareholders on 14 June 2012 and includes subscription rights for existing shareholders. The subscription ratio will be 17 : 5. The offer price, which will correspond to the subscription price, is expected to be determined on December 3 based on a bookbuilding procedure, whereby the New Shares will be offered to selected domestic and international investors subject to clawback, i.e. a pro rata reduction to the extent subscription rights were exercised in the Subscription Offer.
The registered share capital of currently €100.7 million will be increased to up to €130.7 million. The New Shares are to be admitted to trading immediately after registration of the capital increase with the Commercial Register, which is expected in December 2012 and shall have full dividend rights from January 1, 2012. The members of TAG's management board intend to fully exercise the subscription rights attributable to their privately held TAG shares. The capital increase is conditional upon approval of the prospectus by the German Federal Financial Supervisory Authority ('BaFin'), which is expected for November 22, 2012.
The 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