Allan Saunderson is managing editor of Property Finance Europe and a contributor to

DOUGLAS, ISLE OF MAN-The AIM-listed Deutsche Land, which has a portfolio of some €560 million in office, retail and hotels in Germany, is to make a placing and subscription of ordinary shares that will, subject to approval of shareholders and the UK Takeover Commission, bring in the Romanian company Black Sea Global Properties as majority shareholder with 54% of its equity.

Deutsche Land CEO David Maxwell told PFE that the investment, if it goes through in full, will cut loan to value on the portfolio to around 75% from the current 87%. “Even if all each financing is ring-fenced I feel that it is best if you are managing real estate assets in the current climate to have a bit more money around you,” he said. Maxwell, who co-founded the company with the late Klaus Fassbender, will remain CEO even after BSGP takes control.

Separately BSGP also announced a cash offer to acquire 100% of Rutley European Property. The offer is pitched at 6 pence in cash per Rutley preference share, valuing the existing issued equity at £12.6m and Rutley at an enterprise value of £447 million including net debt of £434m as at end-December. The offer represents a premium of 107% to the closing price of 2.9p per Rutley share on 27 March, before the announcement of an approach. In January, AIM-listed Romanian property group Fabian Romania backed a takeover offer worth €50.8 million from BSGP, which built a 25.2% stake last November.

Deutsche Land, registered in the Isle of Man, will issue 119 million new shares at 12 pence each to raise around €16.4 million. Of these just under 30% will be subscribed to by BSGP, a wholly-owned subsidiary of Rompetrol Holding, a company investing in a range of asset classes including direct private equity investments and real estate. RPH is wholly owned by Dan (Dinu) Costache Patriciu, a leading Romanian businessman, and also the CEO of Netherlands-based Rompetrol Group which he founded and developed into the second largest oil company in Romania. Existing shareholders have subscribed for 24.3 million shares, including Deutsche Land CEO David Maxwell, and Chairman Stephen Dickinson, who have subscribed for one million and 337,022 shares respectively. The proceeds of the placement will be used, together with existing cash resources, to fund the existing capital expenditure program, provide working capital and strengthen the financial position of the group.

Deutsche Land will also issue a further 167.5 million shares to BSGP at 12 pence each, thereby increasing BSGP’s holding to 54.1%. The deal is subject to the receipt of a waiver from the UK Takeover Panel of the obligations that would otherwise arise on BSGP to make a general offer, and the approval of the waiver by independent shareholders. SP Angel Corporate Finance was appointed as placing agent. BSGP will nominate one member to the board of directors – Obie Moore, CEO of RPH and director of BSGP. Taube Hodson Stonex Partners, will following the placement, hold the same 16.3% of Deutsche Land voting rights.

Deutsche Land also announced pre-tax profit after IFRS fair value adjustments and goodwill impairment of €3.0 million compared with a loss of €2.7 million for the 11 months to 31 December 2007. Net asset value at the end of last year was 54.8 pence, a reduction of 19% in the 12 months. However, the IFRS net loss ballooned to €69.0 million from a €12.2 million loss in the last 11 2007 months. The per share loss was €34.7, much wider than 2007 loss of €6.3.

PFE COMMENT: This and the Jelmoli takeover in Switzerland are strong indications that the consolidation wave in European listed real estate has started. Dinu Patriciu is a self-madebnaire, with strong interest in real estate, who looks to be building a larger group here. Many smaller firms, like DL and Rutley, are running up against cash-flow difficulties that threaten their existence now but may, in fact, be relatively short-lived. And even if direct real estate values decline further, under pressure from occupiers, they are highly unlikely to fall to match listed property trading discounts – with the result that buying property on the stock market presents a strong and very rare bargain. More will come.

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