(Bloomberg) -- H.I.G. Capital is injecting €50 million ($55 million) into Berlin-based property developer Ziegert, according to people familiar with the matter, one of the first such deals in the sector since a slump caused by a sharp rise in construction costs and drop in demand.
Germany’s property market is reeling from the end of the cheap-money era that pushed a slew of developers into insolvency or debt restructuring. While some investors have picked up property assets out of bankruptcy, there have been few investments into healthy firms in the sector.
The Ziegert deal is a sign that H.I.G. sees certain segments of the German residential market as being at an inflection point and are offering attractive investment opportunities, one of the people said. The deal will enable Ziegert to make use of current price distortions and seize opportunities that would otherwise be difficult to realize, another person said.
H.I.G. and Ziegert declined to comment.
H.I.G. is supplying a structured financing to Ziegert that will allow the private equity firm to convert the debt into an equity holding of more than 25% under certain circumstances, the people said, adding that the deal could be announced as early as this week.
Ziegert, owned by its founder and management, has roughly €500 million in bank debt. It manages assets worth about €500 million and has a property development pipeline of more than €1 billion.
H.I.G. has done a similar deal recently. In August, it participated in a €53 million capital increase in Berlin-headquartered The Grounds Real Estate Development AG.
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