May 22, 2019 / 3:10 PM / 3 months ago

UPDATE 1-German property developer Isaria prepares for sale or IPO -sources

(Adds details, background)

By Arno Schuetze

FRANKFURT, May 22 (Reuters) - Buyout group Lone Star is preparing German residential property developer Isaria for a potential sale or stock market listing in the autumn, hoping to benefit from buoyant real estate valuations, people close to the matter said.

The investor, which is working with VictoriaPartners as its adviser, is aiming for a valuation of roughly 500 million euros ($558 million) for the company which it bought in a 2016 deal at a valuation of 107 million euros, and which it shortly thereafter propped up with a 53 million euro cap hike.

Lone Star, Isaria and VictoriaPartners declined to comment.

Other German real estate groups are also trying to capitalise on the country's strong property valuations.

Garbe Industrial Real Estate, for example, is preparing for a float in Frankfurt in the autumn, people close to the matter said.

Residential property group Domicil said in April that it is planning an IPO and property developer Gateway launched a share sale in March.

Isaria, which is led by CEO Peter Finkbeiner, last year reported earnings before interest, tax, depreciation and amortisation of 39 million euros on sales of 142 million. The company is targeting sales of 700-800 million euros within the next five years, with the help of acquisitions, it said in its annual report.

The expected combined sales price of its property development pipeline currently stands more than 2.7 billion euros.

Isaria employs roughly 100 staff and is one of the largest residential property developers in Munich, where price increases have been among the steepest in Germany's recent property boom.

According to Bundesbank statistics, residential property prices rose by roughly 10% in Munich last year, and the central bank said that prices were above a level justified by the longer-term economic and demographic determinants.

Despite its short history - Isaria was founded as JK Wohnbau in 1994 - the company and its founder Josef Kastenberger have already made plenty of headlines.

Kastenberger was sentenced to three and a half years in jail by a Munich court in 2013 for breach of trust and fraud after confessing to having used company money for private purposes and to cheating on an investor.

He had taken the real estate developer public in 2010, at a market value of around 170 million euros but no longer owns Isaria shares. ($1 = 0.8955 euros) (Reporting by Arno Schuetze, editing by Riham Alkousaa and Jane Merriman)

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