The German government plans to sell €500m worth of its real estate assets annually as part of a rationalisation programme, according to the head of the federal agency in charge of the property.

The government's properties include 58,000 flats nationwide, military training areas, and ageing office buildings. The portfolio is valued at around €10bn.

But in a newspaper interview, Hans Hinrich Schroeder-Hohenwarth, the new head of the Bundesanstalt für Immobilienaufgaben, the Federal Properties Agency, said he had been given the task of selling 83% of the total portfolio.

"This means that each year, we plan to sell €500m worth of real estate, starting, ideally, with that which is losing money," he told the Financial Times Deutschland.

Of the government's flats, Schroeder-Hohenwarth said the agency would offer 55,000. He added that the agency would consider using German Real Estate Investment Trusts (G-REITs) to sell the properties, if, as assumed, the government legalised the vehicles next year.

Schroeder-Hohenwarth noted that a key motivation behind the planned divestments was that income from rents did not suffice to cover the costs of maintaining the properties. He added that the government's ministries, which are valued at €1.4bn, were not part of the planned divestments.

Anglo-Saxon private equity firms, including Fortress, Guy Hands' Terra Firma and Cerebus, have bought hundreds of thousands of flats in Germany, many of which were formerly owned by state and local governments.

As classic, short-term investors, these firms do not plan on holding on to the properties but instead will sell them when they can realise a profit. Fortress, for example, plans to float part of its multi-billion euro German property portfolio on the stock exchange by the beginning of 2007.