Arcandor, the largest department store owner in Germany, has signed a letter of intent to sell its 49% stake in the EUR 4.7 bn Highstreet real estate company to a syndicate of Deutsche Bank's RREEF unit, Milan-based Pirelli Real Estate and the Italian family-run Borletti Group. Arcandor said earlier it expected to realise capital gains of EUR 800 mln from the sale.
Arcandor, the largest department store owner in Germany, has signed a letter of intent to sell its 49% stake in the EUR 4.7 bn Highstreet real estate company to a syndicate of Deutsche Bank's RREEF unit, Milan-based Pirelli Real Estate and the Italian family-run Borletti Group. Arcandor said earlier it expected to realise capital gains of EUR 800 mln from the sale.
Highstreet owns 164 properties with a total surface area of 3.1 million m2. Some 90% of the portfolio comprises Karstadt department stores, including the KeDeWe in Berlin, one of the largest department stores in Europe. The letter of intent stipulates an exclusivity period until 1 February next year to finalise the acquisition agreement.
Arcandor, which was formerly named Karstadt Quelle, sold the other 51% of the portfolio to Goldman Sachs' Whitehall Funds in 2006 for EUR 3.7 bn. The sale of the 49% to the Pirelli-RREEF group requires the approval of the Whitehall Funds.
'We are extremely satisfied with the basis upon which the real estate transaction will be consummated,' said Arcandor's CEO Thomas Middelhoff in a statement. 'It was the quality of our portfolio and the creditworthiness of the tenant Karstadt what made this agreement possible under the current difficult market conditions. And we managed to achieve a valuation in line with our initial expectation and significantly higher than the current book value of the assets despite the financial market crisis.'
Arcandor and the RREEF-Pirelli syndicate also agreed to work together to create a European department store alliance. This would involve the acquisition by Karstadt of up to 25% of Pirelli's Italian department store chain La Rinascente and in Printemps in France. In return, the consortium will take up to 25% in Karstadt's premium segment. Each of the partners will appoint a representative to the supervisory boards of Karstadt and La Rinascente/Printemps.
'The premium segment still has great growth potential both throughout Europe and beyond,' commented Peter Wolf, chairman of Karstadt Warenhaus. 'Together with our partners, we will rapidly expand the Premium Group further ultimately setting a clear market leadership in Europe's luxury segment.'
