Berggruen paid EUR 80m for Karstadt, no rent agreement reached with Highstreet

Private equity firm Berggruen Holdings is believed to have paid around EUR 80 mln in its winning bid for insolvent German retailer Karstadt, according to those who track the market.

Berggruen's bid, which was declared the winner by insolvency administrator Klaus Hubert Görg late on Monday, trumped both Highstreet and German-Swedish financial investor Triton, who are both believed to have offered around EUR 30 mln.

Berggruen spokesman Wolfgang Weber-Thedy could not be reached for comment on Tuesday.

However, the sale price is simply 'symbolic', according to Hubertus Kobe, head of professional services, with a focus on retail, at DTZ in Frankfurt. 'The price is not really important, they could equally have sold it for one euro. It will be a long journey to turn Karstadt around but Berggruen has been very successful with other ventures, which is an encouraging sign,' he said.

The Highstreet consortium - which comprises Goldman Sachs' Whitehall Funds (51%), Deutsche Bank's RREEF funds (24%), Milan-based Pirelli Real Estate (12%), Generali (11%) and the Borletti Group - owns the majority of Karstadt's stores and was widely tipped to acquire Karstadt's operational assets after it submitted a bid on 28 May.

But despite the announcement late yesterday that Berggruen's bid had been successful, no agreement between Berggruen and Highstreet has been reached regarding rents, a Highstreet spokeswoman told PropertyEU. Highstreet has offered rent reductions worth EUR 230 mln over five years to all investors bidding for Karstadt, it said in an e-mailed statement.

If the offer is not accepted, the risk of a Karstadt liquidation 'rises considerably', a Highstreet spokeswoman told PropertyEU. 'An agreement with Highstreet is crucial if Karstadt is to be saved. Karstadt can only be saved with a strong business plan and strategy that is supported by everyone involved,' she added.

According to Kobe at DTZ, Highstreet is likely to 'fight' to get the rents it wants. 'Given that its bid wasn’t successful, it will be most concerned with protecting its own interests. I think it will be difficult for Highstreet and Berggruen to agree on rents,' he said.

Triton spokesman Max Hohenberg told PropertyEU that they made their conditions 'very clear'. 'We don't really know why our bid wasn’t successful but I assume Berggruen must have been more willing to compromise on more issues,' he said.

The announcement marks the end of a protracted battle to sell Karstadt’s operational assets, which have likely been sold for far less than the EUR 150 mln it was believed they would fetch as recently as March. The court of Essen, with which the insolvency plan was registered in March, will review the sale on 10 June 2010, Görg said in the statement.