RREEF-Pirelli consortium completes EUR 800m Highstreet deal

A consortium consisting of RREEF, Pirelli Real Estate, Luxembourg-based Borletti Group and Generali Group has completed its acquisition of a 49% stake in Highstreet, a joint venture between Goldman Sachs and Arcandor, the investment company that owns the majority of the German department stores operated by Karstadt, for EUR 800mln.

In partnership with Goldman Sachs' Whitehall Funds, which owns the remaining 51% stake in Highstreet, the consortium now owns Europe’s biggest department store, Berlin’s shopping mecca KaDeWe, as well as 84 other Karstadt stores, 12 Karstadt Sport stores and some offices, according to Arcandor’s head of communications Jörg Howe. Karstadt, Arcandor’s department-store division, will lease back the buildings on 15-year leases, with an option to extend the leases by an additional 15 years, Howe said. In total, Highstreet owns a portfolio of 164 properties throughout Germany, with a total lettable area of 2.1 million m².

'Retail is attractive to us, especially department stores since we have gained experience in the sector following our acquisition of other major European chains. We see a lot of potential to add value to Karstadt stores. Many of the stores are located in major cities, such as Munich, and we also see good potential to turn some of the stores into trophy stores, to add to the trophy KaDeWe store in Berlin,' said Chris Papachristophorou, co-chief executive of RREEF Europe.

The consortium has also signed an agreement with Whitehall Funds for the joint management of the investment company. Pirelli Real Estate and Whitehall will act as co-asset managers of the portfolio. Highstreet's enterprise value is around EUR 4.56bn, including debt of EUR 3.5bn.

When Arcandor, formerly called KarstadtQuelle AG, said it would part with its property portfolio in the spring of 2006, it pioneered a shift toward property sales that has since spread throughout the European retail sector. Since then some of Europe’s largest store chains - including UK-based retail giant Tesco PLC - have announced plans to sell part or all of their property assets to free up funds for other purposes.

In 2006, RREEF and Pirelli Real Estate bought French department store chain Printemps from retail and luxury goods company PPR SA. Another shareholder in Printemps, Borletti Group, bought Italian department store chain La Rinascente in 2005, in partnership with RREEF.