UPDATE: Time running out for Karstadt agreement

Time is running out for rental values at insolvent German retailer Karstadt to be agreed, with lender Valovis and new owner Berggruen Holdings digging in their heels.

Shareholders will meet on 8 August to vote on the deal. The court of Essen than has until 10 August to approve the insolvency plan, according to Thomas Schultz, a spokesman for administrator Klaus Hubert Görg. If a deal cannot be approved, it is like that the judge presiding over the case in Essen will decide to liquidate the troubled retailer, according to Hubertus Kobe, managing director of professional services at DTZ in Germany.

'I think that everyone understands that they have to go the extra mile to get this deal done. But it's very complicated and time is running out,' Kobe said.

The Highstreet consortium, which owns the majority of Karstadt's stores, has agreed to slash rents by EUR 230 mln over the next five years, according to Highstreet spokesman Richard Speich. Highstreet will also stump up EUR 160 mln for renovations, he added.

However, Valovis Bank - which financed Highstreet's acquisition of 36 Karstadt assets - is now in talks with Berggruen regarding monthly rents. Berggruen has asked for rents to be fixed in the 'Grundbuch' or register, which could be problematic for any lender exposed to Pfandbriefe, like Valovis, Speich said. 'This could affect their value with (financial regulator) BaFin,' Speich explained. Alternatively, rents could be verbrieft, or guaranteed, with Pfandbriefe, which is unusual in Germany, said Hubertus Kobe, although they are widely-regarded to be very stable.

Highstreet owns a second portfolio of Karstadt properties, totaling around 45 assets, Speich said. Investors in this portfolio met on Wednesday to discuss rental levels, Speich said.

If a deal cannot be reached, Karstadt could be liquidated. Highstreet said in June that a liquidation was likely if an agreement on rents did not emerge soon. Berggruen has said that he wants to save the 25,000 jobs at stake but has demanded further concessions.

The Highstreet consortium comprises Goldman Sachs' Whitehall Funds (51%), Deutsche Bank's RREEF funds (24%), Milan-based Pirelli Real Estate (12%), Generali (11%) and the Borletti Group.

There has also been speculation in recent days that Italian investment group Borletti may be preparing a counter offer for Karstadt, which could see the Italian group offer as much as EUR100 mln for the operational assets of the troubled retailer. Borletti could not immediately be reached for comment. Despite reports that Spanish retailer El Corte Inglés has approached Highstreet within the last few days to submit an offer for the Karstadt properties owned by Highstreet, a Corte Inglés spokeswoman told PropertyEU that no offer had been made. Highstreet spokesman Richard Speich declined to comment on a possible last-minute counter offer, although he conceded that 'any new bid at this point in time might be too late'.