GERMANY - A RREEF-dominated consortium is to acquire 164 German properties housing Karstadt department stores, via a 49% stake in Canadian fund manager Highstreet.

The three-way deal involves the Deutsche Bank property subsidiary, Italian property investor Pirelli and the Borletti Group which will see RREEF own 40% of the shares covered in the agreement; the other two partners will own 20% each.

Enterprise value of the deal is €4.56bn, with €3.5bn of debt secured by the properties.

A source close to the acquidition described RREEF and Pirelli as "natural partners" as they have worked together on earlier deals, notably in the Italian market.

RREEF and the other partners will exercise joint control over corporate governance in a deal struck with Goldman Sachs's Whitehall fund, which owns the other 51% of the shares in Highstreet.

The partners were pushed to announce the deal - which has yet to close and will be subject to lenders agreeing the transfer of debt ownership - by regulations covering Pirelli, a listed company.

Commercial has swiftly followed residential as a preferred German sector, buoyed by the market's economic recovery.

Moreover, the consortium's acquisition of the 49% shareholding from Karstadt Quelle indicates a broadening both of the German market's investability and of investors' appetite for European retail assets.

A survey earlier this year by Ernst & Young found 90% of property investors expected Germany to remain attractive compared with other European property markets in 2008.

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