Billionaire reportedly scoops German department store chain

Billionaire activist investor Nicolas Berggruen has reportedly won the bidding for the troubled German department store chain, Karstadt. The Goldman Sachs-led investment entity Highstreet, which owns a majority of Kartstadt real estate assets, is said to be unwilling to make concessions requested by Berggruen to save the department store brand.

Billionaire founder of US investment firm Berggruen Holdings, Nicolas Berggruen, has won the bidding for the German department store chain, Karstadt, which went into insolvency last year along with its parent company, Arcandor, Reuters reports.

Berggruen was chosen by a committee of creditors as the preferred buyer Monday, beating rival bids from a Goldman Sachs-led quintet of investors and Nordic-focused private equity firm Triton, according to the report. Financial details were not made available.

Berggruen, whose wholly owned investment vehicle has a social and cultural focus, has stated he wants to salvage the Karstadt brand, together with some 25,000 jobs.

However, it is believed he will need concessions on rent from Highstreet, the property investment vehicle made up of Goldman Sachs' Whitehall Funds, Deutsche Bank’s property arm RREEF, Pirelli Real Estate, Generali and the Borletti family, which owns a majority of the retailers’ real estate assets.

Spokespersons for Goldman Sachs, Triton and Deutsche Bank were not immediately available for comment. Highstreet told Reuters today the consortium would not make further concessions.

Goldman Sachs originally bought a 51 percent stake in the real estate assets of Karstadt, including around 85 department stores and other assets, in 2006. Two years later, RREEF, Pirelli, Generali and the Borletti family acquired the remaining 49 percent.

As part of the deal, the investors financed a portfolio of 47 Karstadt retail properties and other assets covering 778,000-square-metres of space in a CMBS transactions, known as Fleet Street Finance Two. The €1.12 billion CMBS deal though has been widely impacted by the troubles of Karstadt and its parent Arcandor, which both filed for insolvency in 2009.

According to a valuation report by real estate broker Cushman & Wakefield at the start of this year, the Fleet Street Finance Two portfolio would be worth €1.57 billion if Karstadt was sold as a going concern – but just €713 million if it was liquidated. The Fleet Street Finance Two debt is set to mature in July, giving Highstreet added impetus to find a solution to Karstadt’s future.