Crunch time for Karstadt

Now Highstreet, a consortium of property investors including Goldman Sachs which owns the majority of Karstadt properties, makes a bid to take over the operational-side of the business

The Goldman Sachs-led HighStreet company which owns the majority of properties operated by insolvent German department store group Kartstadt has lodged a bid to buy the operation.

Comfirming the bid, a spokesman told Property EU that Highstreet had submitted its offer ahead of a creditors committee meeting today, which would be assessing three bids made so far. Apart from Highstreet, offers have come from European private equity firm Triton, and a partnership between the direct investment vehicle of billionaire Nicolas Berggruen and BCBG Max Azria Group, a leading designer, retailer and distributor of women's apparel and accessories.

Iconic department store chain Karstadt went into insolvency last year, as did its parent company, Arcandor.

The District Court of Essen in Germany appointed Klaus Hubert Görg from the legal firm Görg as the bankruptcy administrator.

Yesterday, Reuters reported that the administrator had said a decision about the future of Karstadt could take longer than expected due to a lack of suitable offers. Reuters also reports today that the district court in Essen is due to decide on Monday whether the administrator's insolvency plan is valid and can be implemented.

In December last year the insolvency administrator and management of Karstadt informed employee representatives and staff that 86 department stores, 26 sports outlets and 8 bargain centres with over 25,000 jobs nationwide were set to remain open under the insolvency plan, which is to sell it as a going concern rather than breaking it up.

Highstreet is a property investment vehicle made up of Goldman Sach’s Whitehall Funds, RREEF, Italy’s Pirelli Real Estate, Generali and the Borletti. Goldman Sachs bought a 51 percent stake in the properties in 2006. Then in 2008, RREEF, Italy’s Pirelli Real Estate, Generali and the Borletti family acquired the other 49 percent.

Bondholders in Fleet Street Finance Two – which was a CMBS transaction that financed some of the Highstreet property acquisition – agreed to the insolvency plan in February.

As PERE reported in April, the maturity date looming on a €1.12 billion Fleet Street Finance Two is in July.

According to a valuation by Cushman & Wakefield at the start of 2010, the portfolio of 47 stores and other assets used as security for the CMBS loan, and covering 778,000-square-metres of space in cities such as Berlin, Hamburg and Munich, would be worth €1.57 billion if Karstadt was sold as a going concern, but only €713 million if it was liquidated.

This is why Goldman Sachs-led Highstreet pressed bondholders to accept the plan and could help explain why Highstreet has lodged its own bid for the operation today.