Arcandor Nearing $1.18 Billion Sale Leaseback of of Property Portfolio

Wall Street Journal - December 1, 2007

The real-estate investment arm of Deutsche Bank AG and Pirelli Real Estate are close to acquiring a property portfolio from Arcandor AG, a German mail-order and department-store company, for €800 million ($1.18 billion), according to people familiar with the matter.

The deal with Deutsche Bank's Rreef and Pirelli Real Estate, in which tire maker and broadband-services company Pirelli & C. SpA owns a 52% stake, is expected to be announced early next week.

Arcandor's head of communications, Jörg Howe, confirmed the company is in the "final stages of negotiations" to sell a portfolio that includes 85 Karstadt stores -- including Europe's biggest department store, Berlin's KaDeWe -- as well as 12 Karstadt Sport stores and some offices. As part of the deal, Rreef and Pirelli Real Estate may acquire a minority stake in Arcandor's retail business, according to people familiar with the deal.

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, Mr. Howe said. Rreef and Pirelli Real Estate declined to comment.

"Arcandor's properties are prime retail properties in good locations, so they would be very popular with investors," said Gerhard Kemper, managing director of Kemper's Deutschland GmbH, a real-estate agency specializing in retail property, in which Cushman & Wakefield Inc. owns a stake. "This will be the biggest retail sale of this kind this year in Germany and I think it will send a signal to the market that big deals are possible, even in the current climate," he added. Sphere: Related Content