Middlehoff's magical mystery tour

27 March 2006

The German retailer has sold its property portfolio to a joint venture with Goldman Sachs. This has shifted its debts off the balance sheet. That s smart if Karstadt can really turn itself round. But it reduces the group s flexibility if things go wrong.

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KarstadtQuelle has sold its property portfolio for E4.5bn to a joint company owned by Whitehall, a fund owned by Goldman Sachs, and the German retailer. The US investment bank owns 51% of the venture, while the remaining 49% is held by KarstadtQuelle.

The property portfolio consists of 182 properties 95 department stores, 29 parking lots, 10 sport shops, 12 office buildings and 36 other properties.

KarstadtQuelle will receive E3.7bn in cash from the disposal. We opted for a strategic model that allows us to completely redeem Group debt, while at the same time enabling us to participate in the appreciation of the real estate, said Karstadt boss Thomas Middelhoff.

Karstadt said it expected an additional E800m from the participation in the appreciation of these real estate assets as agreed with Whitehall.

Karstadt will write up a profit of about E2bn before tax on the disposal, according to Middelhoff.

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