Michelle Napoli is the editor of Real Estate Media’sNet Lease Forum, where this article first appeared.

ESSEN, GERMANY—The Whitehall Fund of US-based investment bank Goldman, Sachs & Co. teamed with an Essen, Germany-based retailer KarstadtQuelle AG in a corporate real estate transaction valued at 4.5 billion euros (approximately US$5.56 billion). Whitehall now owns 51% of a new company established to own the portfolio of mostly retail properties while KarstadtQuelle, which received an immediate cash payment of 3.7 billion euros (almost US$4.65 billion), retains the remaining ownership interest.

With the deal, Karstadt rid itself of all debt. The retailer also expects to receive another 800 million euros (approximately US$1 billion) via participation in the appreciation of the real estate assets as part of its agreement with Whitehall. KarstadtQuelle’s affiliate Karstadt Warenhaus GmbH continues to operate Karstadt’s department and sports stores as the tenant under long-term leasing agreements.

“We reduce group debt to zero, and this gives us new flexibility for further development and growth on the basis of a less capital-intensive business model,” KarstadtQuelle AG CEO Thomas Middelhoff said at the company’s annual press conference in Dusseldorf, Germany on March 27. According to the company’s announcement, “in 2006 the group would commercialize further real estate assets with a value of 600 million euros (about US$753.47 million) in a separate transaction.”

“In 2004, the company fought for survival,” Middelhoff also noted. “Over the past year, we considerably increased the pace for restructuring.”

The retailer’s website describes its property portfolio as consisting of primarily department store real estate “at A1 locations in German towns and cities,” as well as specialty stores and logistics and administrative buildings.

The deal is not the first large overseas corporate real estate transaction for Whitehall, part of Goldman’s real estate principal investment area, whose European offices are headquartered in London. Whitehall has previously closed deals with Deutsche Telekom, ENI in Italy, France Telecom, NCC in Sweden and Telemaco in Italy.

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