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Pirelli, RREEF consortium sign German Arcandor deal

Italy’s Pirelli Real Estate and RREEF are part of a quartet of investors buying a 49 percent stake in German department store joint venture.

Pirelli Real Estate, RREEF, the alternative asset management arm of Deutsche Bank, Generali and the Borletti Group have finally signed a binding agreement to buy a 49 percent stake in a portfolio of 164 German department stores.

Talks have been dragging on for months between the consortium and German department stores operator Arcandor, but the deal was finally signed today according to the three main participants. Though no value has been placed on it, several media outlets report that the consortium is paying €800 million.

Goldman Sachs’ Whitehall funds is retaining its 51 percent in the ‘Highstreet’ portfolio, according to the parties concerned. It is retaining joint control of corporate governance and will asset manage the portfolio jointly with Pirelli.

Arcandor, formerly known as Karstadt Quelle, decided to offload its minority stake in the Highstreet property joint venture last summer. At the time, sceptics said the credit crunch would make such a sale difficult because debt would not be available to finance large acquisitions.

The deal is expected to complete by the end of May, although the transaction still needs consent from existing lenders.

However one unresolved issue is a plan between the parties to create a luxury pan-European department store group. In December, Arcandor said it had agreed to work with Pirelli, RREEF and the Borletti Group with the aim of taking advantage of synergies between different department store operations.

It said Arcandor’s Karstadt business would acquire a 25 percent stake in La Rinascente and Printemps, both of which are partially owned by members of the real estate consortium, while the real estate consortium would take a 25 percent stake in Karstadt’s new Premium Group. However, today there was no mention of the plan.

La Rinascente is owned 46 percent by Italian private equity firm Investitori Associati, a subsidiary of which is Generali Real Estate, while RREEF owns 30 percent, Pirelli 20 percent and the Borletti Group 4 percent. Pinault-Printemps- Redoute, now renamed PPR, is owned by RREEF and Borletti having completed a two-stage acquisition in 2006 and 2007.