BERLIN — KarstadtQuelle AG sold its department store real estate portfolio to Whitehall Fund for 4.5 billion euros, or $5.4 billion.
Whitehall Fund is a joint venture between Goldman Sachs and KarstadtQuelle. The retailer is looking to pay off its debt load of over 4 billion euros, or $4.8 billion, with proceeds from the deal.
KarstadtQuelle, together with its pension fund, will receive an immediate cash payment of 3.7 billion euros, or $4.5 billion. The German department store and catalogue group said it expects an additional 800 million euros, or $1 billion, "from the participation in the potential appreciation of these real estate assets," the company said in a statement.
"We reduced 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," said Thomas Middlehoff, chief executive officer, at a press conference Monday. Middlehoff said as a result of the transaction, "group earnings before taxes will improve by more than 120 million euros a year on a sustainable basis. In addition, we realize an extraordinary income of almost 2.4 billion euros before tax this year."
Middlehoff said in 2006 the group expects to commercialize more real estate assets with a value of 600 million euros, or $722.2 million, in a separate deal.
Separately, the firm released 2005 financial results that showed sales fell 4.1 percent to 3.6 billion euros, or $4.3 billion, at its 90 Karstadt department store chain. The group is realigning its department store portfolio, with five doors including KaDeWe in Berlin and Alsterhaus in Hamburg forming a new premium group.
The group's pretax earnings came in at 274.7 million euros, or $300 million, which compares with a loss of 275.1 million euros, or $332 million, in the prior year. Adjusted for special factors, disinvestments and joint ventures, pretax earnings in 2005 were 544.1 million euros, or $655 million.
"We are on track to becoming an absolutely normal company again," Middlehoff said. "In 2004, the company fought for survival. Over the past year, we considerably increased the pace for restructuring. We completed our disinvestment program rapidly and with great success."
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