Publity buys Karstadt HQ in Essen, new lease with retailer

The German listed fund initiator and asset manager Publity AG has stepped in to buy the complex which includes the corporate headquarters of department store chain Karstadt in Essen, for an unknown sum.

It plans to redevelop the complex with a minimum of €40m investment as a form of business campus with multiple tenants, although the complex does have a 'preserved monument' status.

The complex, in the Bredeney district in the south of the city, was built between 1969 and 1975 and has undergone several modernisations. It comprises four buildings over 109,000 sqm of floor space and a separate garage, comes with a 12-year lease and opportunities for further development. The purchase contract includes an option to redevelop around 30,000 m2 of the leasable area.

It ends speculation that Karstadt, which is now owned by Austrian entrepreneur René Benko would relocate to neighbouring Oberhausen or Düsseldorf, as had been feared by local civic authorities and Karstadt's remaining 1,000+ employees since the beginning of the year. The group had been actively looking at new office locations. Karstadt CEO Stephan Fanderl confirmed it had signed a new 12-year lease for 30,000 sqm with Publity for the Essen-Bredeney location, where it has been since the early 1970s.

Acccording to Publity's chairman Thomas Olek, “The asset offers a lot of potential for investors and developers for a continued use as an office location or even for residential conversion. Essen-Bredeney is also a highly sought-after location for commercial uses as well as residential space."

With Karstadt leasing 30,000 sqm of the property, Publity now has to find new tenants for the remaining 70,000 sqm. Olek said he expected to lease 75% to 80% over the next six months – "the demand for such large contiguous office space in Essen is there", he said.

The struggling Karstadt returned to an operating profit last year, while still overall in the red. Still, the new lease and commitment to remaining in Essen has enabled to save three big stores that had been slated for closure – in Dessau, Neumünster and Mönchengladbach.

Publity now owns 561 German properties, held across a wide range of closed-end funds or in co-investments with institutional investors in joint ventures focused on high-yield commercial asset, along with a portfolio of NPLs.