RFR Holding returns to Munich with prime Karstadt asset

Barely eighteen months after being bought by its current owners, the Karstadt complex opposite Munich's main railway station is being sold again. EPI Special Opportunities 3 (EPISO 3), an opportunity fund managed by Tristan Capital Fund and operating partner Singature Capital, is selling the property to the American group RFR Holding for an undisclosed price (but thought to be around €250m).

The property in central Munich comprises the department store/building complex at Bahnhofplatz 7 and consists of the two building sections, the New Building and the Old Building. The Old Building is a listed property built in 1905, while the New Building was completed in 1971 – the year before the Munich summer Olympics.

The 56,000 sqm complex is 100% leased to retailer Karstadt, and is one of the retail chain's top-performing stores. The store is comprised of six upper floors and 497 parking units on the lower five floors. It extends for 220m between the main station and Stachus, a prime Munich shopping precinct. It borders the Königshof Hotel, a Munich landmark which is scheduled for being torn down and rebuilt.

Signature Capital bought the property at the beginning of 2015 for €180m from the Highstreet consortium, later joining with Tristan's EPISO fund after Tristan's talks with Karstadt to reposition the property had ended. With speculation still surrounding the future of part of the newer building, which might also still find a date with the wrecker's ball, RFR are clearly taking a bet on the uniqueness of the location rather than just Karstadt's retail prowess.

Rui Tereso, head of portfolio & asset management at Tristan Capital Partners, said: "Since our ownership we have worked closely with our operating partner Signature Capital to improve the institutional quality of the asset. The sale to RFR provides us with the opportunity to recognise the value created and generate an attractive return for our fund and its investors."

RFR Holding’s Alexander Koblischek commented: “We are pleased to be back in the Munich metropolis, having acquired an asset in a most attractive and lively location.”

RFR, which was founded by Germans Michael Fuchs and Aby Rosen, has been a frequent investor in top German trophy assets in recent years. It recently beefed up its German local management team by hiring Oliver Zimper and Steffen Ricken from TRIUVA, the institutional funds arm of restructured IVG Immobilien AG. RFR has 20 commercial properties in Germany valued at €2.2bn under management.

Meanwhile, a report this week in trade publication Immobilien Zeitung cited sources suggesting that the Karstadt department stores owned by French-Israeli billionaire Beny Steinmetz were being bundled into a portfolio and offered for sale as a package, for a price of about €900m.

At least 14 prime Karstadt stores are said to be included in the package, including high-profile stores such as that in the Breite Strasse in Cologne. The Beny Steinmetz Group (BSG) teamed up in 2014 with Signa Holdings of Austrian René Benko to buy the physical assets of the Karstadt retail chain, but in 2015 the two partners split up the properties, with Signa Holding remaining the asset manager for all the houses.

Up to ten interested parties are said to be initially interested in bidding for the assets, among them international private equity groups and German asset managers representing institutional investors. Any successful bidder is likely to have to undertake major capex in refurbishment to modernise many of the stores.

Not involved in the sale are the premium Karstadt stores of KaDeWe in Berlin, Alsterhaus in Hamburg, and Oberpollinger in Munich, as well as the Karstadt stores in Stuttgart and on Berlin’s Kurfürstendamm, which remained with the Benko contingent.