Acquisition and CapEx financing for the transformation of the former KARSTADT headquarters

Our client purchased a building complex in Essen-Bredeney in 2016 which was occupied as company headquarters by KARSTADT, the seller and future tenant. A long-term lease with KARSTADT was concluded as part of the original acquisition process. A 30-year lease with the North Rhine-Westphalia State Police was signed in March 2018. The occupation of the property by this new anchor tenant required significant investment in the tenant fit-out. We were instructed to source both purchase and CapEx financing.

The lease contract with North Rhine-Westphalia State Police was a solid basis for the sourcing of both purchase and CapEx financing. In this case, there was a problem with a unilateral option for KARSTADT to significantly expand its occupied space (>20,000 sqm). At the time the financing arrangement was concluded, it was not yet clear whether KARSTADT would exercise this option or whether an alternative tenant could be found.

The construction volume to be financed was unusual for a project of this size, which posed something of a challenge with the tenant fit-out and restructure for the police despite outstanding tenant creditworthiness, as the principal aim was to obtain a financing structure as flexible as possible.