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The possible insolvency of German department-store operator ArcandorAG could have an impact on a property-investment consortium led by the WhitehallFunds, which owns a 51% stake in a portfolio that includes 85 of the retailer's Karstadt stores as well as other properties.

Some of the buildings are among Germany's top retail locations, such as the KaDeWe store in Berlin or the Oberpollinger store in Munich. Goldman Sachs Group Inc.'s WhitehallFunds owns a 51% stake, while a consortium that includes Rreef Alternative Investments, the property fund of Deutsche Bank AG; Pirelli & C. Real Estate SpA; and the Borletti Group acquired the rest in 2007.

The property investors, referred to as the Highstreet consortium, are in negotiations with Arcandor, which posted a 745.7 million euros ($1.04 billion) loss in its 2008 fiscal year ended Sept. 30 and faces a deadline of June 12 to gain an extension on 650 million euros of debt. Arcandoralso isapplying for a 200 million euros loan from KfW, the German state-owned development bank.

The Highstreet consortium has an interest in helping Arcandoravoid insolvency, a person familiar with the matter said. The consortium isnegotiating with Arcandorto find ways to lower Arcandor's costs by adjusting existing leases, which could include offering a grace period of free rent, and ways to boost revenue in the properties.

Another option, depending on the location, could be to reduce the space that Karstadt occupies in order to make sales area available to additional tenants. This would allow the consortium to shift the focus from a one-tenant store to a multitenant center where possible, this person said.

Goldman referred calls to the consortium's public-relations firm, which had no comment.

Under the pressure of a looming debt deadline, ArcandorChief Executive Karl-Gerhard Eick held talks last week with Eckhard Cordes, CEO of rival Metro AG, to discuss a possible merger of Arcandor's Karstadt business and Metro's Kaufhof stores.

Mr. Eick hasn't ruled out a tie-up with Metro, but has said he wouldn't pursue further talks with Metro until after the German government decides whether to assist Arcandor. Without state aid, he said, Arcandorwill become insolvent June 12. Metro has been lobbying the German government not to give Arcandoraid, saying it would distort competition. Instead, Metro wants to use Arcandor's woes as an opportunity to consolidate the department-store market.