Explainer: How tycoon and Chrysler Building owner Benko lost grip of his empire
08/11/2023 15:31
By Matthias Inverardi, Alexandra Schwarz-Goerlich and Tom
Sims
VIENNA/DUESSELDORF/FRANKFURT, Nov 8 (Reuters) - Rene
Benko, one of Europe's most prominent property tycoons, on
Wednesday relinquished the chairmanship of Signa Holding, the
real estate empire he founded, amid an investor revolt and
dimming prospects for the sector.
The Austrian entrepreneur - owner of New York's Chrysler
Building and Britain's Selfridges department store - has been a
major figure in Europe's property industry for more than two
decades.
Signa's troubles have come to symbolise the repercussions of
a surge in interest rates on companies that have borrowed
heavily to grow. The company didn't respond to requests for
comment.
The following are the key protagonists and events in the
saga:
HOW DID IT ALL BEGIN?
Born in 1977 in Innsbruck, Rene Benko dropped out of school
and began by turning attics into apartments.
In 2000, he founded Immofina, which later became Signa, and
got a big boost with investment from Austrian gas station heir
Karl Kovarik.
In 2003, Benko, tried to attract investors to Signa with
promises on his website: "You can now earn money by doing
nothing" and: "It was never so boring to get rich".
WHAT IS SIGNA TODAY?
The group has holdings of 27 billion euros ($28.8 billion)
and 25 billion euros in development. Its real-estate division
operates in Austria, Germany, Italy, Luxembourg and Switzerland.
Big purchases included the corporate headquarters in 2010 of
Deutsche Boerse, the German stock exchange operator, which it
has since sold.
In 2011, Signa bought the storied KaDeWe department store in
Berlin as part of a retail portfolio for 1.1 billion euros.
Benko's group also owns Kaufhof and Karstadt, German
retailers that have been struggling as shoppers go online.
WHAT'S THE BACKDROP?
For years, the property sector in Germany and elsewhere in
Europe boomed as interest rates were low and demand strong.
Now a sharp rise in rates and building costs has put an end
to the run, tipping developers into insolvency as bank financing
dries up, deals freeze and prices fall.
The turmoil comes amid the biggest property crisis in
decades in Germany, Signa's most important market, and where
within the span of a week Signa's sports retailer filed for
insolvency and construction on a skyscraper was halted.
WHAT ARE SOME SIGNS OF TROUBLE AT SIGNA?
Construction of one of Germany's tallest buildings in
Hamburg has halted midway after Signa stopped paying its
builder, Reuters reported last week.
Days earlier, Signa Sports United and a number of
subsidiaries filed for insolvency.
WHAT DO CREDIT RATINGS AGENCIES SAY?
Fitch this week downgraded one of Signa's divisions, Signa
Development, to junk.
"Other Signa group entities have ceased projects and have
financing difficulties due to the changes in the interest rate
environment, bank funding and valuations," Fitch said.
"Unpaid suppliers and bank funding providers to other Signa
entities may cross-contaminate and disrupt Signa Development's
projects and funding," it added.
The price of a 2026 Signa Development bond has plummeted
over the past two weeks.
WHO ARE TOP SIGNA INVESTORS?
Benko will remain the largest shareholder.
Hans Peter Haselsteiner, the founder of Austrian
construction firm Strabag, is a major shareholder, according to
a filing, and German pet retailer Torsten Toeller is too,
according to his family office.
Ernst Tanner, the chair of Swiss chocolate company Lindt &
Spruengli, has been a big investor but didn't immediately
respond to a request about the current status of any holding.
WHO ARE OTHER FINANCIAL BACKERS?
A 76-page internal presentation seen by Reuters listed
nearly 40 lenders and insurance companies as "investors and
financing partners". It is undated but contains data from 2019.
They included Allianz, Munich Re's Ergo insurance, BNP
Paribas, Austrian banks including RBI, and some German savings
banks. Allianz and Ergo declined to comment, RBI said its
commercial real estate loans were "very well collateralised",
while the others didn't respond.
In Germany, Deutsche Bank was joint bookrunner for a Signa
bond sold in 2021, and Commerzbank's real estate last year
became a co-investor in Signa's Hamburg skyscraper. Deutsche
Bank declined to comment and Commerz Real said its investment
was relatively small.
German regulator BaFin and the European Central Bank
(ECB)have been asking banks to detail their exposure to Signa, a
person with knowledge of the matter said, confirming press
reports.
The ECB didn't comment on Signa and instead referred to a
letter on Tuesday by chief supervisor Andrea Enria to a German
lawmaker about "concerns" on real estate lending.
WHO IS THE NEW CHAIR?
Arndt Geiwitz, a restructuring expert best known for his
role in the insolvency proceedings of Galeria Kaufhof-Karstadt
department stores and drug store chain Schlecker.
($1 = 0.9366 euros)
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(Writing by Tom Sims
Editing by Mark Potter)
((Tom.Sims@thomsonreuters.com; +49 30 220 133 645;))