San Francisco Frontiers - Austrian property tycoon's troubles rattle investors

Rene Benko, one of Austria's richest people, with a net worth of $6 billion according to Forbes, has grown his Signa group into a real estate giant since founding it in 2000.

But as the sector is hit by higher borrowing costs and surging material prices, a growing number of developers are filing for bankruptcy.

Several Signa projects, including the construction of a landmark high-rise in Germany, have ground to a halt, making investors jittery about their money.

Confirming its troubles, Signa announced last week that Benko was stepping down from its advisory board as the group prepares a "plan for essential restructuring steps" by the end of November.

"Signa symbolises the real estate boom of recent years, in which cheap money was readily distributed for every project, no matter how daring," the Austrian daily Die Presse wrote in an editorial this month.

"A perfect environment for Benko, who took out dizzying amounts of loans without shame. Sustainability didn't play a role," it said.

- 'Never so boring to get rich' -

Born in 1977 to a middle-class family in Innsbruck, Benko worked with a friend restoring attics as a teenager before dropping out of school and founding Signa.

Among its first purchases was a department store in Innsbruck, which Benko transformed into a modern shopping centre.

Since then, Benko has added the Chrysler building and the Berlin shopping gallery KaDeWe to the company's portfolio, while branching out into media and other sectors.

At one point, the company reportedly tried to attract investors with slogans like "It was never so boring to get rich".

"When you have success, you become interesting. And if you give the impression that you have remained a man of your words, you build trust and expand your circle of friends," Benko told Die Presse in 2008.

With offices in Austria, Germany, Italy, Luxembourg and Switzerland, Signa has holdings worth 27 billion euros ($29 billion) and projects worth 25 billion euros in development, according to its website.

But Signa looks to be in trouble.

Thailand's Central Group said this month that it had taken control of the historic British department store Selfridges, which Signa used to own.

And Signa-led work on the prestigious Elbtower in the heart of Hamburg -- expected to be one of Germany's tallest buildings -- was halted at the end of last month.

Karen Pein, the Hamburg senator in charge of urban development, has threatened to demolish the half-built tower if the group is not able to continue work on schedule.

The future of another Signa project, the renovation of the Alte Akademie in Munich, a former Jesuit college to be transformed into an office and residential complex, is also uncertain.

Fitch, the credit rating agency, has already downgraded the Signa Development subsidiary after it said it was "facing challenges including with respect to its liquidity position".

And the online e-commerce unit Signa Sports United has initiated insolvency proceedings for several of its entities and has decided to drop its stock listing on the New York Stock Exchange to reduce costs.

Signa did not respond to AFP requests for comment.

- Past controversies -

Signa's undertakings have drawn criticism in the past.

The leading German department store chain Galeria Karstadt Kaufhof, which Signa purchased in 2019, filed for bankruptcy in 2020 amid the coronavirus pandemic, and the chain decided to close 52 stores at the start of the year.

In 2020, Benko testified before an Austrian parliamentary committee probing wide-ranging corruption allegations after the so-called Ibizagate scandal shook the country's politics.

He was asked about his links to several high-ranking conservative and far-right political figures, though Benko has not been charged in connection with the case.

The scandal erupted in 2019 when a video showed Austria's former far-right leader offering public contracts to a woman posing as a Russian oligarch's niece in exchange for campaign help.

In a separate matter, Benko received in 2012 a 12-month suspended jail sentence over an Italian tax case, after a court found him guilty of bribing Croatia's former prime minister Ivo Sanader with 150,000 euros to intervene with the Italian tax authorities.

T.Martin--SFF