The most prestigious properties of the largely insolvent Signa Group will be sold by a trustee in the next few years. The creditors of Signa Prime Selection AG approved this plan on Monday in Vienna, as the insolvency administrator of this important subsidiary announced.
The Signa Prime is considered the jewel of the Signa Group of the Austrian investor René Benko, which has slipped into crisis as a result of increased interest rates, construction costs and energy prices. The Prime portfolio includes, among others, the still unfinished Elbtower in Hamburg, the Berlin luxury department store KaDeWe, properties of the Galeria Karstadt Kaufhof department store chain and the building of the Austrian Constitutional Court.
Creditors demand billions of dollars
According to the latest data from restructuring administrator Norbert Abel, Signa Prime’s creditors have registered claims of around 12.8 billion euros. The administrator has so far only recognized around 5.9 billion euros of this. According to his proposal, all properties should now be sold by him as trustee in an orderly manner over a period of three to five years in order to benefit from an expected recovery in the market. This should cover at least 30 percent of the claims.
Reviews are one of the central problems at Signa. According to a “Bloomberg” report, the Upper West building in Berlin was valued at 45 times the rental income, i.e. over 700 million euros. Multipliers in the twenties are more common. At the end of 2018, Signa valued the Upper West itself at 571 million euros, at the end of 2020 at 620 million and at the end at over 700 million euros – even though interest rates have risen in the meantime. According to Bloomberg, these numbers would result in a rental yield of 2.2 percent, which would be – in a nutshell – more or less underground.
Republic of Austria does not want to agree to the restructuring plan
In order to bring the numbers down to the market level of around four percent, either the valuation would have to go down or the rents would have to go up. Possibly both. However, Signa’s financial situation hardly allows for any valuation discounts. And rent increases are no longer accepted unconditionally. The Berlin commercial real estate market is too low for that. And the Upper West is just one of numerous examples from the Signa empire that was rated too “sporty”.
For tax reasons, Signa Prime’s German real estate is now not formally subject to the trustee, but de facto he retains control over approval rights and over Signa Prime’s outstanding claims on its subsidiaries. The creditors’ meeting in Vienna was only about the winding up of Signa real estate, not about the sale of department store businesses such as the KaDeWe Group and Galeria Karstadt Kaufhof. However, these trading companies, which also belong to the Signa Group, are also insolvent and are looking for buyers.
The Republic of Austria had already announced in advance that, as one of the creditors of the insolvent Signa companies, it did not want to agree to the proposed restructuring plans. Wolfgang Peschorn, President of the Austrian Financial Procuratorate and thus the Republic’s lawyer, said this to ORF Radio.
Source: Stern
