Signa, one of Europe’s property and retail giants, has declared insolvency, making it the biggest casualty so far of Europe’s property crash. The company, controlled by Austrian magnate Rene Benko, owns several high-profile projects and department stores across Germany, Austria, and Switzerland, along with the iconic New York Chrysler Building. The company’s collapse is expected to send ripples across the continent’s embattled property sector.
The insolvency of Signa has been attributed to external factors affecting its property business and pressure on the high-street shopping industry. The company’s vast property holdings in mostly central locations in Germany could leave deep scars in the country’s cities. The collapse will also halt the construction of several high-profile projects, including one of Germany’s tallest buildings, the 64-story Elbtower skyscraper in Hamburg.
In light of the insolvency, Austrian Chancellor Karl Nehammer has sought to downplay its significance, emphasizing the need for stability, especially for the banks that have invested in the company. Research by Austria’s Raiffeisen Bank International warned that Signa’s difficulties could trigger a wider drop in commercial property prices if it starts to offload properties.
The company’s majority-owned real estate division, Signa Prime Selection, is the largest in the group with a gross asset value of 20.4 billion euros. The subsidiary is still engaged in last-ditch investor talks to secure liquidity, but the discussions have only a small chance of success. This grim outlook has prompted Signa’s holding company to apply for insolvency proceedings, aiming for an orderly continuation of business operations and the sustainable restructuring of the company.
The insolvency of Signa leaves a trail of half-finished construction projects across Germany and exposes numerous banks, insurance companies, and pension funds to financial risks. The regional state-backed banks of Bavaria and Hesse in Germany have each lent the company several hundred million euros, while Switzerland’s Julius Baer has disclosed an exposure of over 600 million Swiss francs.
The collapse of Signa emphasizes the challenges facing the property sector worldwide, with weaknesses in commercial real estate in the United States and China. The situation in Germany, the largest economy in Europe, has been exacerbated by a sharp rise in interest rates and building costs, forcing some developers into insolvency and putting deals and construction on hold.
The real estate sector, previously viewed as stable and safe, is now grappling with the impact of these developments. The collapse of Signa serves as a significant warning sign for the industry, highlighting the need to navigate challenges in a rapidly changing economic landscape.