René Benko, the founder of Signa, established the company in 1999 at the age of 22. Signa has since grown to become one of the largest privately held real estate conglomerates in Austria, with a portfolio that includes commercial, residential, and hotel properties.

However, Signa Holding, which comprised a retail and real estate conglomerate with assets across Austria, Germany, Switzerland, the UK and Italy, has filed for insolvency and initiated a restructuring process due to a severe credit crunch that hit Europe in 2023. The majority of its employees have already been laid off, and its subsidiaries are facing imminent bankruptcy.

The reasons behind the collapse of Signa Holding are complex and multifaceted. The European property sector has been hit hard by rising interest rates and costs, which have led to a sharp decline in demand and bank financing. The insolvency of Signa Holding is a significant development in the unravelling of René Benko’s real estate empire.

It is unfortunate to see a company with such a rich history and significant impact on the real estate industry in Europe face such a fate.

This blog post will trace the rise and fall of Benko’s Signa Holding, and explore the factors that led to its collapse.

The rise of the empire

René Benko was born in Innsbruck, Tyrol, in 1977, to a local government employee and a nursery school teacher. He studied at a business school and gained his first experience in the real estate sector at the age of 17, working for a building company owned by an acquaintance.

At the end of 1999, he founded Immofina Holding, which was later renamed Signa Holding in 2006. His early projects included converting attics into luxury apartments and buying and selling a health hotel. He received his first financial boost from Karl Kovarik, a Viennese entrepreneur who inherited several gas stations and invested 25 million euros in Benko’s company.

Benko then embarked on a series of ambitious acquisitions, including buying 16 inner-city properties from BAWAG P.S.K. bank in 2007, opening medical centers in Vienna, renovating the Kaufhaus Tyrol department store with the help of renowned architect David Chipperfield, and converting the former headquarters of Länderbank and Bank Austria into the Park Hyatt Vienna hotel.

In 2011, he expanded his portfolio to Germany, buying the Oberpollinger department store in Munich. In 2012, he acquired a portfolio of buildings consisting of KaDeWe and Karstadt properties. In 2013, he bought the commercial businesses of KaDeWe, and in 2014, he took over Karstadt.

Benko also diversified his business interests to other sectors, such as media and sports. In 2018, he bought a stake in Kronen Zeitung, Austria’s largest newspaper, and Kurier, another daily paper. In 2019, he became the majority owner of Selfridges Group, which operates luxury department stores in the UK, Ireland and the Netherlands. In 2020, he acquired a stake in FC Tirol Innsbruck, a football club based in his hometown.

By 2022, Signa Holding had become Austria’s largest privately held real estate conglomerate, with assets worth over 20 billion euros. Benko was ranked as one of the richest Austrians by Forbes, with a net worth of around six billion dollars.

The Fall of Signa Holding

René Benko’s business career was not without controversy. He faced several legal challenges over his business dealings, such as tax evasion charges in 2012 (which were dropped after he paid a fine), bribery allegations in 2014 (which resulted in a suspended sentence), and money laundering accusations in 2018 (which were dismissed by the court). He also faced criticism for his aggressive expansion strategy, which relied heavily on debt financing and leveraged buyouts.

Benko’s financial troubles began to surface in 2023, when a global credit crunch triggered by the collapse of several major banks made it difficult for him to refinance his loans and service his debts. Signa Holding’s retail business was also hit hard by the Covid-19 pandemic, which reduced consumer spending and footfall in its stores. The value of its real estate assets plummeted as well, as demand for office and commercial space declined due to remote working and online shopping trends. Its debt has more than doubled in the first nine months of 2023.

The company had outstanding liabilities of just under €2bn at the end of 2022, up from €635 million the previous year. By the end of September 2023, borrowings had risen to about €5 billion, according to the company’s insolvency filing in November 2023. Signa Holding filed for insolvency at a Vienna court, initiating a self-administered restructuring process. The company hoped to salvage its assets by selling some of them or finding new investors. However, the prospects for recovery were bleak, as most of its subsidiaries were also facing bankruptcy. Signa Prime, the group’s flagship real estate unit, which owned luxury properties in prime city locations, saw its asset value drop from 14.2 billion euros in 2022 to 2.8 billion euros in 2023. Signa Development, which was responsible for building projects, was also insolvent. Signa Retail, which operated Karstadt, KaDeWe and Selfridges, was struggling to survive.

The insolvency of Signa Holding had a significant impact on the Austrian economy, affecting thousands of employees, suppliers, creditors, and customers. It also tarnished René Benko’s reputation as a successful entrepreneur and a powerful figure in the business and political circles. Forbes removed him from its billionaires list after his net worth plummeted to less than one billion dollars. He also faced legal investigations over possible fraud and mismanagement of his company.

Story going forward

René Benko’s Signa Holding was once a prominent example of entrepreneurial success and innovation in the European real estate and retail sectors. However, its rapid rise was followed by an equally rapid fall, as a combination of external shocks and internal weaknesses brought it to the brink of collapse.

Benko’s story illustrates the risks and challenges of building a business empire based on debt, leverage, and expansion, and the importance of adapting to changing market conditions and consumer preferences.

The future of Signa is uncertain at this point. However, it is clear that the company is facing significant financial difficulties and is taking steps to address them.

Please note, none of the information on this blog represents the opinion of my employer and all information does not represent a financial advice.