When the CEO of Swiss wealth manager Julius Baer stepped down on 1 February amid a high-profile hit to profits, it was the latest sign of financial fallout from the collapse into insolvency of real estate giant Signa Holding.
CEO Philipp Rickenbacher became the fall-guy after Julius Baer announced net credit losses of 586 million Swiss Francs linked to its exposure to Signa. The firm will even exit its private debt business and pursue more ‘traditional’ lending routes as a result. Three major loans had been made to the Austrian firm in recent times, backed by collateral which the SonntagsZeitung newspaper reported as being “worthless”.
But as Signa battles its way through a self-managed insolvency, not all its assets are without value. In fact, on its spending spree of recent years, the ambitious property empire founded by Austrian property entrepreneur René Benko snapped up some of the world’s most prized trophy assets. So what went wrong, and what will happen next?
Trophy asset goals
Austria’s largest privately owned real estate company was founded in 2000 and was employing around 150 people when it announced insolvency plans in November 2023, just weeks after its offices had been raided by the Austrian police.
Benko’s original plan – to create a property empire comprising some of the world’s most high-profile real estate assets – went on to involve a rollcall of star architects and famous structures. After modest success with a spa hotel in the early years of Signa, the firm kicked off its first major hotel development in 2008, redeveloping the former headquarters of Länderbank and Bank Austria into the Park Hyatt Vienna hotel. According to sources, the hotel would become Benko’s favoured spot for inviting prestigious guests and wooing capital partners.
In 2011, Signa commissioned its most ambitious hospitality development to date on the shores of Lake Garda in Italy. The group invested over €65 million to create a hotel, a cluster of vacation villas and a clubhouse with holiday apartments designed by the likes of David Chipperfield, Matteo Thun, Richard Meier and Austrian studio Sphere. Dubbed Eden Reserve at Gardone Riviera, the scheme was a success and even performed robustly during the pandemic, with the ultra-wealthy attracted by the villas’ refined isolation. In 2023, the structure’s solid results saw Signa unveil plans to add holiday bungalows with suites, a new pool and spa and a beach club on the lake for its guests in 2024.
Eden Reserve wouldn’t be Signa’s last hospitality play. In parallel with its development, Benko was working on another luxury project, a private ski chalet for his own use which he would also rent to high-net-worth guests. Chalet N in Lech in Arlberg, which cost some $53 million to build and was completed in 2012, was reportedly the most expensive ski chalet in the world on its launch, priced at an average of €290,000 per week. From bullet-proof glass to Bulgari products in its bathrooms, the chalet came with private chef capable of catering for 22 guests and an indoor-outdoor spa. Three years after its opening, however, Benko was investigated for corruption relating to its construction. According to legal documents, Benko was alleged to have paid €250,000 to the commune of Lech to skip a public tender for the site, plus another payment of the same size to speed up building permits. The investigation came in the wake of Benko serving 12 months on probation after being found guilty of making improper payments to Croatian officials.
Benko followed this with the acquisition of the five-star Hotel Bauer in Venice in 2020 for a reported €400 million, taking over the property from US investment manager Elliott Management Corporation. The hospitality assets were all placed under the management of Signa Luxury Hotels. Signa signed a deal with Rosewood to reflag Hotel Bauer in the summer of 2022, and closed the property that same year for an extensive refurbishment, with plans to reopen in 2025 with 110 rooms and four suites.
If Benko had stuck to hotels, would Signa have survived? Not necessarily, as early corruption charges against him allegedly spooked the firm’s board, and in 2012 Benko stepped back from the operational helm of the firm. A more obvious fatal blow was dealt by the firm’s faith in retail real estate. Signa made big investments into German department stores, acquiring a portfolio of KaDeWe and Karstadt properties in 2012, before Signa bought the commercial businesses of KaDeWe in 2013 and Karstadt in 2014. The new company division, Signa Retail, was formed around that time, leading to further retail commitments. The firm initiated the takeover of department store chain Kaufhof in 2018 before merging it with Karstadt.
Towards the end of the decade, its extremely high-profile deals intensified. In 2019, Signa purchased the Chrysler Building in New York for an estimated $100 million, before completing the takeover of Kaufhof in a deal with Canadian retailer Hudson’s Bay Company. It was around this time that it purchased Hotel Bauer too.
In 2021, Signa swooped on a portfolio of British luxury department stores, buying out Selfridges in joint venture with Central Group. Yet less than 18 months later, the writing was already on the wall for the firm’s collapse. By November, Signa conceded that it was in the grip of a liquidity crisis and could not service a reported €10.3 billion of debts. Creditors included not only Julius Baer, but also Italy’s UniCredit bank and Austria’s Raiffeisen.
Signa’s holding company opted for self-administered insolvency, an option under Austrian law, in November 2023. This allows a business to wind-up its own divisions one by one, and In December, it announced that property unit Signa Prime Selection was filing for self-administrated restructuring, as well as Signa Development. Signa Prime is the firm’s largest real estate division with some 54 properties worth nearly €20 billion and debts of €4.5 billion, according to credit documents. Assets include the Park Hyatt in Vienna, the KaDeWe department store in Berlin, and the ambitious Elbtower in Hamburg, where construction has been put on hold.
In the light of the insolvency, Signa's statement read: “It is widely known that, due to external factors in Europe, the retail sector – brick and mortar retail in particular – has been subjected to severe economic pressure in recent years. Investments in this area did not yield the anticipated success. External factors have additionally also had a negative impact on the real estate sector in recent months.”
The retail assets, unsurprisingly, were among the first to go. Selfridges group – which posted a loss last year – has been fully taken over by Central Group. Signa has also reduced its exposure to German department stores. However, the business appears more reluctant to sell its hotels. The president of its Italian arm Signa Rem Italia told a local newspaper last month that Sigina was looking for further financial backing to stay on track with the Hotel Bauer rebuild. “We’re planning to open the hotel in the third quarter of 2025 or at latest the first quarter of 2026,” said Heinz Peter Hager. Yet fiscal authorities in Vienna last month placed a claim against Chalet N over unpaid taxes, suggesting that the Alpine gem may have to be sold to pay bills. With further news that Signa headquarters recently resorted to auctioning off furniture, doormats and e-bikes in a final bid to raise cash, it is not clear how long the business can realistically survive.