Austrian real estate tycoon's problems worry investors

Austrian real estate group that co-owns the landmark Chrysler building in New York City has warned of an imminent "restructuring" that has drawn attention to several unsafe projects and the company's wealthy titan.

Rene Benko, one of Austria's richest men with a fortune of $6 billion according to Forbes, has turned his Signa Group into a real estate giant since it was founded in 2000. But as the sector suffers from higher borrowing costs and rising material prices, more developers are filing for bankruptcy.

Numerous Signa projects, including the construction of a symbolic high-rise in Germany, have stalled, causing anxiety among investors about their money. Confirming its problems, Signa announced last week that Benko was resigning from its board of advisers as the group prepares a "plan for the necessary steps to reform" by the end of November.

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 his first purchases was a department store in Innsbruck, which Benko turned into a modern shopping center. Benko has since added the Chrysler building and Berlin shopping mall KaDeWe to the company's portfolio, expanding into media and other sectors. The company has also tried to attract investors with slogans such as: "It's never been so boring to get rich. "

With branches in Austria, Germany, Italy, Luxembourg and Switzerland, Signa has assets worth 27 billion euros and projects worth 25 billion euros in development, according to its website. However, Signa is in trouble. Thailand's Central Group said last month it had taken control of the historic British department store Selfridges, which was formerly owned by Signa.

Rating agency Fitch has already downgraded a subsidiary of Signa Development after it said it faced problems, including its liquidity. The online trading division of Signa Sports United has already initiated bankruptcy proceedings for several of its businesses and has decided to drop its NYSE listing to cut costs. Signa did not respond to AFP's requests for comment.

Signa's activities have drawn criticism in the past. Leading German department store chain Galeria Karstadt Kaufhof, acquired by Signa in 2019, declared bankruptcy in 2020 due to the coronavirus pandemic, and the chain decided to close 52 stores earlier this year.

In 2020, Benko testified before an Austrian parliamentary committee investigating extensive corruption allegations in the wake of the so-called Ibizagate scandal that rocked the country's politics. He was asked about ties to several high-ranking conservative and far-right political figures, although Benko was not charged in the case. The scandal erupted in 2019 when a video showed the former leader of far-right Austria offering public contracts to a woman pretending to be the niece of a Russian oligarch in exchange for campaign help. In a separate case, Benko received a 12-month suspended sentence in 2012 in an Italian tax case after a court found him guilty of bribing former Croatian Prime Minister Ivo Sanader €150,000 to interfere with Italian tax authorities.