Hamburg skyscraper construction on hold - a bad signal for real estate in Germany | Cyprus Mail

The construction of one of Germany's tallest buildings has suddenly stopped halfway through after the developer stopped making payments to the construction company, another ominous sign for the country's troubled real estate sector.

Signa, the Austrian real estate empire that owns the Chrysler Building skyscraper in New York, was moving forward this year on plans to build the Elbtower skyscraper in Hamburg, which is to have 64 floors. However, Signa, founded by René Benko, has fallen behind in payments to its builder Lupp, the construction company's chief executive said. "Due to late payments from the builder, our construction work at Elbtower is temporarily'''terminated,' Matthias Kaufmann, who is in charge of Lupp's finances, said in an email to Reuters reporters. Signa did not respond to requests for comment.

The city of Hamburg and a minority of investors, a real estate subsidiary of Commerzbank (CBKG.DE) of Germany, confirmed the shutdown. That leads to questions about the future of the tower, which is estimated to cost 1.3 billion euros ($1.38 billion) once completed. It has also prompted warnings from city officials and is another indicator of the challenges facing the real estate sector in Europe's largest economy.

The real estate sector has been the backbone of Germany's existence for years, accounting for about a fifth of GDP and one in ten jobs.

Commerz Real, a subsidiary of Commerzbank, said it was in talks with Signa and Lupp to "find a common solution" and expects construction to resume. Elbtower is located in the HafenCity neighborhood, which is also home to the new Elbphilharmonie concert hall. Tenants will include hotel and restaurant Nobu, risk advisory company Aon (AON.N) and a local bank.

Timo Hertzberg, CEO of Signa Real Estate, just a few weeks ago was showing viewers''s construction site as the building rose to a height of nearly 100 meters (330 feet). "The characteristic concrete pillars now give an increasingly clear idea of the shape of Hamburg's future symbol when it is completed," he wrote on LinkedIn.

Karen Payne, Hamburg's senator for urban development and housing, warned that Signa must stick to the agreed milestones or face the consequences. "The contract allows the City of Hamburg to dismantle the completed work, sell it to a third party for completion or complete the construction itself," she said in a statement.