Signa Holding has entered into negotiations to sell the half of New York’s Chrysler Building in order to raise urgent cash, according to the administrator of Signa Holding, a collapsed European real estate company. He warned that a long and painful financial wind-down was ahead.
The creditors of the Austrian firm, founded by the young, swashbuckling developer Rene Benko in Vienna, gathered on Tuesday to listen to administrator Christof Staff present his first assessment of their finances since bankruptcy proceedings started last month.
Stapf said he, along with other outside advisors, were still struggling to gain control of Signa Holdings’ vast network of subsidiaries and assets .
Stapf said that the holding company urgently needed cash to pay its own wind down, but had relatively little it could immediately sell.
The sale of Signa Holding’s Cessna Citation XLS Private Jet is underway. . . “[and] discussions are being held about the investment in Signa RFR US Selection AG whose US Real Estate projects include the Chrysler Building, in New York,” said he in a press release.
Signa Holding is owed just under €5bn by creditors. As of now, €1.1bn in claims has been filed before a deadline of mid-January.
JPMorgan analysts estimated that the Signa Group as a whole, of which Signa Holding is at the core, owes €13bn.
This figure is based only on publicly available information, but restructuring advisors who work with Signa believe the real figure could be higher.
The problem is that we don’t know the exact amount of borrowing. Even though this is a relatively new process, it’s not right. “None of this is normal,” said an attorney working with a Signa creditor.
The art deco Chrysler Building was completed in 1930 and briefly held the title of New York’s tallest building before it was overtaken by Empire State Building.
property belongs to Aby Rosen’s group RFR. RFR is also managing partner. RFR and Signa spent $151mn on the property in 2019. This is a fraction of what Abu Dhabi Investment Council paid in 2008, which was $800mn.
Rosen, who spoke to the group that year called the Chrysler Building an “American icon” and said: “It’s relevance has a little lost.” It hasn’t lost its beauty, or importance.”
The building’s cachet has been hampered by a ground-lease that requires owners to pay annual rents increasing in price to the Cooper Union Private College. Rents have risen from $7.5mn to $32.5mn and will reach $41mn by 2028.
Rosen is in negotiations with Cooper Union to restructure ground lease. In theory, if he could make it less burdensome, he would be able to upgrade the retail offerings of the property and make other improvements.
The Chrysler Building is doing relatively well, even though other older Manhattan offices are losing tenants and their rents are falling in this era of remote work. According to CoStar data, the building’s 1.2 million square feet are more than 90% leased.
Ruth Colp Haber, of Wharton Property Advisors whose group advises on leasing, said that the building was lacking in modern amenities, but it still appealed, especially to smaller tenants who valued its charm and close proximity to Grand Central Station. She said that “The Chrysler Building will not disappear.”
Signa founder Benko’s 46-year-old property empire is a major obstacle to Stapf.
He owned most of the company and had almost complete control, but he doesn’t have an official management position anymore.Since 2013, he ensured that accounts for its subsidiaries and sub-entities, were not consolidated.
Stapf stated that the holding company alone had 53 direct investments and indirect investments of several hundred companies.
He said that to end the group’s operations fairly and equitably, all creditors and shareholders should gather under a “group-wide steering panel.”
The preliminary organisational chart for the group on September 30 is 46 pages long in A3 format. He added that few people within the company seem to understand how the business operates.
Signa Holding employed 42 people, of which 34 were in hospitality roles. This included a huntsman, and staff to Benko’s personal jet.
Stapf terminated them at the beginning of December.
“There’s a shortage of management capability with overarching expertise. . . Stapf informed creditors that the holding company had only recently partially performed its control function.
Signa’s minor shareholders, which included some of Europe’s wealthiest families, rebelled against Benko shortly before the company was placed into administration. They were troubled by Benko’s apparent sangfroid as he faced mounting problems.
Signa Prime, and Signa Development are two of the most important subsidiaries of the group. They own many of their prized assets, including a portfolio luxury properties in Europe, as well as many of their swankiest department stores.
Timo Herzberg, a Benko associate who was the joint chief executive of both companies, was fired by their supervisory boards earlier this month for what they called “gross breaches” of his fiduciary duty.
Signa owes money to many people who are now closely scrutinizing the way Benko managed the business. They have raised questions about excessive expenditures charged to obscure entities, and complex intra-company loan arrangements that moved billions of Euros around the group just months before it collapsed.
Benko is a suspect in an investigation into corruption and abuse in office in Austria. He was convicted in 2013 of bribery.