A financial crisis that has engulfed Signa Group, Rene Benko’s property empire in Austria, has cast doubt on the future ownership of Selfridges.
Signa shareholders, who bought Selfridges last year in a £4-billion deal with Central Group of Thailand, ousted Benko from his position as chairman, as cash crunch threatens Benko’s €23-billion empire (£20-billion).
The restructuring experts will be called in and a possible sale of the London store is expected. The turmoil has cast a shadow over the future for a retail institution which has been setting the standard in the high street ever since Harry Gordon Selfridge’s Oxford Street store opened in 1909.
Signa bought Selfridges last August and announced plans to build a hotel near its flagship store on Oxford Street, as well as renovate its food hall. However, neither initiative has seen any tangible progress. Sources close to Selfridges claim that this is due to the nature of these projects, which are long-term and not Signa’s financial ability. A potential change of ownership will likely delay the projects further.
The Weston family who had owned Selfridges almost 20 years stressed that it was important to sell the store to responsible buyers who would honor their legacy of long-term, thoughtful stewardship.
Wax mannequins are taken in for repairs, 1930
Benko, 46 years old, was a dropout from school who became a millionaire by making deals during an era when money was cheap. He developed a close friendship with Sebastian Kurz who, two years ago, resigned as Austria’s Chancellor amid allegations of corruption. In October of last year, the offices of Benko in Innsbruck was raided as part an investigation into corruption in government. No charges were brought.
Signa and Central own department store chains Rinascente and KaDeWe, both in Germany and Italy. Central, a family business that spans retail, hotels, and restaurants, has been identified as the most likely purchaser if Signa is forced to sell Selfridges.
The group’s deal with Selfridges threw the group into debt of at least £1.7bn. It also runs department stores in Manchester and Birmingham as well as de Bijenkorf and Brown Thomas and Arnotts, both in Ireland. Selfridges was split into an operating and a real estate company. The trading operations were left to pay rents to the property company. The group reported an operating loss of £124.8m on sales of £804.7m in the 13-month period ending January of this year.
Benko took advantage of a decade’s low interest rates in order to turn Signa into Europe’s largest property developer. Benko’s portfolio includes a stake at the Chrysler Building in New York, luxury hotels in Venice overlooking Lake Garda and a stake at the New York City landmark. The tycoon joked that there are only two European property owners with a portfolio as enviable as his: the royal family, and the pope.
Professor of Management Leonhard Dobusch at Innsbruck University said that Signa was particularly affected by rising interest rates and declining property values, because the company had “aggressively valued” its properties and assumed rates would remain low. It had secured loans based on this assumption.
Signa, the company that built the Elbtower, failed to pay its builder last month. The project, worth €tr6yvbc700m, would have created the third tallest building in Germany.
The acquisition by Frasers Group of SportScheck, the German chain from Signa is now a subject for debate. This deal should be completed early next year.
Central stated that it was committed to “all its luxury department shops”. Selfridges stated: “This doesn’t change anything for Selfridges. Selfridges is independent of its shareholders. Central Group has been a constant and consistent supporter of Selfridges. “We are focused on the Christmas season and looking forward to welcoming our customers in our stores for a unique experience”.
Arndt Gleiwtiz is a German restructuring specialist who will be appointed by the shareholders of privately-held Signa. This includes members of the Peugeot family.