Over two decades, René Benko has grown his Cigna real estate empire from humble beginnings renovating apartments in his home city of Innsbruck to its peak as one of Europe’s most successful property developers.
Buoyed by cheap debt and using an increasingly baroque network of holding companies, subsidiaries and trusts, Cigna acquired some prestigious addresses across the continent, making Benko a billionaire. Only the Pope and the British monarchy had better buildings than him, he liked to joke.
However, its complexity was a key element in the crisis Cigna now faces. Over the past year, investors have been reluctant to give the group more money, due to concern about the complex financial engineering that Banco was using. Without new money, insolvency became inevitable.
The Financial Times has simplified the structure of Signa Group’s more than 1,000 corporate entities to illustrate the challenges now facing lenders and investors. Signa did not respond to requests for comment.
On Wednesday, Signa Holding, the central company in the Signa network, filed for bankruptcy in Austrian courts.
Under Austria’s “self-administration” rules, its management – with the help of German turnaround specialist Arndt Goewitz – has 90 days to come up with a viable restructuring to gain creditor approval. If they fail, an independent administrator will take over.
Benko remains the controlling shareholder of Signa Holding. But there are external investors and billions of euros in debt. Balancing the interests of all concerned would be a fiendish task.
Advisers, investors and lenders who spoke to the Financial Times all said the same thing: no one seems to know exactly who has a claim on what. But in recent months, one insider said, money has been flowing from all arms of the Cigna empire back into Cigna Holdings.
Cigna Sports and Cigna Property Management in Germany
Financial tremors began in the peripheries.
Sports e-commerce platform Signa Sports United listed on the New York Stock Exchange in 2021 at a valuation of $3 billion. However, after months of deteriorating finances, it declared bankruptcy on October 23, days after Signa Holding withdrew a $150 million capital commitment.
The management of the company – which was floated by Cigna with the support of Japan’s SoftBank, the Public Investment Fund of Saudi Arabia and Abu Dhabi’s Mubadala Company – said it would file a lawsuit.
Then on Friday last week, the company responsible for overseeing the day-to-day management of Cigna’s German real estate projects, Cigna Property Management Germany, also declared bankruptcy. Cash from the Austrian parent company stopped flowing.
Development of Cigna Prime and Cigna
All eyes are now on two companies in the Signa network: Signa Prime and Signa Development. The pair owns the most valuable assets in Signa’s portfolio.
Signa Development’s mission is to buy land and build new office buildings or places that it can sell quickly. Its projects include the BEAM and Glance office sites in Berlin and the Twentytwo Tower in Vienna.
By contrast, Signa Prime’s main role is to hold and develop top-tier properties over the long term, making money from rental income and higher valuations. Its origins are those of which Benko is proud: the Kadwei Building in Berlin and the “Golden Quarter” in Vienna, for example. It also owns several construction projects, including the Elbtower in Hamburg.
The two companies are still trading and share the same management and supervisory boards.
Members of the supervisory board include Robert Peugeot, from the car dynasty of the same name; Alfred Gusenbauer, former Chancellor of Austria; and Carl Siefelda, former president of Raiffeisen Bank International, one of Signa’s largest lenders.
Overall, Cigna claims to have a portfolio of buildings worth more than €27 billion and a pipeline of developments worth €25 billion, according to presentations it has made to investors.
Benko’s model – established with its first big acquisition, the Kaufhaus Tyrol department store in Innsbruck – is to buy unloved city center spaces, demolish or renovate them, and turn them into temples of luxury, bringing in big-name brands and stimulation. Raising property valuations in the process.
These valuations have continued to rise in a consumer market fueled by cheap central bank money. The debt needed to finance such projects was also cheap. This means that Signa can scale quickly. In 2019, the company recorded its largest profits ever, with Signa Holding generating more than €1 billion.
Until last year, Cigna was still signing billions of euros in commitments for new development projects.
Work on the largest of these buildings – the Elbetower, which is set to become Germany’s third tallest skyscraper – stopped in October when Cigna stopped paying workers.
Signa’s bullish valuations are based on the rental income its properties can generate. For example, the Kadewe Building in Berlin has generated a value for Cigna Books of over €100 million annually over the past five years.
That raised questions for some in the industry because many of Cigna’s most important tenants — those who paid rents that justified the high valuations — were operating companies controlled by Cigna as well.
KaDeWe Group, which Signa owns alongside Thailand’s Central Group, is the retail operator behind Berlin’s equivalent of Harrods and a fleet of other luxury department stores in Germany and Switzerland. It leases buildings dedicated to all of these things — often synonymous in consumers’ minds with the brands themselves — from Signa Prime.
KaDeWe is a profitable project, and Central Group has repeatedly emphasized that it has the resources to protect it from any problem that may arise from the difficulties faced by its participating shareholders.
Signa has another retail fleet, although it is less appreciated by Benko.
Galeria Karstadt Kaufhof is the largest department store chain in Germany and the third largest in Europe. It is a mid-range retailer that is struggling financially due to nervous consumers on the high street.
Signa took full ownership four years ago and began selling the assets out from under it: a small portion of Galeria’s most valuable locations, in inner-city locations, was sold to Signa Prime. The rest was sold to outside investors to raise funds.
GKK has stumbled through two restructurings, in 2020 and 2022, with thousands of jobs lost and dozens of stores closed. It had expected to receive €200 million from Cigna as part of the turnaround plan, with the first payment due in February. The company employs 18,000 people.
Until earlier this year, Signa department stores also owned the Austrian furniture chain Kika/Leiner. In June, Cigna sold it for 400 million euros. The company went bankrupt less than a week later.
Cigna US, Cigna Hotels and Cigna Media
Signa also has wide-ranging interests beyond the retail sector. Its US joint venture with real estate developer RFR bought the Chrysler Building in 2019. At the time, the move was seen as one of Benko’s boldest bets yet and a sign that Signa saw a future in the world of New York real estate speculation. .
Meanwhile, its hotel arm owns several luxury destinations in Europe, including the Bauer Palazzo in Venice, which Signa is developing, and Chalet N in Lech, one of the most exclusive ski resorts in the Alps.
In Austria, Benko’s home country, Cigna also owns minority stakes in the country’s largest newspaper, the Kronen-Zeitung, and the Kurier newspaper.
At nearly every tier of the Cigna network there are minority co-investors and a dizzying array of lenders.
Among them are some of the richest family offices in Europe such as Rausings and Peugeots.
Prominent businessmen and industry leaders have also invested, including Ernst Tanner, CEO of Lindt & Sprüngli Chocolate; Torsten Toller, pet food magnate; Hans Peter Hasselsteiner, Austrian industrialist; The heirs of Formula 1 racing legend Niki Lauda.
They are all now racing to understand exactly what their investments are worth.
The opaque nature of the group’s structure, combined with side letters, profit-sharing agreements, promissory notes and large loans between the companies, means that no one has a clear idea of what will happen next, according to multiple sources with direct knowledge of the company.
At least 120 banks have exposure to Sigma, according to people familiar with the conglomerate and its entities. Swiss wealth management firm Julius Baer is the only lender to publicly clarify its exposure, saying this week that it had secured loans worth 606 million Swiss francs ($692 million) to a European company, which people close to the company confirmed was Cigna.
Austria’s Raiffeisen International Bank has more than €750 million of exposure, according to people familiar with the details, while documents seen by the Financial Times indicate that a group of global banks have loans owed to Cigna, including the Swiss-owned Credit Suisse. UBS, Bank of China, and Bank of France. Natixis and Italian UniCredit.
Smaller regional banks are more at risk, relative to their size. The documents state that Germany’s state-owned Landesbanken, including Frankfurt-based Helaba and Munich-based BayerLB, have outstanding loans worth hundreds of millions of euros. Other Raiffeisen subsidiaries in Austria are also big supporters of Signa.
JPMorgan analysts estimated last month that Cigna owed at least 13 billion euros to lenders in total.
Benko Family Foundation, Laura Foundation and holding companies
At the top of everything are two Benko establishments in Innsbruck. Over the years, they have been Signa’s biggest financial beneficiaries. But it’s vague. Benko’s mother, Ingeborg, who raised him alone, is the controlling signatory of both institutions.
However, institutional grip on Signa is not complete. Banco has slowly given up control in exchange for investment. Side agreements between Banco and investors allowed him to retain control. But with Cigna Holdings on the verge of bankruptcy this week, the dispute has widened.
Several people close to the situation told the Financial Times that trust had almost completely evaporated between Benko and some of its outside investors.
They said Banquo still seemed to believe his empire could be saved. Everyone hopes to come out with as much of their capital intact as possible.
Additional reporting by Owen Walker in London
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