Signa Holding is in negotiations to sell half of New York’s Chrysler Building to urgently raise cash, the collapsed European property company’s administrator has said, as he warned of a protracted and financially painful wind-down ahead.
Creditors of the Austrian company, founded by swashbuckling young developer René Benko, met in Vienna on Tuesday to hear administrator Christof Stapf give his first assessment of its finances since insolvency proceedings began last month.
Stapf told them he and other outside advisers were still struggling to understand — or gain control over — Signa Holding’s sprawling network of subsidiaries and assets.
The holding company urgently needs cash to pay for its own wind-down, Stapf stressed, but has relatively little that it can immediately put on the market.
“The sale of Signa Holding’s Cessna Citation XLS private jet is under way . . . [and] discussions are also being held regarding the investment in Signa RFR US Selection AG, whose US real estate projects include the Chrysler Building in New York,” he said in a statement.
Signa Holding owes just over €5bn to creditors. So far €1.1bn of claims have been filed ahead of a mid-January deadline.
Analysts at JPMorgan estimated the broader Signa Group, which Signa Holding sits at the centre of, owes €13bn.
That figure is based on limited publicly available data, however, and restructuring advisers working with Signa say the true figure may be much higher.
“The issue is we do not know really at all about the scale of the borrowing. And even though we are relatively early in this process, that’s not normal. None of this is very normal at all,” said a lawyer working with one Signa creditor.
The art deco Chrysler Building, completed in 1930, was briefly New York’s tallest tower before being overtaken by the Empire State Building.
The property is half owned by Aby Rosen, the developer whose group, RFR, is also the managing partner. RFR and Signa paid $151mn for the property in 2019, a fraction of the $800mn the Abu Dhabi Investment Council spent in 2008.
Speaking to the Financial Times that year, Rosen called the Chrysler Building “an American icon”, saying: “It has lost a little bit of its relevance. But it has not lost its beauty or importance.”
For all its cachet, the building has long been hobbled by a ground lease that requires the owners to pay escalating annual rents to the Cooper Union private college. Those rents swelled from $7.5mn in 2018 to $32.5mn in 2019 and are due to reach $41mn in 2028.
Rosen has been locked in negotiations with Cooper Union’s board to restructure the ground lease. Making it less onerous would, in theory, allow him to invest in upgrading the property’s retail offerings and make other changes.
In the meantime, the Chrysler Building has performed relatively well even as other older Manhattan office buildings are shedding tenants and seeing their rents plummet in an era of remote working. The building’s 1.2mn square feet were more than 90 per cent leased, according to recent CoStar data.
Ruth Colp-Haber of Wharton Property Advisors, whose group advises companies on leasing, said the building lacked the most modern amenities but still appealed to smaller tenants, in particular, who appreciated its charm and proximity to Grand Central Station. “The Chrysler Building is not going anywhere,” she said.
Stapf’s task is greatly complicated by the way Signa’s founder Benko, 46, set up his property empire.
Although he exerted almost complete control, and was its biggest shareholder, he has held no formal managerial role since 2013 and ensured accounts across its dozens of subsidiaries and their sub-entities were never consolidated.
“The holding company alone has 53 direct investments in companies and indirect investments in several hundred other companies,” Stapf said.
He asked for creditors and shareholders from across the group to unite under a single “group-wide steering committee” as the only viable way to fairly unwind its operations.
“The preliminary organisational chart of the group as of September 30 comprises a total of 46 pages in A3 format,” he added, pointing out that hardly anyone within the company seemed to know how it was run.
Of the 42 employees of Signa Holding, 34 worked in hospitality functions, including a huntsman and staff for Benko’s private jet.
Stapf laid them off in early December.
“There is a lack of management capacity with overarching knowledge . . . the holding company has recently only partially fulfilled its control function,” Stapf told creditors.
Faced with a crippling debt burden, and troubled by Benko’s apparent sangfroid in the face of mounting problems, Signa’s minority shareholders — which include some of the wealthiest families in Europe — rebelled against the businessman shortly before the company went into administration.
They are still in control of two of its most important subsidiaries, Signa Prime and Signa Development, which own many of the group’s prize assets — a portfolio of luxury properties across Europe including many of its swankiest department stores.
The supervisory board of the two companies fired their joint chief executive, Timo Herzberg — a Benko ally — earlier this month over what they alleged were “gross violations” of his fiduciary duties.
Many of those owed money by Signa are now carefully scrutinising the way Benko ran the businesses, raising questions about excessive expenses charged to obscure entities and complex intra-company loans that shuffled billions of euros around the group in the months before its collapse.
Benko, who was convicted of bribery in 2013, is currently a high-profile suspect in a probe into corruption and abuse of office in Austria.