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The crisis-hit Signa Group sold half of its prized KaDeWe department store building for a fraction of the valuation listed in its books, raising doubts about how much the assets underpinning billions of euros of debt are worth.
René Benko’s luxury property group sold the stake in the west Berlin property to Thailand’s Central Group in March for around €300mn, according to three people directly familiar with the transaction, as it raced to raise cash.
Signa Holding, the company at the centre of the Austrian property network, filed for administration on Wednesday. Other Signa entities continue to trade, including the owner of the KaDeWe building, Signa Prime. However, on Friday Signa Prime’s supervisory board appointed restructuring experts to take control of the company.
Signa continued to value the whole of the KaDeWe property at €1.5bn as recently as last month, according to due diligence documents produced by Signa’s lenders and seen by the Financial Times.
Although the sale of the stake in KaDeWe is a matter of public record, the price paid and internal valuation have not previously been reported.
The crisis at Signa has rippled through the European banking community, as lenders seek to establish their exposure to the group and the likely value of their collateral.
Banks have so far sought to reassure their investors that loans to Signa are backed by the highest quality property assets which will retain their value. Shares in the Swiss bank, Julius Baer, slid nearly 20 per cent last month over fears about its SFr600mn of lending to Signa. The bank has repeatedly said it is well-collateralised.
The European Central Bank last week warned about the risk to banks from losses in commercial real estate, noting that the average debt load of large European property companies, measured against their earnings, was already close to pre-2008 levels.
The KaDeWe building is Signa’s single most valuable piece of real estate and has long been regarded as its jewel in the crown. When the group bought it in 2014, it was a deal that supercharged Signa’s profits and helped turn the company’s swashbuckling founder, Benko, now 46, into a multibillionaire.
The Central Group already co-owns the KaDeWe Group operating company, which runs the department store business and leases the property from Signa.
Signa did not respond to requests for comment. The KaDeWe Group said its business is financially independent of Signa. The Central Group declined to comment on the price paid for KaDeWe’s Berlin property.
Additional reporting by Joshua Oliver in London