Galeria

"At Galeria, a man henceforth takes charge, who bears the nickname "emergency doctor of the German economy." Arndt Geiwitz, a tall man with distinctive glasses, has previously stepped in to navigate notable companies through bankruptcy. He tried to save Schlecker, and stepped in as trustee for the fashion czar Willy Bogner. Geiwitz is drawn to prestigious cases. At Galeria, he is Benko's man. The protective shield procedure allows the company to separate itself from all liabilities, including excessive rents. Geiwitz renegotiates the contracts of the properties; in the first insolvency procedure, in which around 40 properties were closed, rents were reduced by a mid-double-digit million amount. He does not touch the businesses that belong to Signa. Geiwitz acts tactically skillfully. There was no transparency about the status of the rent negotiations with the owners, one of those involved said. For a long time, it was said to be "not yet negotiated", everything "open". Only at the end did the rents come to the table. As compensation for the high rent payments to Signa, Benko then offered a subsidy of 200 million euros, 100 million from Signa Prime, 100 million from the holding. At that time, it was said: Deal or dead; if there is no approval, Galeria would go under. The employees finally wanted peace, and the creditors' committee was set up in such a way that Signa controlled it, so they could have pushed it through."

"But the beautiful facade of the Galeria building is deceptive. Hardly anything of the former glamour is felt in the department store anymore, as Walter Droege had to experience. The senior boss of the consulting and investment firm in Düsseldorf, which bears his name, started as a consultant and now his company, co-owned with his son, turns over double-digit billion euro amounts annually. In the scene, he is known as the turnaround king. With his team, he has, for example, acquired the struggling online book retailer Weltbild. At the beginning of 2024, he then became interested in acquiring part of the Galeria stores. Signa Retail Selection AG, based in Switzerland, to which Galeria Karstadt Kaufhof also belongs, had announced that it would wind up the company. Galeria was thus up for sale."

"The gallery in Cologne obviously has a considerable backlog of investment. Normally, defects such as a pieced-together floor or scarcely usable spaces lead to opportunities for rent reductions. Not so with Galeria. For the building on Hohe Straße, the landlord called for around 19 million euros per year, which corresponds to about 30 percent of sales. The market standard is 6 to 10 percent. Who was so greedy? The Galeria parent, Signa. "I don't want to mention figures," says the head of Cologne's Kaufhof, Harry Benzrath, to the Kölner Stadt-Anzeiger at the end of 2023: "But let me put it this way: (…) Rents significantly above what all retail experts known to me describe as too high, are a huge burden on the business. Hohe Straße is not the same as the Champs-Élysées in Paris.""

"If something was non-negotiable in the Signa empire, it was the rents of the Signa-owned Galeria buildings. In Frankfurt, they were about 25 percent of sales, even in B-cities like Mannheim they were so high at 19 percent that the business could not be profitable. A total of around 200 million euros in rents for the 18 buildings thus flowed annually to Signa. Some of the buildings will not turn a profit, says a top manager from Galeria. Especially since the department stores had to cover not only the rent but also all operating costs and repairs to the roof and building, meaning façade, roof, and windows, themselves. Rip-off contracts, known in the industry under the euphemism of triple-net leases."

"Benko generated 140 million euros, only then was a protective shield procedure possible, in which, unlike a complete bankruptcy, the owner still has control. The protective shield procedure offers Benko - besides the risk of a poor image - also opportunities. Lease contracts can be terminated more quickly, employees can be laid off more easily, and the already planned restructuring can be done more radically and in fast-forward. Signa's man for the protective shield procedure is a familiar face to Benko: Arndt Geiwitz, the tax consultant and auditor known to the broader public from the Schlecker insolvency. Benko first hired Geiwitz in 2013 during the purchase of Karstadt, where he had him review the finances. He also assisted in the takeover of the Otto subsidiary SportScheck. Now he is supposed to reorganize the department store business at Galeria. In the end, around 40 branches will close. No one among the top executives had experience with a protective shield procedure, says a trade manager. Geiwitz, on the other hand, would have known how to quickly set up a protective shield procedure, how to control the creditors' committee, which people to bring in; he did all that very cleverly."

"In the end, the winners and losers of the Galeria bankruptcies during and shortly after the coronavirus pandemic become clearly apparent. In the first bankruptcy proceedings, 81.4 million Euros are incurred for consulting fees, 41.5 million of which were expenses for the protective shield procedure, and 39.9 million flowed in the subsequent bankruptcy proceedings. A large part of that is collected by Geiwitz and his people, and in the second process, it is around 52 million. Nearly ten thousand jobs are lost. And the fool is undoubtedly the state. In total, two loans amounting to 680 million euros are being provided by the Economic Stabilization Fund for Galeria – amid considerable doubts from some actors and also criticism from the public. Why invest money in department stores when time has passed them by and fewer and fewer customers are wandering into the largely deserted floors manned by salespeople? Why give money to Benko and his Signa when he continues to report high profits for his real estate and in the crisis year of 2020 delighted his investors in the Prime with distributions of more than 200 million euros?"

"Later, the works councils of the department store chain will accuse Geiwitz of not having restructured in the interest of Galeria, but for Signa. While most landlords of the Galeria buildings granted considerable rent reductions, the contracts with Signa as a landlord remained unaffected. Geiwitz confirmed to several participants that he had no leeway. Benko had been very strict. Because a correction of the rents downwards would have immediately triggered value adjustments in the properties of Signa - and thus probably turned the previously reported profits into losses."

"In April 2020, the month in which Galeria sought protection under the protective shield, Benko gave his investors a "Status Update". In the 65-page document, the entrepreneur advertised more than 1 billion euros in net profit and a real estate value of 18.3 billion euros for 2019. This was followed by a slideshow, a glossy presentation of his properties one after the other – from the Globus buildings to the Bauer Hotel in Venice. The document speaks of more than 550,000 square meters of office space, ten hotels, more than 7,400 apartments, and 290,000 square meters of commercial space. In the German-speaking region, Signa sees itself positioned directly behind Aroundtown, a real estate corporation listed in the MDAX. The word "crisis" is not mentioned at all in the update. Despite this, the demand for office spaces dramatically drops, and vacancies in cities are on the rise. Nevertheless, Benko plans as if Signa were immune to crises. He continues to invest in office towers, hotels, and department stores. In the pipeline are projects which, with a market value of around 23 billion euros, would double the property value by 2023."