Signa

"Wiedeking was the first to suspect, perhaps even too soon, a Ponzi scheme. That is, Signa could only pay its high dividends because it kept raising fresh money from banks and private lenders. Above all, Wiedeking was annoyed that Benko did not present him with all the figures. And he threatened with a special audit, which he wanted to enforce as a supervisory board member, as he said in discussions with various media. "I suspected as a shareholder that the figures presented by Mr. Benko did not match the ongoing business," Wiedeking said in retrospect. "I confronted him with questions that he could not answer sufficiently for me. He could not or would not give me satisfactory answers. That is why we went our separate ways. In hindsight, given the evidence and allegations now against Signa, I must assume that my fears were all justified." For Wiedeking, the commitment and timely exit paid off. He managed to more than double his investment within a few years. He chose reason over greed because he did not trust Benko's promises of an even rosier future. However, the ruler of the Signa conglomerate managed to prevent a mass exodus among his investors. Neither the founder of "Fressnapf" Torsten Toeller nor Niki Lauda, whom Wiedeking also tried to persuade to leave, followed the manager."

"The KaDeWe in Berlin is getting a new owner just before Christmas. The Austrian real estate investor René Benko pays a total of more than 1.1 billion euros for the luxury department store and 16 other department stores rented to Karstadt. According to media reports, Benko's company Signa is paying 500 million euros for the KaDeWe alone. The seller is the landlord consortium Highstreet Holding in London. Nicolas Berggruen, the owner of Karstadt, will continue to operate the KaDeWe, but he now has to negotiate a new rent with the new owner."

"René Benko created something great and then destroyed much of it. Solid business operations and trust in the solidity of the real estate business were left by the wayside. Even though the business and legal processing will take years and it is likely that Benko will have to face court, he did not build the castle in the air called Signa alone. He readily found financiers, including wealthy private individuals, bank managers and insurance people, foundation managers, and Arab sheikhs. Benko invited them to his yacht "Roma" or his estate high above Lake Garda, or he quickly flew to Dubai or Abu Dhabi, to Hamburg or Vienna on his private plane. And all the economic experts willingly gave him capital, apparently without really examining his business model. Just as auditors and real estate appraisers played their roles in the illusion theater of the Austrian entrepreneur. The lawmakers in Germany and Austria, who left gaps through which the clever newcomer slipped, also bear some of the blame."

"René Benko created something great and then destroyed much of it. Solid business operations and trust in the solidity of the real estate business were left by the wayside. Even though the business and legal processing will take years and it is likely that Benko will have to face court, he did not build the castle in the air called Signa alone. He readily found financiers, including wealthy private individuals, bank managers and insurance people, foundation managers, and Arab sheikhs. Benko invited them to his yacht "Roma" or his estate high above Lake Garda, or he quickly flew to Dubai or Abu Dhabi, to Hamburg or Vienna on his private plane. And all the economic experts willingly gave him capital, apparently without really examining his business model. Just as auditors and real estate appraisers played their roles in the illusion theater of the Austrian entrepreneur. The lawmakers in Germany and Austria, who left gaps through which the clever newcomer slipped, also bear some of the blame."

"Gusenbauer procured several contacts for Benko and remained the most eager lobbyist for Signa until its failure, however, he could not provide him with any money. Benko needs new financiers for his constant drive for growth. Not always do the financiers have an impeccable reputation. In 2009, the Greek shipowner George Economou joined Benko, whom he met at an event organized by HSH Nordbank in Athens. The meeting was titled "Real Estate meets Shipping," to which the US real estate giant Hines was also invited, along with Benko."

"One person who acted like a catalyst for Benko's career is Karl Kovarik, a very wealthy heir to a gas station empire, who financed the young Innsbruck businessman after Benko had previously sold a penthouse apartment to Kovarik's brother-in-law. The gas station king invested about 25 million euros in Benko's first company, Immofina, renamed Signa in 2006. Benko and Kovarik each held half."

"In the year 2013, René Benko and Roland Berger take a seat at one of the white-laid tables. They dine on upscale bourgeois food at Borchardt, a whole plate-filling Wiener Schnitzel being one of the most popular dishes. Occasionally, one of the other guests comes to the table around lunchtime and greets Berger, who then introduces the young man and successful entrepreneur by his side. Just then, Benko's Signa had entered the department store chain Karstadt and would soon take over all shares from the failed US entrepreneur Nicolas Berggruen. Thus, Benko suddenly becomes a highly relevant real estate investor in German city centers."

"Solid business operations and trust in the solidity of the real estate business were left by the wayside. Even though the business and legal processing will take years and it is likely that Benko will have to face court, he did not build the castle in the air called Signa alone. He readily found financiers, including wealthy private individuals, bank managers and insurance people, foundation managers, and Arab sheikhs."

"However, not everything is going well for him in these years. In 2013, the Vienna Higher Regional Court convicted him to a one-year suspended sentence, a verdict later confirmed by the Supreme Court in the following year. According to the court, Benko aimed to resolve a Signa tax issue in Italy quickly and in his favor. He had promised 150,000 euros to a former Croatian Prime Minister to influence the Italian Prime Minister Silvio Berlusconi. The Viennese judge referred to it as a "textbook case of corruption.""

"People are eating out of Benko's hand, and the billionaires are feeding him fresh money. His narrative of Signa as the real estate company, which, thanks to the entrepreneurial genius of its founder, is better than all the others, fits perfectly with his clientele. One of his early fans, the entrepreneur Torsten Toeller, recounts Benko's strengths today with which he could dazzle: "I overestimated the energy and strategic understanding of a young supposed exceptional entrepreneur for too long and didn't recognize the story behind the story that René Benko has always told so eloquently.""

"Benko's gold rush in concrete has, in addition to macroeconomic reasons, very specific ones as well. A long-standing senior executive at Signa lists three arguments for investors: Benko paid up to 6 percent dividends each year, whereas real estate usually only yields 2 to 3 percent. The shares increased in value year after year. Moreover, Benko concluded secret deals with individual financiers like Roland Berger, Klaus-Michael Kühne, or Torsten Toeller. He gave them the option to exit and return their shares if they wanted to. This made the shares fungible, as if investing in stocks – very unusual in the real estate business, which is typically long-term and therefore requires long-term capital planning."

"The letter concludes with a promise: "Signa makes the impossible possible – it has been, is, and will remain so. Promised.""

"Benko convinced the Chairman of the Board of the Swiss private bank Julius Bär, Philipp Rickenbacher, to grant loans totaling 600 million Swiss francs to Signa in 2021 and 2022. Actually, lending to companies was not at all part of the core business model, but the bank had made a good profit with an interim financing for the purchase of the Swiss Globus chain by Signa – and Rickenbacher had obviously become both greedy and gullible."

"Benko often had the luxury of his private life paid for by Signa: the operation of his 62-meter yacht "Roma" as well as the upkeep of the two airplanes and various estates from Innsbruck to Lake Garda, which he occupied with his wife Nathalie. The shareholders often found out afterward that they had to cover significant parts of Benko's extravagances. Even the ongoing costs of his villa in Sirmione on Lake Garda were partially paid by Signa Holding. According to research by the Austrian newspaper Standard, they transferred 20,000 euros per month plus additional costs for the supposed Italian headquarters of Signa, although no 40 kilometers away at Lake Garda in Gardone Riviera, other villas of Signa existed, including an infinity pool."

"And Benko served the fantasy of ever higher, further, better with new acquisitions. Thus, he transformed the real estate company Signa, which only invested in prime locations in core Europe, into a conglomerate of real estate, trade and media, and also a bit of digital business. From a business in which he was more knowledgeable than anyone else, it becomes an increasingly complex conglomerate. In 2013, Benko entered the German department store business with the purchase of Karstadt, more of an opportunity than a long-planned venture. Five years later, he also secured the acquisition of Kaufhof after a long attempt. With the idea of merging into the German Department Store AG with high synergies, he attracts fresh investors. Among them is Roland Berger, who invests in the still-young retail division, but also in the two main Signa companies, Prime and Development."

"From the small Immofina/Signa, which after 2000 operated with just a few dozen people, had become a conglomerate with a holding and several divisions. The organizational chart flourished; over 1000 upper, intermediate, and simple companies gradually expanded."

"Benko's gold rush in concrete has, in addition to macroeconomic reasons, very specific ones as well. A long-standing senior executive at Signa lists three arguments for investors: Benko paid up to 6 percent dividends each year, whereas real estate usually only yields 2 to 3 percent. The shares increased in value year after year. Moreover, Benko concluded secret deals with individual financiers like Roland Berger, Klaus-Michael Kühne, or Torsten Toeller. He gave them the option to exit and return their shares if they wanted to. This made the shares fungible, as if investing in stocks – very unusual in the real estate business, which is typically long-term and therefore requires long-term capital planning."

"The company founder proved once again to be a skilled opinion maker – behind the scenes, but also in front of them. Thus, Benko regularly claimed to journalists, often unchallenged, that Signa operated with a high equity ratio of almost 50 percent. That was not entirely wrong, but nevertheless anything but right. Because, like other real estate conglomerates, Signa included financing with hybrid capital - namely mezzanine such as profit participation certificates; both are counted as equity on the balance sheet but come from external creditors. Therefore, the 20 to 30 percent of the capital actually provided by the shareholders was all the more important. But even this genuine equity capital, as it turned out at the latest after the bankruptcy at the end of 2023, was not really safe. For Benko had granted numerous investors the right to return their shares and be paid out at the then current rate. Roland Berger, Torsten Toeller, but also Swiss Lindt & Sprüngli Chairman of the Board Ernst Tanner and German logistics entrepreneur Klaus-Michael Kühne all had written agreements that could compel either René Benko's private foundation or parts of Signa to buy back their shares. And they were probably by far not the only ones."

"All deals with investors, especially in the year before the bankruptcies, will be closely examined by the insolvency administrators. Were they conducted at market prices? Did they drain liquidity from the company? Then they will be contested and unwound. Because the high payments further depleted the various Signa companies – and thus contributed to the end of Benko's baby."

"Benko almost exclusively took care of investors in all Signa divisions, as well as all major acquisitions or new projects. The appearance and content of the presentations had to get Benko's approval. Even some articles in the "Signa Times," the company's own public relations organ, were something the boss wanted to review – for which Chairman Berninghaus personally wrote texts. Clearly, the example of the top boss had set a precedent."

"What did not change: Benko wanted to continue making both small and large decisions. When he went on trips, he filled his pockets with countless printouts to work through on the plane or in the car. It could take weeks before he engaged with them and made a decision. Until then, nothing happened. Thus, Benko, who had always spoken of quick decision-making paths, unintentionally slowed down the pace of Signa. His unwillingness to give the company an organization that would have been appropriate for its size also had fatal effects. A long-time leading expert at Signa, the finance and trade expert Wolfram Keil, summarizes: "René Benko had completely tailored the company to himself and did not change that even when Signa had grown significantly and became a conglomerate. Almost all important decisions had to be made by him. Thus, he became a bottleneck for the entire organization.""

"Fenk attracted individual investors and tried, albeit unsuccessfully, to organize a bond for Prime Selection. Later, in mid-2021, they managed to place a 300-million-euro bond for the Development project division with an interest rate of 5.5 percent. But by that time, Fenk had already resigned because he quickly noticed that Benko continued to act as he pleased. And he realized that Signa was dangerously highly indebted around the years of 2020."

"Most of the shareholders did not have Benko's private foundation as a contracting partner, but the holding company. Roland Berger, who had invested in low percentages in the Signa companies Prime, Development, and Retail, managed to partially exit. Apparently, he pressed for payment from Benko early on and exchanged about half of his Prime shares for money. Berger benefited from the high market value of the shares, which had multiplied since his entry. However, at the end of the day, Berger will likely exit his Signa investment with a small double-digit million loss, Torsten Toeller will lose a triple-digit million amount, and in the fiscal year 2023, he will write off a book value of 196 million euros, which can be read in the annual financial statement of "Fressnapf" Luxembourg."

"Innsbruck business administration professor Leonhard Dobusch and his colleague Jakob Sturn see in capital raising "one of the central innovations of the Signa model" and describe the approach in an article in the Austrian journal Juridicum. Under the headline "Listen to the Signa (ls)", they summarize in their manuscript: "The exit only works, of course, if not all shareholders exit at the same time (...) At the same time, however, this financing model relied to a certain extent on avoiding transparency. Not all investors were offered put options, and the conditions for the put options remained secret. This was probably also to prevent 'contagion' or 'herd effects' should individual investors exercise their put options, and to conceal unequal treatment of investors.""

"The CFO of Signa, Manuel Pirolt, was largely to confirm this assessment in June 2024: "It is true that one or two potential investors failed because of the legal complexity, although they might have found Signa real estate exciting," Pirolt said in an interview with manager magazin. "The structure of Signa was of course designed to achieve the best possible return in normal operation and not for the quickest possible transparency in an emergency." The basis of Signa's success, the steep revaluations of properties and the barely transparent structures, thus ultimately led to its failure. When it mattered, the emperor was naked. And everyone could see it."

"However, many things were quite different from what is known from the stock market, where all shareholders are treated equally. Benko is said to have told each Signa investor their own tailored story. Many had an individual special deal. Some, like the RAG Foundation or Kühne, received dividends for 2022 if they made a fuss – something the other shareholders were not allowed to know. Some, like Roland Berger or temporarily Torsten Toeller, were allowed to attend the supervisory board of Prime as guests if they insisted. Others were not. Numerous investors were given put options, which allowed them to exit within certain periods. Others were not."

""I am a fighter, and that will not change. I express my opinion very clearly, I criticize sharply when I think it's appropriate. This style has brought me success," said the then 85-year-old man to journalists shortly thereafter at the beginning of 2023. He then added two sentences that had the potential to undermine the structural pillars of the corporate construct. "The situation is currently somewhat volatile," he described the state of Signa. "We are monitoring this matter." Both sentences were authorized by Kühne for publication. He pointed out that he could exit in two years with some financial concessions thanks to a put option."

"The collaboration with his merchant Dieter Berninghaus seemed most likely to develop into a friendship. Operating as "B and B," the two, some who had previously felt closer to the sun named Benko, complained that Berninghaus monopolized the contacts. And indeed, Berninghaus could afford to ask Benko to wash his hair before a joint business meeting. However, Berninghaus was important between 2013 and 2022 mainly because Signa spectacularly expanded its trade business, and Benko understood less about it than Berninghaus did. Moreover, the merchant had good contacts with wealthy people worldwide, who could be business partners and potential investors. Today, B and B are outright enemies. Benko probably eventually saw that Berninghaus was representing the interests of other investors in the holding rather than his own, and suspected Berninghaus of switching sides. The merchant, in turn, felt deceived by Benko when he tricked during the takeover of the British retail chain Selfridges and offended long-standing partners like the Thai Central Group."

"Most of the shareholders did not have Benko's private foundation as a contracting partner, but the holding company. Roland Berger, who had invested in low percentages in the Signa companies Prime, Development, and Retail, managed to partially exit. Apparently, he pressed for payment from Benko early on and exchanged about half of his Prime shares for money. Berger benefited from the high market value of the shares, which had multiplied since his entry. However, at the end of the day, Berger will likely exit his Signa investment with a small double-digit million loss, Torsten Toeller will lose a triple-digit million amount, and in the fiscal year 2023, he will write off a book value of 196 million euros, which can be read in the annual financial statement of "Fressnapf" Luxembourg."

"Nevertheless, René Benko gave the impression at a Signa employee event at the end of 2022 that Signa could emerge as a winner from the real estate crisis. There is no such thing as the real estate market, there are real estate properties and there are very good real estate properties. The latter belong to Signa."

"It is the end of March 2019 when the city imposes new conditions on Signa. The Bürgerschaft links the transfer of the property to the fulfillment of a pre-letting quota, which requires Signa to demonstrate leases for about 30 percent of the planned office space with a minimum term of five years, as well as for the planned hotel with a term of 15 to 20 years."

"In a press release, the Hamburg Commercial Bank (HCOB), formerly HSH Nordbank, announced on December 16, 2020, that it had handed over its dilapidated block constructed in 1972 at Gerhart-Hauptmann-Platz, including the shopping arcade "Perle", to Signa. This is a piece of land that the city had, senselessly according to critics, included in the deal with the Hamburg Commercial Bank. This, despite billions of euros in state aid having freed the predecessor bank from its risks."

"The Hamburg Commercial Bank then cleverly dealt with the property. After a phase of lease-back, during which the bank rented the building back from Signa, it plans to "move to the Elbtower, currently in planning, located in the east of Hamburg's new Hafencity district. About 11,000 square meters will be rented, with an option for an additional 2,000 square meters, for at least ten years," according to the press release."

""This business is incomprehensible. Possibly, Signa paid an extra high purchase price to HCOB, thereby effectively prepaying the future rent," Markus Schreiber told Handelsblatt in November 2023. Nevertheless, Signa received the building permit in March 2022. The planned construction area had suddenly increased from 100,000 to 120,000 square meters, and the tower was no longer 235 meters but 245 meters high."

"Not only did HCOB get rid of its old premises to Signa and took up new offices from Signa, but it also sold the credit for the sale: 166 million euros went to Benko as financing. And even the law firm advising HCOB on the deal is a familiar one: Freshfields with Conradi, who also supported the City of Hamburg in the sale of the Elbtower."

"Torsten Toeller has traveled there, as well as other shareholders such as the Swiss coffee machine millionaire Arthur Eugster and Ernst Tanner, Chairman of the Board of Lindt & Sprüngli, who either attend themselves or are represented by family members, and the Arduini Clan, a Brazilian-Italian entrepreneur family that has mainly made their wealth with cement. The Austrian construction entrepreneur Hans Peter Haselsteiner (Strabag), who holds 10 percent of the holding, has sent his apologies. The shareholders want to know if René Benko and his Signa will survive the real estate crisis that is currently rolling towards Europe."

"Klaus-Michael Kühne led the forwarding company Kühne & Nagel to global recognition. He holds large stakes in the Hamburg shipping company Hapag-Lloyd and the German airline Lufthansa. Thus, he has become the richest man in Germany. However, two investments have only brought him losses, both financially and emotionally. His hometown club, Hamburger Sportverein (HSV), just won't manage to get promoted to the 1st Bundesliga, despite several injections of funds from Kühne over the past years. And then there is René Benko's Signa, in which he has invested even more. More than 500 million Euros from his family foundation are tied up in the company, as he spoke to two editors of manager magazin at the beginning of the year 2023."

"Benko could no longer count on the banks since the intervention of the regulatory authorities. They fled from Signa. This was also evident in Benko's most important project: the Hamburg Elbtower. The fact that the Landesbank Hessen-Thüringen (Helaba) finally withdrew its loan commitment for the Elbtower at the beginning of 2023 and the capital-weak Signa would almost be left alone with the estimated construction costs of 950 million euros, most shareholders found out only months later. Just like the city of Hamburg, which wanted to build its largest current architectural showcase project with Benko."

"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."

"Several shareholders, who only started realizing towards the end of the year 2022 that things could financially tighten, blamed the ECB as the culprit. "Such a thing has never happened before," said a longstanding shareholder to the authors of the book in the summer of 2023, criticizing the supervisors for the decision. "That's a pretty bizarre interpretation of what happened," Enria said in December 2023 regarding accusations that the ECB was partly responsible for Signa's bankruptcy. It was obviously clear that there were big risks in financing commercial real estate."

"In August 2022, Signa even closed the biggest deal in its history: Benko, with his Thai partners from the Central Group, bought the British luxury department store chain Selfridges for 4 billion pounds. And in Hamburg, Signa had already made all the preparations for the construction of the 245 meters tall Elbtower. The contract with the city was long signed, the excavation pit was dug, and the construction started promptly in January 2023."

"How exactly the vote on the Elbtower went, during which Signa received the approval for the construction of the high-rise, the red-green government in Hamburg prefers to remain silent, just as they gradually revealed the truth in the Cum-Ex investigations concerning the Hanseatic bank Warburg. Not even the question of whether Scholz attended the crucial meeting of the Hafencity GmbH was to be answered. It took the Bild newspaper to sue for the right to information. The result: Scholz was present. The Elbtower was designed by British star architect David Chipperfield, who has already realized the luxury resort "Villa Eden" on Lake Garda with Benko and built the Innsbrucker Kaufhaus Tyrol. For Hamburg, Chipperfield is designing an impressive counterpart to the Elbphilharmonie, a long, slightly step-like rising giant, which is supposed to surpass all dimensions of what has been built in Hamburg to date. Upon completion, the plan is for the Elbtower to be one of the tallest buildings in Germany. Regarding the investor, Signa from René Benko, which received the contract in a single-step selection process, Scholz had only words of praise on this festive day. It is "an outstanding real estate company" that has proven it can "handle very large projects." "Financially strong" with an "A+ rating" and a "very good reputation among reputable banks." A few years earlier, René Benko had taken over the Alsterhaus."

"René Benko, on the other hand, acts as if Signa were impregnable. As if neither the misery of interest nor the Covid pandemic could touch it. Instead, he spreads, internally and externally, the narrative that Signa will emerge from the crisis stronger. Because while competitors were plummeting, they themselves were protected thanks to long-term financing and an allegedly high level of equity. Even in December 2022, Benko promises his employees at the "Signa Days" in a luxury hotel in Tyrol that they will now grow even faster. Signa would reach its 2030 goals already by 2027, despite and because of the real estate crisis. His employees celebrate Benko for his words. The party, which they also benefited from due to high salaries, bonuses, and value increases of employee shares, is supposed to continue despite the turn in interest rates. Everyone wants to keep making money: the employees, the consultants and lawyers who earned six- to seven-figure sums annually; the shareholders who had previously profited from hefty dividends, as well as the well to spectacularly paid managing directors of the individual Signa divisions. And of course, the founder himself, René Benko, who set the direction for the group even without office."

"The general assessments of the real estate sector's situation are, of course, known to the Single Supervisory Mechanism. However, at a meeting of the body towards the end of 2022, there was also specific discussion about René Benko's Signa. The rapid growth of the group, the company's lack of transparency, and critical media reports prompted the banking supervision to take a very unusual step. It was decided to ask banks in the eurozone exactly how many loans they had issued to Signa, how well they were secured, and whether they could absorb a potential default of payments. Usually, the ECB and BaFin do not inquire about lending to a specific company, but rather they ask more generally. It would have been appropriate to review the burden of lending to the entire real estate sector, especially since there were and are other shaky candidates. But evidently, the SSM wanted to send a clear warning signal and put a big question mark behind Signa's creditworthiness. Because with their inquiry, the supervisory authorities must have been aware that it would halt the flow of credit to Signa, which it desperately needed. No bank can afford to upset the regulators. Officially, the ECB does not comment on this, supposedly due to confidentiality obligations. In response to a query from a member of the Bundestag in November 2023, the then-chairman of the ECB's Supervisory Board, Andrea Enria, only generally indicated that since 2018, there had been several audits concerning credit risks in the commercial real estate sector. This was part of "a more comprehensive set of measures in relation to vulnerable sectors, including the real estate sector." Obviously, the review of the Signa loans was more than just one of many. Once the ECB had received the results of their survey, it decided to take a second step: it pushed several banks to either partly write off loans to Signa or to make additional provisions for potential losses. This was reported by the news agency Bloomberg in the summer of 2023. The very specific signal that Lagarde, Enria, his colleagues, and his female colleagues sent was clearly received. Since the beginning of 2023, Benko could hardly obtain new bank loans – which is devastating for any real estate company because nobody builds with equity alone. In relation to the public and his shareholders, Benko kept quiet about the bank blockade initially. Outwardly, business continued as usual. The facade of all the buildings in "irrecoverable locations" (quote Benko) was still standing, and the company continued to build – albeit on sand."

"Due to the pandemic, the vulnerabilities of Signa have become publicly visible. Although everything appears neatly separated on Benko's charts, the units within the Signa empire are not so easily separated. The struggling trading business directly affects the real estate business, as the holding company must pump large subsidies into the distressed business. At the same time, rental income in the amount of a double-digit million figure is lost. This has earned the real estate group's good A+ credit rating the unfortunate addition of "Watch.""

"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."

"The side deals with individual shareholders are unknown to the others. Benko knows how to make every investor feel that they, and only they, are favored and treated exceptionally well. Benko evidently offers the best of all worlds: high growth, secure dividends, and the option to exit at any time. An outstanding and unprecedented combination in economic history, justified by the innovative business model of Signa."

"It is August 3, 2020, Galeria Karstadt Kaufhof is still in bankruptcy, when the Berlin Senator for Economic Affairs Ramona Pop (Alliance 90/The Greens) announces in a statement that she has "achieved a good solution for Berlin". Together with the then Governing Mayor Michael Müller (SPD) and Cultural Senator Klaus Lederer (The Left), she signed a Letter of Intent with Signa, a declaration of intent. In order to keep four out of six department store branches threatened with closure for another three to five years, politicians in return are making extensive commitments for new construction projects by Signa at Berlin's Alexanderplatz and Hermannplatz, as well as Kurfürstendamm, where Signa will now be allowed to build high-rise buildings, which was previously prohibited. Longer-term guarantees for the buildings will then only be given in exchange for new building permits."

"However, in the wild growth years of Signa with its shiny polished balance sheets, there is no talk of this yet. Benko cultivates his image as a workaholic, which goes down well with the financiers. Someone who earns his money and does not just receive it. For him, it had been a good day when he had worked continuously, a manager recounts. When Benko vacationed on his yacht, he invited his top people to the "Roma" to hold meetings from morning to evening. Occasionally, the children of the executives would run around them. It was not always efficient."

"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?"

"Benko and his partner Aby Rosen pay 150 million US dollars for the icon in the USA, a "bargain" as it is called at Signa. But even then, real estate experts assessed the purchase more critically: the Chrysler Building, a "high security risk" that is dilapidated, with 20 percent vacancy and standing on a plot whose owner demands exorbitant rent. Many funds had previously reviewed the takeover and declined. Also, a Signa manager referred to the purchase as a "media gag," an acquisition for headlines announcing Signa's leap overseas with the newly founded RFR US Selection AG. The deal lacks economic logic. It was only purchased to show off. Sometimes, it seems that Benko was also simply about possessing, says a Signa manager, maybe even collecting."

"And Benko served the fantasy of ever higher, further, better with new acquisitions. Thus, he transformed the real estate company Signa, which only invested in prime locations in core Europe, into a conglomerate of real estate, trade and media, and also a bit of digital business. From a business in which he was more knowledgeable than anyone else, it becomes an increasingly complex conglomerate."

"It's only when it's too late that Berger, like most investors, realizes that the trading business is primarily intended to contribute to the real estate business. He receives his Signa shares not from a capital increase, but directly from Benko himself. Money that flows into the private sphere of the real estate juggler who gradually sells shares to further investors, thus increasing his personal wealth. The zero-interest phase plays into Benko's hands, the fundraising runs almost like the mechanism of an automatic watch. Everywhere, large institutional investors are looking for new investment opportunities, such as the RAG Foundation from the Ruhr area, founded to finance the perpetual burdens of coal mining in Germany, ultimately to save the Ruhr area from collapse."

"In this phase, Signa grows both vertically and horizontally. Investors uncover initial weaknesses but ultimately stay on board because the Net Asset Value, the property value, continuously grows. Internal warnings from individual managers about what would happen to Signa if interest rates rose were sharply countered by Benko: he is an entrepreneur, not a non-entrepreneur."

"In Munich, Stavros Kostantinidis schedules appointments for the Austrian concrete block. An influential lawyer, not least because of his wife. Saskia Greipl-Kostantinidis is the daughter of the deceased, long-standing president of the Chamber of Commerce and Industry in Munich and Upper Bavaria. Erich Greipl was part of the management of Metro, later he sat on its supervisory board as well as on the controlling committee of Kaufhof. When the Greipl-Kostantinidis family invites, such as to the wife’s 50th birthday, the Munich kissing-kissing society appears. But above all, people of weight and importance come, from the president of the state parliament, Ilse Aigner, to the Bavarian Prime Minister Markus Söder. René was occasionally invited to dinner by the Prime Minister, then he dined with Söder at the table, an ex-Signa manager recounts."

"The investors also play along. "I understood the danger of over-indebtedness earlier. Practically, Benko generated a negative cash flow every year, so he relied on additional loans or capital increases," says Roland Berger, who thus became suspicious long before the first Signa bankruptcy. "But Benko has repeatedly shown that he could acquire fresh money.""

"But why did it bother the parent corporation so little that the subsidiary could not operate profitably? The answer lies in Benko's core business: real estate. The rental payments from Galerias to the Signa parent company supported the Benko system. With them, he inflated the value of his properties over the years. Because the value of a property in the balance sheet is not only measured by location and condition. Decisive are also factors such as the general development of property prices, but above all the rents that are paid for the respective property."

"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."

"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."

"In 2017, the foundation board decides to invest in Signa, with RAG acquiring a 5 percent stake in Prime and a 3.5 percent stake in Development, almost simultaneously the Agricultural Insurance Association from Münster (LVM) also strikes. Benko is aware of the needs of insurers and foundations that rely on generating returns. Representatives of the RAG Foundation even join the supervisory board of Signa real estate companies, but remain largely invisible there."

"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.""

"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."

"The multitude of companies that became apparent after the Signa collapse are mainly for tax reasons and are standard in the real estate business. Each project is contained within its own company, a real estate limited liability company. The tax rate on rental income is only 15 percent, and no trade tax is applied. Common too are so-called share deals, where the buyer does not acquire the property itself, but shares in the real estate company, legally circumventing the property transfer tax. The headquarters of these companies are often located in tax-advantaged countries like Luxembourg."

"From the beginning, Benko saw HBC as a "fake company," whose collapse was only a matter of time, as he once told the authors of this book. This was before the bankruptcy of Signa and the return of Hudson’s Bay major shareholder Richard Baker as an investor in Galeria Karstadt Kaufhof in the then still distant year 2024."

"At Signa, the management tries to capitalize on the hype: sports are booming, online is booming, an international sports group with a focus on the internet seemed tailor-made for raising money from investors. Under the leadership of the long-time Ebay manager Stephan Zoll, Signa acquires several profitable companies and outlines the possibility of an IPO early on, also to be able to take over the British bicycle retailer wiggle. An investor presentation from October 2021, two months before the ringing of the bell in New York, is titled "Leading Global Sport E-commerce and Tech Platform." However, the financial basis of the company is weak. At this point, SSU records a net loss of 37.7 million euros."

"Berninghaus met Benko through detours. The German-American investor Nicolas Berggruen, whom Berninghaus calls a "mega close friend," sought contact with Benko in 2012. Two years earlier, Berggruen had presented himself as a good investor for Karstadt's department store business. A billionaire who invested his money in sustainable projects like renewable energies and made everyone believe that he was not only looking at the return but also had society in mind. Berninghaus is said to have advised Berggruen against buying Karstadt at the time. The lifestyle, without a fixed residence, with changing hotels as workspaces, the many parties – this way, Berggruen could not operate a business in Germany. A failure was predicted: After acquiring Karstadt, Berggruen's involvement with the department store ceases. He leaves the management to others, Karstadt continues to incur losses. This is followed by layoffs, investments are at zero, and the smart billionaire increasingly withdraws from the public eye. While Berggruen begins to regret purchasing Karstadt, Berninghaus meets a Signa manager at an evening event in Nuremberg. Berninghaus, then still the trade director of the Swiss chain Migros, starts chatting with the Benko man. In the end, there is a promise to introduce Berninghaus to Benko."

"The side deals with individual shareholders are unknown to the others. Benko knows how to make every investor feel that they, and only they, are favored and treated exceptionally well. Benko evidently offers the best of all worlds: high growth, secure dividends, and the option to exit at any time. An outstanding and unprecedented combination in economic history, justified by the innovative business model of Signa."

"In 2019, Signa acquires the retailer SportScheck from the Otto Group. The idea had been to merge Karstadt Sports and SportScheck as a counterforce to Decathlon and Intersport. They believed Benko could do it, says a participant from back then. As a dowry, Otto gives Signa a buyer loan, a double-digit million amount, for which Signa Holding and Signa Retail guarantee."