Over two decades, René Benko grew his Signa property empire from humble beginnings fixing up apartments in his home city of Innsbruck to its apex as one of Europe’s most successful property developers.

Fuelled with cheap debt and using an increasingly baroque network of holding companies, subsidiaries and trusts, Signa acquired some of the most 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.

Its complexity, however, has been a key element in the crisis that Signa now faces. Over the past year, investors have balked at giving the group more money, concerned about the elaborate financial engineering Benko was using. Without fresh funds, insolvency became inevitable.

The Financial Times has simplified the Signa Group’s structure of more than 1000 corporate entities to illustrate the challenges now facing lenders and investors. Signa did not respond to requests for comment.

Signa Holding

On Wednesday, Signa Holding, the central company in the Signa network filed for insolvency in the Austrian courts.

Under “self-administration” rules in Austria, its management — aided by German turnaround specialist Arndt Geiwitz — have 90 days to pull together a viable restructuring for approval by creditors. If they fail, an independent administrator will take over.

Benko is still the controlling shareholder in Signa Holding. But there are outside investors and billions of euros of debt. Balancing the interests of everyone involved will be a fiendish task.

Advisers, investors and lenders who have spoken to the Financial Times have all said the same thing: no one seems to know exactly who has a claim to what. But in recent months, one insider said, money had been flowing from all arms of the Signa empire back towards Signa Holding.

Signa Sports and Signa Real Estate Management Germany

The financial tremors began at the extremities.

The sports ecommerce platform Signa Sports United was listed on the New York Stock Exchange in 2021 with a valuation of $3bn. After months of deteriorating finances, however, it declared itself bankrupt on October 23, days after Signa Holding withdrew a $150mn capital commitment.

The management of the company — which Signa floated with backing from Japan’s SoftBank, Saudi Arabia’s Public Investment Fund and Abu Dhabi’s Mubadala — said it would sue.

Then on Friday last week, the company responsible for overseeing the day-to-day administration of Signa’s German property projects, Signa Real Estate Management Germany, declared itself insolvent too. The cash from its Austrian parent simply stopped flowing.

Signa Prime and Signa Development

All eyes are now on two companies in the Signa network: Signa Prime and Signa Development. The pair own the most valuable assets in the Signa portfolio.

Signa Development’s remit is to buy land and build new office buildings or venues that it can quickly sell. Its projects include the BEAM and Glance office sites in Berlin and the Twentytwo tower in Vienna.

The main role of Signa Prime, by contrast, is to hold and develop top-tier properties for the long term, making money from their rental income and rising valuations. Its assets are those that Benko is most proud of: the KaDeWe building in Berlin and the “Golden Quarter” in Vienna, for example. It also owns several construction projects, including the Elbtower in Hamburg.

Both companies are still trading and both share the same management and supervisory boards.

Among those on the supervisory board are Robert Peugeot, of the eponymous automobile dynasty; Alfred Gusenbauer, the former chancellor of Austria; and Karl Sevelda, the former chair of Raiffeisen Bank International, one of Signa’s biggest lenders.

The properties

In all, Signa claims to have a portfolio of buildings worth more than €27bn and a pipeline of developments worth €25bn, according to presentations it has given to investors.

Benko’s model — established with his first big acquisition, the Kaufhaus Tyrol department store in Innsbruck — is to buy unloved city-centre venues, knock them down or refurbish them, and turn them into temples for luxury, bringing in big-name brands and cranking up the properties’ valuations in the process.

Those valuations kept on rising in a consumer market fuelled by cheap central bank money. The debt needed to finance such projects was cheap too. That meant Signa could rapidly expand. In 2019, the company recorded its biggest-ever profit, with Signa Holding making more than €1bn.

Up until last year, Signa was still signing commitments for billions of euros worth of new developments.

Work on the largest of those — the Elbtower, due to be Germany’s third-tallest skyscraper — halted in October when Signa stopped paying workers’ wages.

Signa’s bullish valuations hinged on the rental incomes its properties could command. The KaDeWe building in Berlin, for example, appreciated on Signa’s books by more than €100mn every year for the past five years.

That raised questions for some in the industry because many of Signa’s most important tenants — those who paid the rents that justified the rising valuations — were operating companies also controlled by Signa.

KaDeWe Group

The KaDeWe Group, which Signa owns alongside Thailand’s Central Group, is the retail operating company behind Berlin’s equivalent of Harrods and a fleet of other luxury department stores in Germany and Switzerland. It rents the buildings for all of these — often synonymous in consumers’ minds with the brands themselves — from Signa Prime.

KaDeWe is a profitable venture, and Central Group has repeatedly stressed that it has the resources to insulate it from any trouble that might arise from its co-shareholder’s difficulties.

Signa Department Stores

Signa owns another retail fleet, though one less cherished by Benko.

Galeria Karstadt Kaufhof is Germany’s biggest department store chain and the third-largest in Europe. It is a mid-range retailer that has been struggling financially as consumers have soured on the high street.

Signa took full ownership four years ago and began selling the assets from under it: a small portion of the most valuable Galeria sites, in inner-city locations, were sold to Signa Prime. The rest were sold to third-party investors to raise funds.

GKK has limped on through two restructurings, in 2020 and 2022, with thousands of job losses and scores of store closures. It was expecting to receive €200mn from Signa as part of a turnaround plan, with the first tranche 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, Signa sold it for €400mn. The company went bust less than a week later.

Signa US, Signa Hotels and Signa Media

Signa also has extensive interests beyond the retail sector. Its US joint venture with the property 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 signal that Signa saw a future in the cut-throat world of New York property speculation.

Its hotel arm, meanwhile, owns several luxury destinations in Europe, including the Hotel Bauer Palazzo in Venice, which Signa is in the middle of developing, and Chalet N in Lech, one of the most exclusive ski resorts in the Alps.

In Benko’s native Austria, Signa also owns minority stakes in the country’s biggest newspaper, the tabloid Kronen Zeitung, and the broadsheet Kurier.

The investors

At almost every layer of the Signa network are minority co-investors and a bewildering array of lenders.

Among them are some of Europe’s wealthiest family offices such as the Rausings and the Peugeots.

Prominent entrepreneurs and captains of industry have also invested, including Ernst Tanner, chief executive of chocolatier Lindt & Sprüngli; Torsten Toeller, the pet food magnate; Hans Peter Haselsteiner, the Austrian industrialist; and the heirs to Formula One racing legend Niki Lauda.

All of them are now racing to understand exactly what their investments are worth.

The opaque nature of the group’s structure, as well as side letters, profit-sharing agreements, promissory notes and substantial intercompany loans, mean no one has a clear sense of what will happen next, according to multiple sources with direct knowledge of the company.

The lenders

At least 120 banks are exposed to Sigma, according to people with knowledge of the conglomerate and its entities. Swiss wealth manager Julius Baer is the only lender to publicly outline its exposure, stating this week that it had SFr606mn ($692mn) of loans to a European company, which people close to the business have confirmed is Signa.

Austria’s Raiffeisen Bank International has more than €750mn of exposure, according to people familiar with the details, while documents seen by the FT indicate a range of global banks have outstanding loans to Signa, including UBS-owned Credit Suisse, Bank of China, France’s Natixis and Italy’s UniCredit.

Smaller regional banks are even more exposed, relative to their size. German state-owned Landesbanken, including Frankfurt-based Helaba and Munich-based BayernLB, have outstanding loans worth hundreds of millions of euros, according to the documents. Other Raiffeisen affiliates in Austria are also big backers of Signa.

JPMorgan analysts last month estimated that Signa owed at least €13bn to lenders in total.

The Benko Family Foundation, Laura Foundation and holding companies

At the top of everything sit Benko’s two foundations in Innsbruck. Over the years, they have been the biggest financial beneficiaries of Signa. But they are opaque. Benko’s mother, Ingeborg, who raised him alone, is the controlling signatory of both foundations.

The foundations’ grip on Signa is not complete, however. Benko has slowly relinquished control in return for investment. Side agreements between Benko and investors allowed him to retain control. But as Signa Holding approached insolvency this week, the rift has widened.

Multiple people close to the situation have told the FT that trust has almost totally evaporated between Benko and some of his external investors.

Benko, they said, still seemed to believe his empire could be salvaged. Everyone else is hoping to get out with as much of their capital intact as they can.

Additional reporting by Owen Walker in London