ICSM Business News: Financial Times reports on the collapse of one of Europe’s largest real estate groups with fears it could be a 'canary in the coal mine' warning of a recession in 2024

By Harry Mottram: You may not have heard of Sigma Real but in the UK many will know of Selfridges in London – one of the Austrian based property group’s acquisitions in recent years. The group of Sigma firms cover property, retail, sports, media and construction amongst a variety of sectors but is debt to its lenders by £12 billion pounds it’s creating a massive headache from Vienna to London and from Berlin to New York.

Ian Carrotte of ICSM said there is a danger that the collapse one by one of Sigma’s various firms at the end of last year could be the ‘canary in the mine’ – a warning that things are about to go awry in the property sector. The complex structure of the empire built by Rene Benko over the last few decades is one of the reasons why it is in trouble as lenders have been reported by the media as being reluctant invest more cash in Sigma.

Main image from the FT website's article on Sigma. Below is a diagram of the structure created by the Financial Times:

Writing for the FT Sam Jones penned: “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 main concern is the domino effect said Ian Carrotte with one lender being hit by the collapse of each of the various companies. Peter Schwarz of the World Socialist Web Site said JP Morgan had concerns about the survival of several well-known institutions. He said: “The company owes more than 600 million Swiss francs to the Swiss private bank Julius Bär and €750 million to the Austrian Raiffeisen Bank International. The Swiss USB, the French Natixis, the Italian UniCredit, the Bank of China and several German state banks are also affected to the tune of hundreds of millions.”

With the future of New York’s Chrysler Building and Selfridges in London, plus a string of cancelled building projects in Germany such as the Elbtower in Hamburg which is now half built and work suspended – all in doubt – things look bleak. Sigma may be a largely European group but it may signal the dark clouds of recession across the continent – all sparked by rising inflation, hikes in interest rates and a falling demand – which could impact the UK’s property market this year.

See https://www.ft.com/content/31884c4d-2da7-4b43-917e-3180e9eafa3d

and https://www.wsws.org/en/articles/2023/12/04/aaab-d04.html

You may also be interested in ICSM Business News: banking jitters continue as UBS rescues Credit Suisse triggering fears for business and jobs in the UK – Harry Mottram

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ICSM CREDIT
For information on ICSM visit www.icsmcredit.com or call 0844 854 1850.
ICSM, The Exchange, Express Park, Bristol Road, Bridgwater, Somerset TA6 4RR. Tel: 0844 854 1850. www.icsmcredit.com. Ian.carrotte@icsmcredit.com