Galeria Karstadt Kaufhof, Germany’s major department store chain, has filed for insolvency for the third time, attributing the crisis to its owner, Signa, facing broader real estate challenges in Europe. Signa, a conglomerate with a portfolio of 1,000 companies, is facing financial turmoil. The founder, Rene Benko, lost billionaire status, and various Signa businesses are experiencing insolvency. Galeria seeks new ownership amidst talks with potential investors. The struggles highlight the broader impact of rising rates and costs, leading developers to insolvency as financing dwindles, marking a significant downturn in the real estate sector.
Germany’s major department store chain, Galeria Karstadt Kaufhof, announced its insolvency due to the downfall of its parent company, Signa, amid a real estate crisis in the region. Galeria is now actively looking for a new owner as it grapples with the challenges. Signa, the insolvent Austrian property empire, stands as a significant casualty in Europe’s real estate crisis.
Galeria employs 15,000 individuals and has now filed for insolvency for the third time in recent years. The pandemic prompted the first filing in 2020, and the repercussions of the Ukraine war, including soaring inflation and energy costs, led to the second filing in 2022. In this latest instance, Galeria’s challenges arise from its owner, Signa, which had pledged to provide 200 million euros ($218.62 million) to Galeria. But with Signa facing its own financial difficulties, this commitment is now uncertain.
From 2020 onward, Galeria has closed stores and implemented staff layoffs, but the challenges posed by Signa became overwhelming. Galeria is actively pursuing a shift in ownership, and discussions with potential investors are underway. Stefan Denkhaus, Galeria’s court-appointed insolvency manager, stated that the insolvencies of the Signa Group have impeded Galeria’s positive progress and pose a threat to the company.
The holding company of Signa consists of approximately 1,000 companies, renowned projects, and stores in Germany, Austria, and Switzerland, along with a stake in New York’s Chrysler Building. Signa filed for insolvency at the end of the previous year as its debts have crossed 5 billion euros.
Subsequent to this, various other Signa enterprises have taken similar actions. This led banks, insurers, pension funds, and other investors to pursue avenues for recovering some of the lost billions. Following these events, Signa founder Rene Benko, a prominent property tycoon in Europe, was excluded from Forbes’ list of global billionaires. Construction projects, such as a Hamburg skyscraper, have been halted, and items ranging from Signa’s leather-covered boardroom table to toilet brushes from its Vienna offices are being auctioned.
For years, the real estate sector in Germany and other parts of Europe experienced a booming market with robust demand. However, a significant surge in interest rates and expenses has halted this trend, pushing developers like Signa into insolvency as bank funding diminishes, and transactions come to a standstill.
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