Signa is putting the Chrysler Building up for sale in an urgent effort to raise cash

Signa Holding is in talks to sell half of New York’s Chrysler Building to raise cash quickly, the manager of the embattled European property firm has said, while warning of a difficult long-term and financial situation.

Creditors of the Austrian company, founded by young software developer René Benko, met in Vienna on Tuesday to hear administrator Christof Stapf give his first assessment of its finances since bankruptcy proceedings began last month.

Stapf told them he and other outside consultants were still struggling to understand – or gain control over – Signa Holding’s network of subsidiaries and assets.

The holding company needs cash quickly to cover its exit costs, Stapf stressed, but has very little it can immediately put on the market.

“Sales of Signa Holding’s Cessna Citation XLS private jet continue. . . (and) discussions are also being held regarding an investment in Signa RFR US Selection AG, whose US real estate projects include the Chrysler Building in New York,” he said in a statement.

Signa Holding owes more than €5bn to creditors. So far €1.1bn of claims have been submitted before the mid-January deadline.

Analysts at JPMorgan estimated the wider Signa Group, of which Signa Holding sits at the centre, is owed €13bn.

That number is based on limited publicly available data, however, and restructuring consultants working with Signa say the actual number could be much higher.

“The issue is that we do not know at all about the size of borrowing. And although we are early in this process, that is not normal. None of this is normal at all,” said a lawyer working with one Signa claimant.

The Chrysler Building, completed in 1930, was New York’s tallest building for a short time before it was surpassed by the Empire State Building.

The property is half-owned by Aby Rosen, a developer whose group, RFR, is also a major partner. RFR and Signa paid $151mn for the property in 2019, part of the $800mn that the Abu Dhabi Investment Council spent in 2008.

Speaking to the Financial Times that year, Rosen called the Chrysler Building “an American icon”, saying: “It’s lost a little bit of its significance. But it hasn’t lost its beauty or its importance.”

For all its cachet, the building has long been plagued by a ground lease that requires owners to pay annual tuition to the private Cooper Union college. Those taxes increased from $7.5mn in 2018 to $32.5mn in 2019 and should reach $41mn in 2028.

Rosen is locked in negotiations with the Cooper Union board to revise the ground lease. Making it less complicated would, in theory, allow him to invest in improving the property’s retail offerings and making other changes.

Meanwhile, the Chrysler Building has done well even as other old Manhattan office buildings are shedding tenants and seeing their rents drop in the age of remote work. The 1.2 million-square-foot building was more than 90 percent leased, according to the most recent CoStar data.

Ruth Colp-Haber of Wharton Property Advisors, whose group advises companies on leasing, said the building lacked the most modern amenities but still appealed to younger tenants, in particular, who appreciated its charm and proximity to Grand Central Station. “The Chrysler building isn’t going anywhere,” he said.

Stapf’s job is complicated by how Signa founder Benko, 46, built his property empire.

Although he exercised almost complete control, and was its largest shareholder, he has not held a formal management role since 2013 and ensured the accounts at many of his subsidiaries and smaller entities were never consolidated.

“The holding company alone has 53 direct investments in companies and indirect investments in several hundred other companies,” Stapf said.

He asked creditors and shareholders from across the group to unite under a “group steering committee” as the only way to resolve its affairs.

“The original organizational chart as of September 30 includes a total of 46 pages in A3 format,” he added, pointing out that no one inside the company seemed to know how it was run.

Of the 42 employees of Signa Holding, 34 worked in hospitality activities, including the hunter and the crew of Benko’s private jet.

Stapf fired them in early December.

“There is a lack of management capacity and general knowledge . . . the holding company has recently partially fulfilled its regulatory role,” Stapf told lenders.

Faced with a heavy debt load, and troubled by Benko’s apparent sangfroid in the face of mounting difficulties, Signa’s minority shareholders – who include some of Europe’s wealthiest families – revolted against the businessman shortly before the company went into administration.

They still control its two most important subsidiaries, Signa Prime and Signa Development, which own most of the group’s prized assets – a portfolio of luxury properties across Europe including many of its flagship stores.

The two companies’ boards of directors fired their co-chief executive, Timo Herzberg – a Benko partner – earlier this month for what they claimed was a “gross breach” of his fiduciary duties.

Many of those who owe money to Signa are now scrutinizing how Benko ran the business, raising questions about the huge costs charged to hide the complex internal corporate and credit unions that shuffled billions of euros around the group in the months before its collapse.

Benko, who was convicted of bribery in 2013, is currently a high-profile suspect in an investigation into corruption and abuse of office in Austria.