The Austrian real estate company “Sigena” declares bankruptcy

The Austrian real estate giant “Sigena” declared bankruptcy on Wednesday after its recent attempts to secure new funding failed, marking the largest victim so far of the collapse of the real estate market in Europe.

The group, controlled by Austrian businessman René Benko, owns the Chrysler Building in New York in addition to several prominent projects and major stores throughout Germany, Austria, and Switzerland.

The company stated in a press release that it will file an application with a court in Vienna to initiate insolvency proceedings under its own administration and commence the restructuring of the group.

It added that “the goal is the organized continuation of business operations within the framework of self-administration and the sustainable restructuring of the company.”

The sharp increase in borrowing costs in the 25-year history of the euro had led to a decline in property prices in Germany, where most of the group’s business is concentrated.

Sigena attributed its troubles to external factors affecting its real estate operations and the pressure on shopping in main streets. The group, estimated to have assets worth 27 billion euros (29 billion dollars), consists of several subsidiary companies.

Its bankruptcy raises questions about many prominent construction projects in Germany, including one of the tallest buildings in the country.

The company was making significant progress in the construction of the 64-story Elbtower skyscraper in Hamburg until it stopped payments to the construction company that halted work. Construction also came to a halt at five other sites owned by the company in Germany.

Sigena heavily borrowed from banks, including the Swiss Julius Baer bank, which revealed exposure of over 600 million Swiss francs (678 million dollars).

Among other lenders was the Austrian international bank Raiffeisen.

arlier this month, one of the executive directors, Hanius Mosenbacher, indicated a significant exposure of 755 million euros to a client, pointing to the BANCO group, according to a person familiar with the matter.

Informed sources state that both Bayern LB and Helaba, the state-supported regional banks in two of the wealthiest German states, Bavaria and Hesse, lent the group several hundred million euros.

Germany, the largest economy in Europe, is experiencing a real estate crisis as a sharp rise in interest rates and construction costs has forced some developers into bankruptcy, leading to halted transactions and construction.

The real estate sector has been a cornerstone of the German economy for years, accounting for nearly a fifth of the gross domestic product and one in every ten jobs. Due to low-interest rates, billions were poured into real estate, seen as stable and secure.

Now, the sharp rise in interest rates has put an end to this rush, leading some developers to bankruptcy, freezing transactions, and causing price declines.

Weakness in commercial real estate in the United States, with offices remaining vacant after the pandemic, and struggles among major real estate developers in China, have drawn global attention to the sector.