René Benko, Austria's biggest real estate entrepreneur and owner of the Signa group, says he did not acquire German store chain Karstadt to convert all of them into shopping malls but to restore profitability. Except for one store, he told the Quo Vadis conference this week, he succeeded.
In a wide-ranging on-stage discussion at the conference in Berlin organised by Heuer Dialog, Benko, whose offer earlier this month to buy the German Kaufhof chain was turned down by Canada's Hudson's Bay Company, said he did convert the Karstadt store in his home town of Innsbrück into a mall. But the way back to profitability was different for each individual shop.
"I tell this story in order to lay to rest the speculation that I bought Karstadt only to make a shopping mall out of all of them," Benko said. "This was not the case. My idea was to make each one profitable and this worked for all of them except for one." But the cleanup of the store in Innsbrück was a particular challenge; it had been tried by the local banks, by the listed Immofinanz and by several others.
And even Signa's attempts were held up at the last minute by the local mayor who slapped a cultural heritage certificate on a row of houses that had to be cleared for the project. "That was a pet project in my home town and it fits into my view that things considered not possible to do actually turn out to be possible," Benko told the Quo Vadis conference Wednesday.
"And that's the motto I emphasise to my employees: there's no such thing as 'can't be done'." In a much publicised move in 2013, Benko acquired the Karstadt chain - today comprising 79 stores in German high streets - out of near-insolvency, paying its owner, German-American billionaire Nicolas Berggruen, just €1.
Signa injected what Benko called a three-figure million sum and installed CEO Stephan Fanderl, now the chief executive of Signa's entire retail arm. "My job was to enthuse him do this with me," Benko said. With the capital injection holding Karstadt above water, the two men plus a team of retail managers spent every day for a year in Karstadt headquarters, trying to see how it could be turned round.
"It sounds nice to buy a company for €1 but there were also financial risks .. and this was of course a huge reputational question," Benko said. "I didn't want to be the next owner of Karstadt who would have to take quasi co-responsibility for a second insolvency. So in that year, with Stephan Fanderl and a team of super retail people, we were able to prepare a complete renovation plan... The situation with Karstadt was, let's say, very, very tense.
But in the end it became clear that the renovation would succeed." The Vienna-based Signa, controlled through Benko's family foundation, is split into two areas, real estate and retail, of which the property arm manages around €8bn of assets devolved into four branches. Signa Prime Selection is a long-term holder of selected properties in Austria, Germany and Italy; Signa Development Selection develops projects in major urban centres mainly in German-speaking Europe; Signa Luxury Hotel develops and markets premium hospitality assets such as the Villa Eden Gardone at Lake Garda and the Park Hyatt Vienna.
Under the Signa Retail corporate umbrella are a number of companies that operate independently. The 79-unit Karstadt department store chain is part of the arm's 127 stores and 72 web shops located in 18 countries, which generates annual revenues of some €3.8bn. Germany's premier KaDeWe in Berlin heads a group of three luxury stores, located also in Hamburg and in Oberpollinger near Munich.
Signa Sports is a multi-channel retail arm created out of Germany's Karstadt Sports but with stakes in online platforms such as Outfitter and Tennis-Point. The group has also begun to develop Signa Foods & Restaurants Group, one of the largest quick-service platforms in the German market, with Le Buffet as its core, together with a joint venture with Italian cuisine specialist Eataly.
Benko, who broke off high school in the 1990s to go into business of loft conversions in the Tyrolian capital of Innsbrück, created Signa in 2000 and has built it piece by piece. Asked when he realised that was a very good entrepreneur, he said: "I was really good right from the start .. but there was a moment when I realised that I had a base of credibility built over many years and many projects.
And when the size had grown substantially one realises eventually that it can't just be a coincidence - and what's more those were the times when real estate wasn't the easiest sector to be in because we actually got really big from the end of 2008 to start of 2010 when hardly anyone was able to get credits for large development projects.
So that was a moment when it became more and more sustained and more and more credible. And now I am 40 years old and have lost the status of being a young entrepreneur... People don't see me any longer as a young wild social climber."