A Bribery Probe Into Rene Benko €Billion Empire

Austrian realestate tycoon Rene Benko denies allegations and expects to be cleared from all the allegations.

       Rene Benko 

Photographer: Marcel Kusch/picture alliance/Getty Images

Rene Benko has built an opulent $25 billion real estate empire by wooing old money and up-and-coming power players, but now faces the biggest test of his career amid a tangle of legal challenges and market headwinds. 

Prosecutors in Vienna claim donations he made to a charity were veiled bribery payments to facilitate building permits. The 45-year-old denies the charges and expects to be cleared in court. Hearings in the case will continue Friday. 

On top of that, a former official in Austria’s finance ministry told anti-corruption investigators that Benko offered him a lucrative job in exchange for help resolving a tax probe -- an allegation the billionaire also rejects. The claims by Thomas Schmid, which prompted police to search the offices of Benko‘s Signa Holding GmbH, have drawn the property mogul into a broader corruption scandal involving former Chancellor Sebastian Kurz.

The legal distractions come as rising interest rates upend real estate markets across Europe, creating a volatile mix for the billionaire who started building his empire after dropping out of high school more than two decades ago. 

“Mr. Schmid’s allegations are false and are firmly rejected,” Benko said in emailed comments to Bloomberg. “At no time was any unlawful influence exerted or attempted to be exerted on any tax proceeding.”

Benko rose from converting attic space in Innsbruck to being part of Europe’s elite with a portfolio that spans New York’s Chrysler Building, Germany’s biggest department-store chain and the five-star Hotel Bauer in Venice. He counts France’s Peugeot family, German transportation tycoon Klaus-Michael Kuehne and the Swiss businessman behind Lindt chocolates among his backers. 

Some investors in Signa, which recently bought Britain’s Selfridges & Co. department stores, are concerned that the legal cases could contribute to slower growth rates, according to a person close to the situation.

Market Turmoil

Benko is still the linchpin of the group despite resigning from operating roles in 2013 after receiving a suspended sentence in Austria for trying to pay his way out of a tax dispute in Italy, a verdict he contested at the time.

His private trust owns more than half of the main holding company, and his importance was highlighted to bond investors of unit Signa Development. As part of the debt sale, a memorandum noted that Benko’s image becoming tarnished could have a material impact on the company’s business and finances. 

Since being issued last year, the yield of the €300 million ($310 million) green bond -- one of the few publicly-traded instruments issued by Benko’s group -- has quadrupled to 24%, a steep markup to the 4.9% rate on the Bloomberg Euro-Aggregate REITS Total Return Index.

Other real estate companies have also suffered from the current economic environment. Swedish landlord SBB’s shares have tumbled more than 70% this year and Adler Group SA’s stock dropped over 80%, as investors worry about refinancing debt piled on during the boom years. 

Stable Funding

In contrast to some of its rivals, Benko’s group relies mostly on private transactions for funding. That structure could help insulate it from volatile markets, as long as he can keep his tight-knit group of outside investors on board.

“All our investors are long-term committed and great partners for many years,” said Timo Herzberg, chief executive officer of Signa’s real estate division. “Our shareholders, major relationship banks as well as holders of hybrid capital and bonds have just recently reaffirmed their strong commitment to Signa.” 

His backers have shown loyalty in the past. Earlier this year, Benko’s real estate operations secured almost €1 billion of fresh equity.

The bank loans used to finance construction projects have fixed rates and an average maturity of 18 years, with limited upcoming refunding needs, according to a different person with direct knowledge of the operations. 

‘Important Adviser’

The company has raised more than €5 billion of secured real estate debt and more than €2 billion of common equity, hybrid capital and bonds since allegations of wrongdoing first appeared, the person said.

Participation rights, which Signa uses to bolster its capital base, have an average lifespan of 10 years, said the person, who asked not to be identified discussing private matters. The company is considering potential debt buybacks for the green bond, according to the person.

Benko’s strategy has leaned on ever-increasing valuations, which risk coming under pressure from higher interest rates. Entities like the Galeria chain in Germany -- which filed for insolvency under a so-called protective shield scheme last month, despite receiving government loans -- are often anchor tenants that secure his property businesses. 

Signa expects the overall market value of its portfolios to remain stable compared to 2021, the person familiar with the company’s operations said.

“Given the size of our group, our founder and chairman of the advisory board is not involved in the day-to-day operations,” Herzberg said. “But of course due to his role and entrepreneurial experience, he is an important adviser on strategic questions and ideas.”

Author's Note

content from news piece:
https://www.bloomberg.com/news/articles/2022-11-17/billionaire-benko-faces-bribery-probe-in-risk-to-property-empire

Reviews

[Dave Brown]

The basic reason I never became a billionaire, altho' I too dropped out of school early, is because of my poor memory
I think anybody in this tax bracket has to have a brilliant mind to first conceive the
many devious shortcuts used and then most importantly, off the cuff, remember them.
I firmly feel that, apart from inheritance, every big money wrangler has pulled off more than his/her share of shady deals.
I also wonder just what in the hell anybody needs a billion+ $'s for
One sign of my naivety among countless others
Can you imagine loosing 100+ billion dollars
(simple) mind boggling
Hope you enjoyed your Valentine day