Renovation consultant: “There are no uncontaminated Signa properties”

Alvarez & Marsal became known for handling the Lehman bankruptcy; they renovated the Vapiano and Concord mattresses. What's so explosive about the Signa affair?

NOW

Signa's bankruptcy is similar in some ways to previous bank failures. There are also many mutual links in a very complex business structure. According to corporate law, it was not a unified group. In bankruptcy, the music stops playing and the question now arises of which company owns which assets. At Lehman, it was also very difficult to determine which parts of the company in which countries owned which assets – and which debts. This is why banking regulations were strengthened after the financial crisis.

Do you also expect legal changes or stricter regulatory requirements after Causa Signa?

NOW

A constellation was created in which this conglomerate did not need to consolidate a balance sheet, that is, it did not need to produce a joint balance sheet. There will definitely be need for improvement. But it must be said: it would have been possible for any creditor or lender to request consolidated financial statements. The case shows that we cannot rely solely on self-regulation. There were savvy investors and lenders on board.

Many real estate developers are currently under pressure and bankruptcies are increasing. How is the real estate sector itself doing?

NOW

The speed of interest rate changes is great. Here, we generally think in years and not in quarters. If a key factor such as interest rates changes so dramatically in a short period of time, it is difficult to react in time. In addition, the demand for office real estate has evolved considerably. There are more and more home offices and the requirements for sustainability and energy efficiency have increased significantly. Properties that are only 20 years old simply do not meet these criteria and are sold at very favorable prices.

Almost every economic crisis started with a housing crisis. Is there a risk of the financial system flaring up?

NOW

The real estate sector is very capital intensive and involves a lot of debt. Yes, there is a housing crisis, but most banks can bear the risk. You have sufficient equity. No major bank faces intractable challenges in the real estate sector.

Is a market shake-up currently underway?

NOW

Yes. Recently, you couldn't go wrong when it came to real estate development. The errors were simply compensated for by an automatic increase in market prices. This meant that players without the necessary specialist knowledge and experience were also active in the market.

However, prices are falling relatively modestly.

NOW

What remains are high construction costs. It's difficult for even the best developers to produce to cover their costs. What is falling now are property prices.

Every crisis has its winners. Who is currently benefiting from the real estate crisis?

NOW

We won't know for sure for three years. Anyone with money has many more investment options today than they did two years ago. The winners will be those who, in addition to capital, also have the technical capabilities necessary to take over half-finished projects. You have to have the courage to do it and you have to be able to do it, because it's a high risk.

And who are the winners of the Signa crisis?

NOW

There is no immediate winner at Signa. Just because you buy something today a third cheaper than three years ago doesn't mean you still haven't bought it cheap. And we don't know how much it will all be worth in three years.

Leave a Comment