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Billionaire Rene Benko monetized the signing of a long-term lease on a historical Vienna property by selling 99-year bonds worth almost twice what the building was valued in September.
An early 20th century Art Nouveau jewel, formerly the headquarter of the Austrian postal savings bank, backs 250 million euros ($270 million) of covered notes sold to German insurerR+V Versicherung AG, according to a mortgage deed linked to the securities that was filed to the Austrian land register this month. No prospectus or terms were published for the deal.
An official at Signa and a representative of R+V declined to comment on the deal.
Purchased in 2013, the then vacant landmark building was held in the books of Benko’s real estate firmSigna Prime Selection AG with a gross asset value of 130 million euros just last year, according to aprospectus for a different bond marketed in September.
That was before Signa in November reached an agreement for a 99-year lease with the Austrian government’s real estate manager BIG, which plans to transfer there some state university faculties. The agreement ensures that the historical lobby remains open to the public and to architecture students who come to Vienna to study the building. Art students will also be able to have a base close to Vienna’s many inner-city cultural institutions.
The securities yield around 1.5%, according to a person familiar with the deal. That pricing is based on an annual rent of around 3.5 million euros BIG is paying, according to the person, who asked not to be identified because the deal was private. Signa revalued the building, known in German as Postsparkasse, to more than 300 million euros after the deal with BIG was struck, the person said. BIG wasn’t immediately available for a comment.
Austria’s 100-year government bond due 2117 yields about 0.8%, according to data compiled by Bloomberg.Prime office yields that building owners generate from long-term private tenants in Vienna are below 3.5%, according to Vienna-based real estate adviser EHL. Signa is foregoing a higher market rent from a hotel or luxury flats for the long-term term cash flows from a zero-risk tenant.
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Benko, 42, has become a notable player in real estate with his bold bet that inner city retail spaces will continue to thrive even amid a shift to online shopping. This month, the Innsbruck-born financier bought half of Swiss upscale retailer Globus. Last year, he completed the takeover of Germany’s Kaufhof departments stores buying a 50% stake fromHudson’s Bay Co. and merging it with theKarstadt department stores he already owned.
To help finance his spree, Benko relies on private debt and equity placements and closely-held companies. Among the shareholders of Signa Prime are insurers including R+V, trusts and wealthy European families. An attempt to tap a wider range of investors with a senior unsecured bonddidn’t lead to a deal last year.
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