Ohne Kapitalismuskritik làßt sich das hier nicht begreifen

[Jerome Marot]

Ohne Kapitalismuskritik làßt sich das hier nicht begreifen.
(What is here cannot be understood without a critique of capitalism)​

René Benko (born 1977) is a bankrupt Austrian real estate, media and retail investor and was founder of the Signa Holding. The company was considered Austria's largest privately held real estate conglomerate. https://en.wikipedia.org/wiki/René_Benko René Benko’s holding: Signa invested massively in German cities retail space, planing several luxury projects in prime real estate locations.

In November 2003, René Benko had to step down from Signa holdings following a fatal liquidity crisis due to a 10.3 Billion Euro debt charge and impossibility to honor loans and debt. In March 2024 Benko declared personal insolvency. All the pending construction projects are stopped. Nobody knows when they will start again.


Munich is one of the many cities hit by the crisis.

 

[Jerome Marot]

The first project is the Alte Akademie: https://en.wikipedia.org/wiki/Old_Academy_(Munich) a building from the 16th century, home of a Jesuite school and later a school of painting and sculpture (hence the designation "Academy”).

Retail als Gesamtkunstwerk - Retail as a complete work of art
Konsum als Ersatzkultur - Consumption as a substitute for culture.​

 

[Jerome Marot]

The next project is a sport shop. It is still open, but filed for bankruptcy. It used to be a department store from Karstadt, was torn down and rebuilt.

You will see the names Karstadt and Kaufhof several times in this thread. These were the two competing department store chains in Germany. They went bankrupt around 2010 and were bought by Signa holdings in 2018:
https://en.wikipedia.org/wiki/Karstadt
https://en.wikipedia.org/wiki/Galeria_Kaufhof

 

[Jerome Marot]

Near the west city gate, this historical building is wrapped for construction. It used to be a large department store for sports apparel and equipment under the name Karstadt.

​

The billboard gives us an idea how it looked like.

 

[Jerome Marot]

Next to it (the two buildings are connected by a tunnel), the largest department store in south Germany, also from Karstadt. The facade is historical, but the building extends quite a bit behind.

This shop is still open, but filed for bankruptcy.

A view inside. Large parts of the ground floor were rebuilt by British architect John Pawson around 2016 and leased to luxury brands. I don’t go there very often, but I have never seen it very crowded, maybe empty spaces are part of the luxury shopping experience.

Some details show that the store was designed to cater to middle east tourists.

 

[Jerome Marot]

On our way to the main train station, a large building on the left, formerly for the competing chain Kaufhof. The whole building was emptied, but some temporary events still take place.

 

[Jerome Marot]

And on the right, we see another building from Karstadt again. It takes the whole block to the train station.

 

[Jerome Marot]

One side is modern, the side near the train station has historical flair.

​

It is empty, another failed project of Signa holdings.

 

[Jerome Marot]

On this map (source: openstreetmaps), I painted the vacated or demolished buildings in red, the ones still open under bankruptcy protection in orange. These are the ones I know of, but new findings about the extent of Signa holdings reach the press regularly.

​

Munich city center is quite small for the size of the city. The projects of Signa holdings take up a large part of the city center retail space.

Why did this happen? Simple explanations will say that Signa was a zero interest rate phenomenon, which is certainly true. One can also point to the covid lockdowns as to a cause for collapse. Personally, I don’t believe in perpetual growth. The vastness of projects made the whole system unsustainable.

We should remember that Kaufhof and Karstadt were already bankrupt in 2010. Kaufhof and Karstadt closed because their customers disappeared. This is true for all shops catering to the traditional middle class in the west. The traditional middle class disappeared, the word used by marketing is called “consumer bifurcation”. Deloitte published this report just before covid: https://www2.deloitte.com/content/d...urcation/DI_Consumer-products-bifurcation.pdf


If the middle class disappears from the city shops, the only alternative source is tourism. And to make it pay, the tourists the shop wants are the ones buying luxury products, with a huge markup. But luxury is defined by scarcity. Signa had no chance to lease that much space to luxury retail. There simply aren’t enough luxury brands to fill it.

 

[Asher Kelman]

it seems to me that these frozen projects threaten society flourishing as it should.

Buy in context to theGerman economic 10 Billion Euro is almost budget dust, spreading the cost over the next 10 years.

Wouldn’t it be prudent for the Federal Government to restore confidence and simply take over the projects.

What to do with them shouldn’t be too hard for civic planners and entrepreneurs, after all, difficulties always provide unique opportunities to be exploited and perhaps better confirms to make changes not possible without this shocking disruption!

What ideas are being floated?

Asher

 

[Asher Kelman]

Jérôme,

At least in the USA, digital-based purchases online has pressure city stores either to close down or else to switch course to provide sone special experience to survive. In my City, commercial space has moved to luxury brands, fine dining and services such as Law Firms, Entertainment Industry or supermarkets with specialty bookstores, cheese and creative chocolate shops and the like serving many small niche pockets of interest.

Unfortunately, the City gets no share of the massive online sales diverted to digital megastores.

It has to be that cities receive some wealth back from digital purchases from their population so that everywhere has opportunities for funding the libraries, parks, sports facilities and evening schools that can help make City life more healthy and attractive.

In Germany, are there flows of taxation moneys back to Cities?

Here unfortunately, most massive digital retailers hardly pay taxes and so communities struggle for lack of discretionary funds that can pay for amenities that make life a little more comfortable for everyone.

We haven’t got a 10 billion Euro worth of a big development company’s shortfall in financing, as Germany has and I don’t know how we’d deal with such a disaster!

Asher

 

[Jerome Marot]

Wouldn’t it be prudent for the Federal Government to restore confidence and simply take over the projects.

That would be a bit like "Privatizing profits and socializing losses", wouldn't it?

Am Anfang stand die Privatisierung - Was nun Herr Söder?
At the beginning was the privatisation - what now Mr. Söder?
(Söder is the head of Bavaria)

 

[Jerome Marot]

Jérôme,

At least in the USA, digital-based purchases online has pressure city stores either to close down or else to switch course to provide sone special experience to survive. In my City, commercial space has moved to luxury brands, fine dining and services such as Law Firms, Entertainment Industry or supermarkets with specialty bookstores, cheese and creative chocolate shops and the like serving many small niche pockets of interest.

Unfortunately, the City gets no share of the massive online sales diverted to digital megastores.

It has to be that cities receive some wealth back from digital purchases from their population so that everywhere has opportunities for funding the libraries, parks, sports facilities and evening schools that can help make City life more healthy and attractive.

In Germany, are there flows of taxation moneys back to Cities?

Here unfortunately, most massive digital retailers hardly pay taxes and so communities struggle for lack of discretionary funds that can pay for amenities that make life a little more comfortable for everyone.

We haven’t got a 10 billion Euro worth of a big development company’s shortfall in financing, as Germany has and I don’t know how we’d deal with such a disaster!

Asher

While the increase of online retail certainly has had a large influence on retail, I don't think this is the reason for the crash here or even for the changes you are describing in the USA. Online retail has disrupted what can be bought online, but not everything is bought online. Online retail has disrupted things like books, cameras, electronics, etc... but areas like food less so (I know about the recent invention of "dark stores" and quick delivery). If the reason for the changes in retail was the rise in online orders, we would see a correlation between what shops offer in city stores and what cannot be easily bought on order, yet that correlation is not apparent or at least not to me.

More important, I think, are changes in buying habits, the "consumer bifurcation" trend I posted above and the obsolescence of large segments of retail: video rental, CD and record shops, all the electronics associated to them (players and recorders), camera shops (people use a smartphone nowadays and never print pictures), books and magazines (people get their news from the Internet), toys and games (largely replaced by software and apps), etc...

As to taxation, German municipalities benefit from real property and real property transfer taxes. The latter one has increased with the value of the properties. Municipalities also benefit from trade tax, but this would probably only be the case for city-based retailers and not for chains based somewhere else, although I am not sure.
Retail, online or not, is subjected to VAT levied at the state level, not like sales tax in the USA.

 

[Asher Kelman]

Think about the tidal change brought just be automobiles: a whole industry around Horace’s and carriages vanished.

Than the electric light. In the UK thousands of jobs in candle and lantern factories went away.

🔴 Why is the change in buying habits so different?

Is it because underneath is hidden the decreasing buying power by the working poor?

In addition the stock markets seem to show we are flourishing, but the working poke’s wages haven’t risen!

Asher

 

[Jerome Marot]

Think about the tidal change brought just be automobiles: a whole industry around Horace’s and carriages vanished.

Than the electric light. In the UK thousands of jobs in candle and lantern factories went away.

Yes, and large tracts of the western countries saw a market decline. It used to be that small cities and rural areas could sustain several small industries and shops.

Note that I am not advocating for this to return, I am just trying to make sense of the present situation and noted that complete categories of retail disappeared because what they were selling disappeared as well. As far as electronics and small personal devices are concerned, I see only smartphones and flat screen TVs where there used to be several independent devices, for example.

🔴 Why is the change in buying habits so different?

Is it because underneath is hidden the decreasing buying power by the working poor?

In addition the stock markets seem to show we are flourishing, but the working poke’s wages haven’t risen!

The poor were never able to sustain the economy, almost per definition. Then, the inequalities have risen, which squeezed the middle class and made retail catering to this segment of the population less profitable.

As to the stock market, our economies have created huge amounts of fiat money since the 2008 crisis. That money should have created inflation, but only did so in the stock market and real estate (and the huge increase in real estate prices made shops less profitable). Pre-covid, that money did not increase wages and thus did not create inflation for day to day shopping, for reasons not quite fully understood, at least by me.

That is changing as we speak. We have had inflation and wages have risen post covid, both in the USA and in Europe. The effects of the changes should be visible in 5 to 10 years.

 

[Asher Kelman]

It’s proposed and being tested to have basic regular incline from the government to cover purchase of basic needs .

It’s suggested that that will be normal in 20-30 years time!

Asher

 

[Jerome Marot]

It’s proposed and being tested to have basic regular incline from the government to cover purchase of basic needs .

It’s suggested that that will be normal in 20-30 years time!

Asher

There have been several such proposals. One of the most notable was from Benoît Hamon (parti socialiste) in 2022 in France. it was a disaster for his party: electors do not want to live on public money, they want jobs and the social status that comes with having a job.

 

[Asher Kelman]

There have been several such proposals. One of the most notable was from Benoît Hamon (parti socialiste) in 2022 in France. it was a disaster for his party: electors do not want to live on public money, they want jobs and the social status that comes with having a job.

Is that basic to man in his needs as a valued part of a supportive society. After all, we want self-worth!

…. or just part of the ethos of French society?

Asher

 

[Asher Kelman]

Look at this 18 month experiment in Stockton California!

 

[Jerome Marot]

There have been several such projects, this Wikipedia article lists them: https://en.wikipedia.org/wiki/Universal_basic_income

Small scale projects indeed improve the conditions of the recipients but fail to address the societal changes that would arise from extending a such project to the size of a country.

There are several social systems around the world (most notably in France, Italy, the UK and Spain), which warranty a limited income to unemployed citizens.

 

[Jerome Marot]

…. or just part of the ethos of French society?

From Swiss society as well. Switzerland had a referendum about universal basic income in 2016.

 

[Asher Kelman]

I take it that this is separate from those who get the payments as part of “unemployment insurance” they paid for for years while they were employed!

So how do you view the impact of guaranteed salary to the unemployed?

Asher

 

[James Lemon]

Investments that produce a multiple streams of income are severely affected by interests rates. When interest rates rise the value of the investment declines so it is easy to get upside down. The high cost of goods, and labour due to high inflation would also add to the cost burden. People seem to like real estate as investments due to the fact that you can leverage your money. The income approach—provided by commercial property appraisers and by underwriters for real-estate backed investments—is very similar to the discounted cash flow analysis conducted on equity and bond investments.

 

[Jerome Marot]

Investments that produce a multiple streams of income are severely affected by interests rates. When interest rates rise the value of the investment declines so it is easy to get upside down. The high cost of goods, and labour due to high inflation would also add to the cost burden. People seem to like real estate as investments due to the fact that you can leverage your money. The income approach—provided by commercial property appraisers and by underwriters for real-estate backed investments—is very similar to the discounted cash flow analysis conducted on equity and bond investments.

I don't think a complicated analysis is necessary here: Signa borrowed money when it was cheap, interest rates increased, they could not repay. Bankruptcy.
And of course the argument I already raised that so much retail surface for luxury products was never going to work.

 

[Jerome Marot]

I take it that this is separate from those who get the payments as part of “unemployment insurance” they paid for for years while they were employed!

So how do you view the impact of guaranteed salary to the unemployed?

Frankly, I do not know. The problem with universal income, should it be really implemented at the size of a country, is that it would be a major society change. I don't think anyone can predict what the consequences in the behaviour of the complete population would be.

 

[James Lemon]

I don't think a complicated analysis is necessary here: Signa borrowed money when it was cheap, interest rates increased, they could not repay. Bankruptcy.
And of course the argument I already raised that so much retail surface for luxury products was never going to work.

Nothing complicated Jerome the properties lost value because of the rise in interest rates regardless of whether he paid cash or borrowed the money.

 

[Asher Kelman]

Frankly, I do not know. The problem with universal income, should it be really implemented at the size of a country, is that it would be a major society change. I don't think anyone can predict what the consequences in the behaviour of the complete population would be.

For people who do the work they love, like artists, astronomers, physicists, astrophysicists, mathematicians, social workers, craftsmen and the like, work will continue, but they will feel protected against the whims of employers.

But those who do menial labor, like truck drivers and warehousemen with forklifts and garment workers being paid piecemeal by the 100 Garments sewn, could demand greater wages or else, stay home.

We can’t of course predict where the minimal work wages will rise to, but for summer tgey will rise!

Asher

 

[James Lemon]

Universal basic income is not a solution .

 

[Asher Kelman]

Universal basic income is not a solution .

It will allow sufficient sales of coca colas and beer!

 

[James Lemon]

It will allow sufficient sales of coca colas and beer!

Yes don't forget the snacks like Doritos & Peanuts ...lol