Court of Auditors tears apart BIG’s postal savings bank deal with Signa

The background: In 2019, BIG concluded a building lease agreement for the “Postsparkasse” (PSK) property in Vienna’s 1st district. This gave her the right to build for 99 years at an interest rate adjusted to the consumer price index of 4.3 million euros per year. Five years previously, the property had been acquired by the Signa group of companies for 150 million euros. The public sector building contract with Signa enabled the group to raise debt capital of 250 million euros, according to the report presented on Friday. The period from 2018 to 2024 was examined.

In its statement, BIG said that the raising of outside capital and the revaluation of the property by Signa was not within its sphere of influence. “The fact is that the building rights interest that BIG pays has been checked by an expert and is appropriate and economical considering the location and the architectural uniqueness of the building.” In general, the property has established itself as a “house for art and science” and is used by various rented universities and research institutes, it was emphasized.

Lack of needs analysis

The auditors criticize the fact that BIG decided on the PSK property prematurely, without analyzing the actual space requirements. How the deal was initiated between the state-owned company and Signa remained unclear to the auditors. There was no concrete need for the property at the beginning of the negotiations. “It was only in May 2019 – around eight months after the first documented conversation between BIG and the Signa group of companies – that universities expressed interest in renting the PSK building. The building rights contract was finally concluded in November 2019,” said the Court of Auditors.

Shortly before the negotiations on the building contract were concluded, Signa sent an invitation to hunt for a former managing director. This was rejected, but not further documented. However, the accusation is more serious: the managing director forwarded application documents from an acquaintance to the CEO of the Signa group of companies. “This results in a conflict of interest that should have led to the withdrawal of this managing director from the contract negotiations,” the Court of Auditors clarifies.

BIG: Comprehensive set of rules for compliance

The BIG said that it had a “comprehensive” and “well-established set of rules” on the subject of compliance and corruption prevention. “This is constantly being revised and also taking into account the RH recommendations.” In addition, a standardized test for assessing project partners, which the BIG introduced in 2018, has “now been refined and a more in-depth test has been established”. The BIG also confirmed that the hunting invitation had been demonstrably rejected and that the “(unsuccessful) forwarding of a CV” had not been followed up.

Lack of repairs to construction defects

The building contract became expensive for taxpayers. “Due to the necessary structural adaptations, the costs increased. Among other things, warranty-relevant defects in connection with fire protection emerged. The BIG did not claim the costs for the repair, which amounted to around 7.9 million euros, in court. Including fire protection, the renovation and adaptation amounted to 54.7 million euros. However, significantly less was initially calculated, namely 23.7 million euros,” points out the Court of Auditors. The RH auditors note: “Overall, the economic viability of the project can be assessed as disadvantageous.”

With regard to the costs “compared to the original purchase calculation”, BIG referred to “further orders from rented institutions that were implemented by BIG”. “On the other hand, all the consequences of the COVID pandemic had an impact from 2020 onwards, including material shortages and delivery delays as well as rising inflation and increased financing, material and personnel costs.”

High salaries

And something surprising also emerged when it came to the salaries of the BIG managing directors for 2023: these were a third higher than those of the Federal Chancellor. “Even without performance-related components, the annual salaries of the managing directors exceeded the highest possible salaries of these federal employees by 16 to 95 percent; including bonuses, by 79 to 159 percent,” report the auditors. But that’s not all: Although they were contractually obliged to dedicate their full time to BIG, three of BIG’s managing directors were given the opportunity to work a total of eleven additional jobs. According to BIG itself, however, these are supervisory board mandates approved by the state holding company ÖBAG.

Criticism last week

Last Friday there was already harsh criticism of BIG from the Court of Auditors, also in connection with a Signa deal. The federal real estate company wanted to build the Vienna Twentytwo real estate project together with Signa. However, there were disagreements between the former partners. The construction costs almost doubled to around 412 million euros, and the return shrank, according to the short version of the undertaking, which was also expensive for taxpayers.