Adler is to retain a ten percent stake in the real estate portfolio even after the transaction.
(Photo: dpa)
Berlin, Düsseldorf, Frankfurt After the attack by the British shortseller Fraser Perring, the Adler Group is parting with a fifth of its housing stock: The group wants to sell more than 15,000 residential units to its industry rival LEG Immobilien. The two companies announced this on Monday.
Adler and LEG have therefore signed “a declaration of intent on key points”. According to Adler, the transaction is based on a property valuation of around 1.5 billion euros, which is above the book value reported for the first half of the year. The group expects the transaction to close in late 2021.
The Adler Group should retain around ten percent of the portfolio. “Therefore, the inflow of funds, also due to customary purchase price adjustments, will not correspond to the property valuation,” said Adler. The net inflow of funds will be around 800 million euros.
The housing company wants to use the deal to reduce its mountain of billions in debt. “The sale can lead to a significant reduction in the leverage of the Adler through the repayment of bonds and loans,” said the announcement. The planned deal has no influence on the earnings forecasts for the current year.
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The group is currently the focus of British investor Fraser Perring. The shortseller had published a 61-page report on the website of its analysis company Viceroy Research last week. In it he accused Adler of fraud, manipulation and deception of their financiers. Particularly in focus: questionable transactions.
The share then fell by 30 percent to a record low of nine euros. By the end of the week, however, it recovered to twelve euros after the real estate giant Vonovia announced that it would consider joining Adler.
Germany’s largest housing group acquired an option to purchase 13.3 percent of the shares in Adler’s major shareholder Aggregate Holdings. That corresponds to half of the participation of the Luxembourgers. The option has a term of 18 months.
Vonovia has received the promise to examine Adler’s real estate portfolio over the next one and a half years and to decide whether to take over apartments. The now announced agreement between Adler and LEG “does not change anything in our agreement,” said a Vonovia spokeswoman on request.
Adler had previously “strongly dismissed” Perring’s allegations. The shortseller’s report contained numerous “inaccurate allegations”. On Friday, the group announced that they would face an investigation by independent experts.
Adler decided to hire external “consultants and auditors to carry out a comprehensive review of the allegations, in particular the third-party transactions,” it said in a statement. The group also referred to existing reports on its portfolio and its development projects.
LEG obviously does not want to rely on it. The deal with Adler was agreed subject to a due diligence, the industry rival said. LEG will therefore take a closer look at the Adler books before the final purchase agreement.
According to LEG, 90 percent of the apartments with relatively low rents, most of which belong to the subsidiaries Adler Real Estate and Westgrund, are in Lower Saxony, Schleswig-Holstein and Bremen. Among other things, Adler names the locations in Wilhelmshaven, Göttingen and Wolfsburg. Vonovia should not focus on these – the industry leader focuses primarily on metropolises.
LEG wants to use the transaction to expand its own market position in northern Germany. So far, the focus of the Düsseldorf company has been primarily in the home state of North Rhine-Westphalia. In contrast to other real estate companies, LEG’s business focus is on “affordable apartments”.
It’s no secret that LEG is on a shopping spree: the company wanted to buy 7,000 apartments this year. By the beginning of August there were already 4,000 units – even when LEG boss Lars von Lackum spoke of a “challenging environment with an overall tight supply”.
Just two days before the Perring Report was published, Adler had announced that it would be selling a large part of its 70,000 apartments portfolio. Co-boss Maximilian Rienecker spoke of 40,000 to 60,000 apartments that could be sold.
Adler’s goal is to reduce the loan-to-value ratio (LTV), which is important for real estate companies’ debt levels, to below 50 percent. In the first half of the year it was 54.7 percent. For comparison: the LTV of the larger competitor Vonovia was 40.5 percent at the same time.
More: LEG could expand abroad