The first residents wanted to move into the Steglitz roundabout in Berlin at the end of the year. It won’t come of that. The project is behind schedule.
(Photo: Bloomberg)
Dusseldorf The Adler Group housing group earned more in the first nine months of 2021 thanks to higher rental income. At the same time, the level of indebtedness rose further at the end of September. Adler announced this on Tuesday morning. It was the first time that Adler presented figures since the shortseller attack on the company.
Adler announced that the operating income from the rental business (FFO 1) grew to 101.9 million euros in the first few months. In the previous year it was 74.7 million euros. The net rental income rose by 28 percent to 259.3 million euros.
Adler has been under pressure for weeks. While investors have long been demanding a reduction in debt, the British shortseller Fraser Perring accuses the group of systematic fraud. Adler denies this and has commissioned the auditing company KPMG with a forensic investigation. However, the group did not provide a detailed reply on Tuesday either.
One accusation by Perring is that Adler is glossing over its debt. This is tricky because the group guarantees its bondholders a leverage ratio (LTV) of less than 60 percent. Adler recently vehemently rejected Perring’s criticism and made it clear that “there is no reason for termination under the bonds issued by Adler and its daughters”.
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Adler actually wants to push its LTV below 50 percent. For this purpose, large real estate packages are to be sold to the competitor LEG and the financial investor KKR. But the level of debt has now increased from 54.7 percent to 57 percent, as Adler announced. For comparison: at the end of the third quarter, the rate at LEG’s competitor was 38 percent.
The background to the LTV increase at Adler is the controversial Gerresheim transaction, in which shortseller Perring locates the Austrian entrepreneur Cevdet Caner. This allegedly acts as a kind of “shadow CEO” of Adler. Confidants and members of the Caner family would exempt the company.
The investor is controversial in the real estate industry.
(Photo: Bloomberg)
Caner denies this and has filed a criminal complaint against Perring. The Austrian, who does not hold an official position at the housing company, says that as a consultant he helped shape the “Adler success story”, establishing contacts and accompanying transactions.
But the dealings with a relative of Caner are now apparently burdening the group’s balance sheet. The Austrian’s brother-in-law had bought 75 percent of a company from an Adler subsidiary that was planning the so-called “Glasmacherviertel” in the Gerresheim district of Düsseldorf. To this day, hardly anything has happened on the construction site. Only a third of the purchase price flowed, which was considered overpriced. Then Adler announced that it would reverse the transaction.
The group now explained that the group reassessed its “rights and obligations under the contract” on the occasion of “delays in the planning approval decisions”. Adler came to the conclusion that the group exercised control over the company that had previously been “accounted for using the equity method”.
Adler has now fully consolidated the company and “booked out the investment valued using the equity method and the purchase price claim”. This resulted in a negative change in the amount of 126 million euros, which ultimately drove the LTV further.
Adler Group: Forensic examination by KPMG
Adler did not mention either Caner or Perring by name in its quarterly report. The CO bosses Maximilian Rienecker and Thierry Beaudemoulin announced in their letter to the shareholders that there would be “no cash flows to the parties involved” in the Gerresheim transaction and that “no other parties have received any funds since the sale”.
The CEOs also emphasized that Adler’s real estate appraisers CBRE and NAI Apollo are independent and that their work has been “reviewed”. At the end of the year, you should again create evaluations for the portfolio. Revaluation of the portfolio as a whole amounted to EUR 571 million in the first nine months.
Up to now, Adler had not named the special auditors that the group brought in. In its report, the group announced that it was KPMG. The forensic experts at the auditing company were commissioned to “check certain transactions from the past”.
Upon completion of the review, Adler received a full report from KPMG that the Board of Directors would be informed “immediately of all key findings” by then.
The Adler Group believes that it remains on track for the full year 2021. The group expects net rental income in the range of 340 to 345 million euros, for FFO 1 a range of 135 to 140 million euros is targeted. In the afternoon, the management will answer questions from investors in a conference call.
More: “Almost scandalous”: Adler Group comes under pressure due to stagnant large construction sites.