Status: 07.10.2021 6:16 p.m.
Has the Adler housing group inflated its balance sheet and thereby deceived its shareholders? A heated argument has broken out between the investor and the company over this accusation. The exit is open.
For the shareholders of the Adler Group housing company, which was created only last year through mergers and acquisitions, things are going to be rock hard. After the shares had already lost more than half of their value in the past three years, the allegations of a British investor have now caused the share price to fall by an additional third. The investor Fraser Perring accuses the real estate company of fraud, manipulation and deception of its financiers – and has at the same time bet on the fall of the share.
Fraser Perring is no stranger to the stock markets. The short seller was one of the first to express doubts about Wirecard’s business model back in 2016 and accuse the former payment service provider of fraudulent activities and falsifying accounts.
In the current case, Perring’s company Viceroy Research accuses the Adler Group, among other things, of artificially inflating the balance sheet. At the same time, Perring criticizes idle construction sites such as the Steglitzer Kreisel, a 120-meter-high former office building that was supposed to be converted into a residential tower, but which has been unfinished for years as a gutted concrete frame towering into the sky over Berlin. In addition, the management withdraws money from acquired companies.
As the beneficiaries of these machinations, Perring identified a group of shareholders and managers at Adler and around the group. These belonged to a network around the entrepreneur Cevdet Caner, who supposedly controls the real estate company from the background like a shadow CEO. Perring accuses the “Friends & Family” group of covert insider trading – at the expense of shareholders and bondholders.
Allegations rejected
Adler rejected the allegations “in the strongest possible way” and spoke of allegations. The fact that Adler inflated property values in their balance sheets “is demonstrably wrong,” according to the company. The real estate values used were determined by independent experts and checked by the financing banks. Contrary to what the investor said, Adler had sold several properties to major investors in the past twelve months, at a value above the balance sheet value reported by Adler. As already announced, Adler was approached by several interested parties who would like to purchase a large part of its 70,000 apartments. The inquiries are currently being examined.
The lawyer of the entrepreneur Caner rejected the allegations in full when asked. “Mr. Caner does not control the eagles and does not act as a puller in the background,” said the lawyer. There is also no system that is designed with the involvement of family members to take over better capitalized companies or to participate in them in order to burden them with debt. “Adler Group SE is managed and controlled solely by its independent bodies,” said the lawyer.
Adler is heavily in debt
The fact is that the Adler Group, which emerged from the merger of ADO Properties, Adler Real Estate and Consus Real Estate last year, is highly indebted. As a result, the LTV loan-to-value ratio, which is important for the debt level of real estate groups, rose to 54.7 percent in the first half of the year. For comparison: At the same point in time, it was 40.5 percent for its larger competitor Vonovia. The priority is therefore debt relief, announced the two CEOs Maximilian Rienecker and Thierry Beaudemoulin in an interview with the Reuters agency on Monday.
A sale could include tens of thousands of the approximately 70,000 apartments: “If we sell 50,000 units at an attractive premium, we create values in order to significantly excuse ourselves,” said Rienecker: “But that also applies to 40,000 or 60,000 units.” A separation from the subsidiary Westgrund with its around 17,000 units is also on the cards. The company announced that it would “initiate a fundamental review of its strategic options for action”.
Market watchers remain skeptical
How much the debt will fall will depend on how many apartments are sold. The aim is to “reduce the LTV quickly and significantly below 50 percent,” said Rienecker. The Adler Group will be “well positioned with the remaining portfolio thanks to significant debt relief,” he announced.
However, market watchers remain skeptical. Analyst Sander Bunck of the British investment bank Barclays sees “considerable risks” even after the price slide as a result of the allegations by Fraser Perring. He is particularly concerned about the company’s debt position and liquidity. The fact that the financial supervisory authority BaFin intervened should not be seen as positive either. For the time being, there is no bottom in sight for the share, even if the SDAX-listed paper can rise again today.
Critics also complain about the company’s opaque ownership structure, speaking of a complex network of companies and anchor shareholders in Luxembourg, Israel and Germany. The predecessor companies Adler Real Estate and Consus Real Estate are also still listed. A detailed statement that the company has promised for the next few days could provide information about the actual situation of the Adler Group.