The good mood seems to be gone again at the badly hit and highly indebted real estate group Adler. The company had recently gained some breathing space and, above all, money from its creditors. However, important problems of the group are still unsolved: Because there are only around 26,000 apartments in the portfolio, the operating profit in the third quarter almost halved over the year; at the same time, real estate is worth less and debt is growing; and an auditor for the balance sheet has still not been found.
The head of the board of directors, Stefan Kirsten, and the chief financial officer, Thomas Echelmeyer, therefore didn’t even talk about the past quarter on Wednesday – at Adler it’s all about one thing: the future. And she had decided last Friday evening, at least for the time being. Since the group had announced a new agreement with a group of important creditors, including investors such as Blackrock and Pimco. For higher interest rates, they are extending the bonds due in 2024 by one year, and they are also making up to 937.5 million euros in fresh capital available – albeit at an interest rate of 12.5 percent. “It was an expensive deal,” Kirsten said, but he still called the agreement a “liberation strike.” At the same time, bankruptcy was also examined as a “Plan B”.
Almost seven billion euros in debt
Adler has bonds totaling 3.2 billion euros on the market, including convertible bonds and bank loans, the group even owes 6.9 billion euros. The agreement now secures financing until mid-2025, even if no further apartments or real estate projects are sold by then. But that’s exactly what the plan is, said CFO Echelmeyer: “It makes a lot of sense to repay a loan with an interest rate of 12.5 percent as quickly as possible.” However, the price has to be right. However, this could be difficult in view of the trend towards further increases in interest rates and growing uncertainty. In the third quarter, Adler already had to lower the value of its existing properties by 2.3 percent.
The Adler managers did not provide any precise information on how things should continue. The group will concentrate on its apartment portfolio in Berlin, it was only said, new construction projects will only be “continued selectively”. What does that mean for the future of Adler projects that have hit the headlines nationwide, such as the Holsten Brewery site in Hamburg, the Steglitzer Kreisel in Berlin or the glass-making district in Düsseldorf? Not clear.
The new colleagues that Kirsten and Echelmeyer are now looking for should also have a say in this: an agreement was reached with the lenders to appoint another, independent member to the board of directors and to bring someone responsible for restructuring into management. However, both would “not be watchdogs”, said Kirsten, but were “only committed to the company’s well-being”. There is no need for someone “to constantly look over my shoulder”.