Dhe real estate group Adler Group cannot shake off the suspicion of an unstable financial situation. The Berlin-based company based in Luxembourg has been in trouble for months, had to sell housing stocks and postpone the publication of the balance sheet.
The auditing company KPMG is currently working on an investigation of various transactions at Adler and the predecessor companies as well as on a review of the property and project values of the Luxembourg investor.
A preliminary summary is now available. And little good can be expected. At least that’s what a hurriedly published message from the Adler Group on Thursday evening suggests. They want to extend the ongoing KPMG investigation a little, it says, until March 25th.
Until then, they still want to “limit evaluation differences together”, “extend data input” and concentrate on “email analysis” with regard to people who may be close to the company – i.e. people who may have benefited from previous deals in an inadmissible way could have benefited.
That doesn’t sound like a sovereign course of the exam. Rather after hasty repairs and a little reinterpretation here and there.
The Adler case has been causing unrest in the real estate industry for some time and could expand into a real scandal – with consequences not only for the shareholders, but also for German cities in which Adler construction projects are planned.
Deception and Financial Misrepresentation
The company was created in 2019 through a merger of the Berlin ADO Group by Adler Real Estate. In 2020, ADO, which had a comparatively attractive residential portfolio, swallowed up Adler, which had comparatively precarious properties, acquired a stake in the project developer Consus Real Estete, and everything was renamed Adler Group. The operational headquarters are in Berlin, the tax-privileged company address is in Luxembourg.
Even this rough description of the process gives rise to doubts. These, however, only really boiled up when the British hedge fund manager Fraser Perring accused the management of deception and financial misrepresentation in a comprehensive dossier last year.
The real estate holdings are valued too high, the credit lines do not match these values, and ongoing construction projects are also bloated. In addition, there are at least strange sales of shares and takeovers by investors involved.
The pressure became so great that Adler began selling off housing stocks. Of around 70,000, 57,000 are now left and further sales are planned. In addition, there are ongoing real estate projects that Consus started but are making little progress.
The “Grand Central” project in Düsseldorf, for example, has been idle for years, the city administration is angry, and in the real estate industry this kind of delay is simply speculation.
So far, KPMG has not been able to dismiss the accusation of having conducted non-transparent transactions with related parties. In his report, Fraser Perring accused the real estate entrepreneur Cevdet Caner of being a kind of shadow CEO of the Adler Group and described as an example a transaction involving another construction project in Düsseldorf that is currently idle.
business with relatives
The transaction worked like this: In 2019, Brack Capital Properties, in which the Adler Group held a 70 percent stake at the time, sold 75 percent of the Düsseldorf construction project “Glasmacherviertel” at a value of 375 million euros to Cevdet Caner’s brother-in-law Joseph Schrattbauer.
Less than two years earlier, the price for the site was 142 million euros. Not a bad deal. But Schrattbauer never paid the purchase price in full. Finally, Adler Group announced that it intended to reverse the transaction.
The KPMG auditors are now biting their teeth on a very special constellation of people: According to the transparency register, Joseph Schrattbauer and his sister – Cevdet Caner’s wife – Gerda Caner are among the beneficial owners of the large Luxembourg company Mezzanine IX Investors, one of the main shareholders of the Adler Group.
According to the Perring report, Mezzanine IX is owned by Bassan SAM, whose director is Wolfgang Hahn. Hahn was previously Managing Director of Pebble Investment, which has since been renamed Consus Holding. Due to a complicated takeover deal, Consus now belongs to the Adler Group. According to Fraser Perring, Wolfgang Hahn and Cevdet Caner have been doing business together for more than a decade.
Vonovia suddenly also has a stake in Adler
This back and forth between people and companies, which seems a little dubious, is at the heart of the suspicions that the new Adler board of directors, Stefan Kirsten, wants to dispel. “We (…) intend to publish our consolidated financial statements for 2021 in the last week of April, taking into account the special audit report,” Kirsten explained.
Germany’s largest housing group Vonovia is now also on board. The Bochum-based company had given Aggregate, a major investor in Adler, a loan in order to get through the difficult phase with severe price slumps – secured by collateral with Adler shares.
Because Aggregate has now failed to meet an obligation, the takeover option was pulled three weeks ago. Since then, Vonovia has been one of the largest Adler shareholders with 20.5 percent. The people in Bochum are not really enthusiastic about this, as can be heard at the company headquarters.
The Vonovia stake is still subject to the approval of the antitrust authorities. If there is no green light, more Adler shares would come onto the market. And the price could slip below the ten euro mark. In September last year, the price was twice as high.