Real estate company: Adler Group in serious turmoil

The Adler Group’s crisis has escalated dramatically. Auditors have refused to certify the real estate investor’s annual figures, and the stock has fallen. The rest of the management promises a fresh start.

Shares of Adler Group, which is listed on the small-cap index SDAX, lost more than 40 percent. The crisis of the real estate investor facing serious allegations has thus reached a new peak. Several members of the management resigned on Saturday after KPMG’s auditors were unable to issue an audit opinion on the 2021 financial data on Friday evening.

Refusal to testify is a serious process. The reasons given by the auditors also make people stand up and take notice. For example, management denied them access to certain information about affiliated companies and individuals.

In the absence of sufficient “evidence of related party identification and disclosure and significant related party transactions and account balances”, auditors were unable to review multiple bookings for adequacy.

Damage reported in billions

On Saturday, however, the company submitted unaudited annual figures to ensure timely compliance with its reporting obligations. In this the Adler Group, which has a legal seat in Luxembourg, shows a loss of about 1.2 billion euros after a profit of 191 million euros a year earlier. The loss came primarily from the write-down on the real estate company Consus.

With a statement from KPMG, British investment firm Viceroy’s allegation Back in focus from last October. Viceroy is followed by short seller Fraser Pering, who with the publication also put pressure on the now-bankrupt financial services provider Wirecard.

The Viceroy had accused the company of artificially inflating the balance sheet by inflating the valuation of real estate projects. Management is also withdrawing money from the acquired companies. According to the Viceroy, a group of shareholders and managers in the Adler and Group environment benefit from these conspiracies. Ultimately, the Adler group is controlled by this hidden network.

“No Evidence of Systematic Fraud”

Adler had repeatedly vehemently denied the allegations. Because of the allegations, KPMG was commissioned with a special investigation. On April 21, after completing a special audit, the Adler Group announced that it had been cleared of systematic fraud charges. Deficiencies were found in the documentation and processing of certain transactions. However, specialized auditors found no evidence that there were systematic “fraudulent transactions or transactions involving persons allegedly involved in robbing the Company”. Meanwhile, financial regulator BaFin said it would continue to investigate the company’s accounts.

The Adler Group only emerged in 2020 from the merger of ADO Properties, Adler Real Estate and Consensus Real Estate. He had taken on a huge debt. The amount of bonds outstanding alone is 4.4 billion euros.

To reduce high debt, the company sold a large number of assets in late 2021 and early 2022, including those of investment firm KKR and its rival LEG. The company was also backed by DAX Group Vonovia with stake and debt. Due to the large number of sales, Adler expects operating results this year to be significantly lower, between EUR 73 million and EUR 76 million. For 2021, the company reported 137.1 million euros.

Currently do not have access to capital markets

Stephen Kirsten, the head of the Adler Board of Directors, said, “We are facing a difficult moment for the company, which has been in office since February. In the meantime, Adler made a fresh start. KPMG’s decision to refinance The results are in. Banks and capital markets are currently closed for the company, according to Kirsten. But Adler has more than half a billion euros in liquid assets, as the balance sheet shows. “We have no concerns at this point, Kirsten said.

Adler Group is finished with the past and is still striving for a verification for its 2022 annual financial statements: “We relaunched the company on May 1st.” On Tuesday, the company will give an update on the real estate transaction in the investor call.

Past co-CEO Maximilian Reineker is now leaving the company – along with three other members of the board of directors. Previous co-owner Thierry Beaudemoulin should remain in office until at least a general meeting in June. According to the Adler Group, legal action against the old board will be investigated.