Property Firm Adler Looks to Sell Assets at Up to 47% Discount

Branding for Adler Group SA at the Quartier Heidestrasse residential and commercial project, by Aggregate Holdings SA, under construction in central Berlin, Germany, on Monday, July 4, 2022. Aggregate has sold parts of the Heidestrasse project in order to repay bonds and loans and shore up its finances after allegations of systemic fraud were leveled at Adler Group SA, a German real estate firm in which it was the largest shareholder.

(Bloomberg) — Adler Group SA asked its bondholders for permission to sell an unfinished apartment development at a 47% discount from where it was valued less than two years ago, as the embattled landlord races to repay its vast debt load.

The German real estate firm aims to sell a project known as Cologne Apart for €44 million ($48 million), according to documents seen by Bloomberg. That price is also a 37% discount from the property’s June 30 valuation. The price is an even steeper discount, 47%, to its valuation in June 2022.

It’s at least the second time Adler has sought bondholders’ approval to sell the development, after initially securing their approval for a €50 million sale last year. The price slipped after protracted negotiations.

The sale seeks to reduce the risk that Adler would have to put even more money into the project, and that it would be “held liable for potential environmental damages, remedial measures and the like,” Adler told bondholders in a letter.

A UK court derailed its restructuring plan earlier this year, putting even more pressure on the landlord to sell assets at a favorable price. Adler has sold more than 30,000 apartments since short seller Viceroy Research accused it of fraud more than two years ago — allegations the firm has strongly rejected.

The deals, along with the partial sale of a subsidiary, cut its portfolio by more than half, but the proceeds made only a small dent in its debt.

As part of Adler’s debt restructuring plan and injection of new funds, investors demanded authority to approve any future asset sales — and said they wanted a say in what is and isn’t sold and at what price. The firm’s creditors can vote against any such transactions if they deem the price too low, according people familiar with the matter and documents seen by Bloomberg.

The majority of bondholders have so far approved the sales.

The latest planned asset sale comes after Adler asked for consent in November for a series of disposals, when it expected to sell the Cologne property for €50 million, the document said. It also sought to sell its Grand Central project for €80 million at the time, a 45% discount to its June 2022 valuation and a 30% haircut from the same month last year. It also sought consent at the time to sell the Riverside project for €17 million, a 25% discount to its June valuation.

Creditors have until April 9 to approve the sale of the Cologne development.

The company, which reports results next month, is under growing pressure to execute deals as German apartment prices continue to fall and ahead of a looming maturity wall next year.

Progress on major sales has been slow, with potential buyers well aware of the pressure the company is under, while its loan-to-value ratio has climbed to about 90% — giving it little wiggle room for further writedowns or discounted sales.

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