Adler boost bond issue by €50m to buy conwert stake

Shareholders in Frankfurt listed Adler Real Estate have approved a €175m convertible bond designed to finance the €285m purchase of a 25% stake in Austrian listed peer conwert.

“The investment has made co-operation with conwert possible on many levels,” said CEO Axel Harloff following approval last Friday. Co-operation could strengthen the two firms’ purchasing power for residential utility services such as heating, insurance payments or building services, cutting operating costs.

The extraordinary general meeting approved issuance of a €175m mandatory convertible bond to MountainPeak Trading, a holding company owned by British-Israeli billionaire Teddy Sagi, which previously held the 24.79% conwert stake – albeit for a period of only about three months.

The mandatory bond has a three-year term, an annual interest rate of 0.5% and a strike price of €16.50 per share, representing a premium to the current share price – which has risen sharply this month from €11.50 to nearly €14.50 - and its net asset value. A company presentation prepared for a roadshow in October shows the share traded then at around a 14% discount to NAV, compared to a median 26% premium for peers.

For Adler, the net purchase price per Conwert share comes to €13.49. Though this is more than the market price (currently about €13.00), the board believes it is significantly lower than the net asset value. Conwert estimates its Epra-NAV at €15.82 per share.

"Based on conversations with experts”, however, the Adler board of directors deems €19.50 to €21.50 to be realistic. Their justification: the properties in Berlin, Vienna, Leipzig, Dresden and the state of North-Rhine Westphalia have an appreciation potential of €342mn, which corresponds to €4.00 per share.

Vienna-based conwert holds 30,000 units of residential and commercial real estate in Germany and Austria, but with 80% of its real estate portfolio held mainly in A-locations in Germany. Adler’s general meeting also authorised a share buy-back program of up to 10% of its outstanding equity, and it said it aims to use repurchased shares as a transaction currency in investments.

Adler has expanded fast over the last few months. In May, it won support from fellow-listed Westgrund AG for a takeover offer that valued Westgrund at €350m - making Adler Germany’s fifth-largest listed housing company holding 51,000 residential units.

Meanwhilee, activist shareholder Alexander Proschofsky and his ally Peter Hohlbein are set to join conwert's administrative board as Martina Postl, Alexander Schoeller and Phillip Burns will resign by Nov. 17, Conwert said recently.

It has been a turbulent year for Conwert, whose CEO Wolfgang Beck replaced Clemens Schneider in July. Schneider had been ousted after fending off a hostile takeover bid by listed Deutsche Wohnen AG, against the will of Conwert's biggest shareholder, the Haselsteiner family. This resulted in the sale of the family 24.8% stake to Teddy Sagi's MountainPeak Trading.