Adler raises €150m in convertible shares after rapid growth phase

Listed German housing group Adler Real Estate is issuing about €150m of convertible notes to finance existing loans and bonds with higher interest rates, fund acquisitions and modernise the company’s portfolio.

According to a company statement, the notes with a five-year term are expected to be convertible into shares of Adler at a 25%–30% premium to the volume weighted average price of the listed stock on Frankfurt exchange on the pricing date. The interest rate is expected to be set between 1.50 % and 2.50 % per year.

The issue and subscription price and the interest rate will be set by the management board with approval from the supervisory board. The subscription period began on 14th June and ends on June 27.

Adler is in the process of moving its company headquarters to Berlin, following a series of acquisitions and consolidations, including that of privatisation specialist Accentro and residential investor Westgrund, both Berlin-based. This will mean closing its operations in Frankfurt and shrinking its team in Hamburg. Adler also plans to sell non-core residential assets over the next two years, which will see it shedding about 4,500 units from its 48,000-plus residential holdings.

New CEO Arndt Krienen is introducing several other changes while the company is in this phase of consolidation, stabilising after three years of meteoric growth. The asset management business is being restructured with the company's own property management being beefed up to handle more than the current 25% of company-owned units. Refinancing the costly debt burden and streamlining the in-house IT systems could save up to €11m, Adler hopes.

After doubling its holdings last year, first-quarter FFO rose by 50% to €5.7m, despite a near-halving of EBIT to €33m, largely due to one-off charges.

CEO Krienen said, “In the first quarter, we benefited for the first time in full from the acquisitions made last year. What’s more, we are all well on track in terms of our expectations for the 2016 financial year. Having said that, this strong operating performance is not directly reflected in the earnings figures reported in the income statement as the previous year’s figures were significantly influenced by non-cash, non-recurring items.”