Adler Real Estate continues stellar rise with surge in profits

From minnow status barely a year ago, the Hamburg-headquartered, publicly-listed Adler Real Estate has soared over the past year to become one of the most active and aggressive residential investors on the German market. The company, which has its roots in the old Frankfurt Adlerwerke automotive and engineering firm, made the commitment over a year ago to transform itself into a specialist residential investor, and has been hungrily on the acquisition trail ever since.

Its most recent acquisition – and its largest to date - was a share deal which saw it buying 7,721 residential units, along with 490 commercial units, bringing its German residential holdings up to about 18,000 units. The 540,000 sqm portfolio is spread out across most of Germany, but with a strong weighting towards North Rhine-Westphalia, Saxony and Saxony-Anhalt.

Earlier this month Adler secured its minimum acceptance rate of 50% approval from the shareholders of the Berlin-based listed property trader Estavis AG in its bid to acquire the company. With Estavis’ management board recommending that its shareholders accept the Adler exchange offer, the takeover is now expected to be finalized by early June. Adler is offering 14 Adler shares for every 25 Estavis shares.

Estavis was created in 2012 out of a residential portfolio of Hamburg's TAG, holds €146m of assets under management. Its subsidiary Accentro focuses on the privatisation of residential housing for Estavis itself and third party holdings. US private equity fund Mezzanine IX Investors, controlled by Atlanta-based John D. Heikenfeld, owns 47.9% of Adler equity, with Swiss family office Wecken holding 10.18%.

In a recent statement, Adler’s CEO Axel Harloff said, “We are growing very successfully on all levels - revenue, assets and earnings - and we also have the resources which are required for continuing the expansion of Adler rapidly and consistently”.

This is certainly true – consolidated revenue in the first quarter rose twelvefold to €12.8m (up from €1.08m) as the full rental income on the portfolios bought in 2013 – plus the 2,400 WBG housing association units in Helmstedt, near Braunschweig and Wolfsburg, bought in the quarter - came through to the bottom line. The total of all operating income rose to €37.66m from last year’s €1.72m. Adler’s balance sheet total reached €540.9m at the end of the quarter, up from €460.9m at the end of December, while equity rose from €86.9m at end of year to €115.3m after the first quarter.

All of this helped make the placement of a further €50m bond at the end of March even more palatable to investors, and gives Adler further firepower to propel itself towards its goal of 25,000 units by year-end