Los ladrilleros alemanes inventándose las cuentas.. mucho cuidado porque esto ya pasó en 2008 y ya sabemos cómo acabó la historia..
Second time this year real estate group has had 2019 accounts questioned by German watchdog
Adler inflated its balance sheet by €3.9bn and its earnings by €543mn in 2019, according to Germany’s financial regulator, which could have allowed the struggling real estate group to report a profit for the year.
BaFin on Thursday said that Adler incorrectly consolidated Luxembourg-based peer ADO Properties despite controlling just a third of voting rights, which the regulator argued was too low to guarantee control over the company.
By consolidating ADO Properties’ €4.4bn in assets, Adler inflated its balance sheet by a net €3.9bn, according to BaFin. Adler’s total reported assets in 2019, with ADO included, were €10.7bn.
As a consequence, Adler’s reported net profit in 2019 was inflated by €543mn, BaFin said. The group reported a net profit of €299mn for the year, implying that without the boost from ADO Properties it could have potentially made €244mn in losses.
Adler, which owns 26,000 flats in Germany and has come under sustained pressure from short sellers, does not agree with the regulator’s assessment and is appealing against the decision.
“Adler and BaFin have different opinions on this matter, which are now being clarified by taking legal action,” the company said in a statement, adding it was in “good and constructive dialogue with BaFin despite opposing positions”.
It this the second time this year that BaFin has flagged mistakes in the group’s 2019 accounts. In August, the watchdog said that the sale of a property project in Düsseldorf was booked at roughly double its fair valuation, inflating Adler’s accounts by up to €233mn.
The case is the first test of BaFin’s new competencies to probe listed firms’ accounts. The regulator’s powers were significantly expanded after the collapse of fraudulent German payments group Wirecard in 2020.
Thorsten Pötzsch, the head of BaFin’s new accounting division told the Financial Times in August that the watchdog would operate a zero-tolerance policy adding that “the risk of getting caught has never been as high as it is today”.
The new findings deepen Adler’s accounting woes as it struggles to find a new auditor after KPMG refused to sign off the 2021 financial results and then ditched the company as a client earlier this year.
Adler was plunged into crisis after short-selling firm Viceroy Research in October 2021 accused the company of widespread fraud, inappropriate related-party transactions and accounting manipulations. Adler denied any wrongdoing.
The Frankfurt-listed shares of its Luxembourg-based holding company plunged 85 per cent over the past 12 months even as it has divested large chunks of its portfolio in an attempt to lower its debt.
BaFin on Thursday also said that Adler’s 2019 annual report, which was signed off by German audit group Ebner Stolz, downplayed the risks arising from the lack of control over ADO, in particular that indebtedness could be significantly higher. “Without the full consolidation, the loan to value ratio would have been risen significantly to about 70 per cent,” BaFin said in a statement. The reported number just stood at 51.4 per cent.
Moreover, BaFin publicly rebuked Adler for not keeping records about potential related party transactions in a violation of German accounting laws. “The accounting documents were incomplete in that regard”, BaFin said.
Viceroy’s report last year claimed to identify a series of transactions between a nexus of closely related parties that it alleged had carried out to “systematically enrich themselves” to the detriment of other investors. Adler rejected the allegations.
The BaFin probe into the group’s accounts is continuing.
