Upload
others
View
3
Download
0
Embed Size (px)
Citation preview
Page 1 of 62
» Real Estate «
Init
ial
co
vera
ge
«
In
ADO Properties S.A. (Adler Real Estate Group)
WKN: A14U78 | ISIN: LU1250154413 | Bloomberg: ADJ GY
Eagles (Adler) are going to fly
We initiate coverage of ADO Properties S.A. (ADLER Real Estate Group) with a BUY
recommendation and a target price of EUR 35.00 (=~50% upside). Our TP is based
on our EPRA NAV valuation (EUR 35.54) for ADO on a stand-alone basis.
New real estate group is created: The integration of ADLER and renaming to ADLER
Real Estate Group creates one of the largest German real estate companies with a
current gross asset value (GAV) of EUR 8.5bn. For comparison: ADO Standalone had
a GAV of EUR 3.6bn at the end of 2019, while ADLER will integrate a value of EUR
4.9bn. Together, the two companies currently own 75,721 units, with 58,000 units
coming from ADLER. ADO previously operated exclusively in the Berlin region. The
acquisition of ADLER reduces this regional concentration to 25% of the total
portfolio. Overall, ADO/ADLER will become a serious German player in the
residential real estate sector.
Option to consolidate Consus offers opportunity for sustainable growth:
Currently, the new ADLER holds about 25% of Consus - with an option for additional
51% until the end of June 2021. With this step, the new ADLER would also include
the fast-growing project developer Consus into the group, which speaks for a clear
fundamental strength and promising strategic orientation. Since ADO and Consus
have already agreed on a strategic cooperation agreement in which both parties
agree to work together on current and future projects, and ADO also has a right to
follow up on offers, ADO can already benefit from Consus' market strength (at-
equity result) without having rating problems or even having to pay higher interest
rates. Investors have always seen Consus as "the weakest link", but ADO/ADLER
have taken a strategically valuable path with the cooperation plus option, without
having to make direct changes in LTV or net debt.
Impact of COVID-19: As a residential player, ADO assumes only a minor impact
from COVID-19. Which will have an impact, however, is the rent cap in Berlin.
Published: 22.04.2020
BUY Before: -
Price target EUR 35.00 (-)
Share price* EUR 23.88 (47%)
*last XETRA closing price
Initial 2020e 2021e 2022e
Rental income 131.7 138.0 143.6
EBIT 162.0 165.1 168.6
NAV per share 63.24 65.20 67.21
Key share data
Number of shares (million) 44.2:
Free Float (in %) 80%
Market Cap (in EURm) 1055:
Trading volume (Ø) 290k
High (EUR, 52 weeks) 49.84
Low (EUR, 52 weeks) 13.00
Shareholder structure
ADO Group 20,4%
Free Float 79,6%
Corporate calendar
Q1 2020 report 20.05.2020
Analysts
Mariya Lazarova
Analyst
+49 (0) 69 – 920 389 10
Robel Tesfeom
Analyst
+49 (0) 69 – 920 389 10
xxx
xx
+49 (0) 69 - 920 389 12
Contakt
FMR Frankfurt Main Research AG
Schillerstrasse 16
60313 Frankfurt am Main
Germany
+49 (0) 69 - 920 389 10
www.fmr-research.de
Source: Factset
May-19 Jul-19 Sep-19 Nov-19 Jan-20 Mar-20
10
15
20
25
30
35
40
45
50
55
ADO Properties S.A. Germany SDAX Germany CDAX
FY end: 31.12.; in EURm CAGR (19-22e) 2017 2018 2019 2020e 2021e 2022e
Net rental income -5.4% 103.3 128.0 134.1 105.6 109.5 113.6
EBITDA -3.1% 81.0 96.3 93.8 78.8 82.1 85.2
EBIT -35.0% 463.6 499.3 613.9 162.0 165.1 168.6
Net income before minorities -42.0% 356.0 386.9 601.9 112.2 114.7 117.4
EPS (EUR) -46.3% 8.07 8.77 13.63 2.02 2.07 2.11
FFO 1 -7.5% 54.3 66.8 63.2 46.9 48.5 50.0
FFO 1 per share (EUR) 1.23 1.51 1.43 0.84 0.87 0.90
EPRA NAV 8.7% 1,988.8 2,429.5 2,905.7 3,510.5 3,619.7 3,731.0
EPRA NAV per share (EUR) 45.10 55.05 65.79 63.24 65.20 67.21
DPS (EUR) 0.60 0.75 0.75 0.42 0.44 0.45
Market cap/sqm (EUR) 1,749.1 1,526.2 927.1 1,178.0 1,259.1 1,199.1
EV/sqm (EUR) 3,331.4 2,808.6 2,038.0 3,107.5 2,979.7 2,842.9
FFO 1 Yield (%) 2.91% 3.33% 4.46% 3.53% 3.26% 3.36%
Source: ADO, FMR
ADO Properties S.A. (Adler Real Estate Group)
Page 2 of 62
Inhalt Investment Thesis .............................................................................................................................................. 4
SWOT ................................................................................................................................................................. 7
The ADO/ADLER/Consus takeover process ....................................................................................................... 9
Current Group structure .............................................................................................................................. 12
Valuation .......................................................................................................................................................... 13
Summary ...................................................................................................................................................... 13
ADO: stand-alone valuation ......................................................................................................................... 14
ADLER: stand-alone valuation...................................................................................................................... 15
Consus: stand-alone valuation ..................................................................................................................... 16
Peer group valuation ................................................................................................................................... 17
ADO + ADLER: combined valuation ............................................................................................................. 18
ADO’s company profile .................................................................................................................................... 20
Group structure ........................................................................................................................................... 20
Management/supervisory board ................................................................................................................. 21
Shareholder structure .................................................................................................................................. 22
ADLER’s company profile ................................................................................................................................. 23
Company history .......................................................................................................................................... 23
Group structure ........................................................................................................................................... 24
Management ............................................................................................................................................... 24
Shareholder structure .................................................................................................................................. 25
Consus’s company profile ................................................................................................................................ 25
Group structure ........................................................................................................................................... 26
Management ............................................................................................................................................... 26
Shareholder structure .................................................................................................................................. 27
ADO’s business model ..................................................................................................................................... 28
ADLER’s business model .............................................................................................................................. 29
The residential portfolio .............................................................................................................................. 29
Acquisition strategy ..................................................................................................................................... 29
Financing strategy ........................................................................................................................................ 30
Key management metrics ............................................................................................................................ 30
Employees .................................................................................................................................................... 30
Research and development ......................................................................................................................... 30
Consus’s business model ................................................................................................................................. 31
ADO Properties S.A. (Adler Real Estate Group)
Page 3 of 62
Real estate project development for institutional buyers........................................................................... 31
Real estate development for private buyers ............................................................................................... 32
Development of income properties............................................................................................................. 32
Cost advantages from digitalisation and prefabrication ............................................................................. 32
Portfolio ....................................................................................................................................................... 33
Market environment ........................................................................................................................................ 36
Supply of residential real estate .................................................................................................................. 36
Demand for residential properties .............................................................................................................. 37
The residential market ................................................................................................................................. 38
North Rhine-Westphalia & Lower Saxony ................................................................................................... 40
The Big 8 ...................................................................................................................................................... 42
Forecast ....................................................................................................................................................... 45
Financials ......................................................................................................................................................... 47
ADO FY 2019 ................................................................................................................................................ 47
Adler FY 2019 ............................................................................................................................................... 48
Guidance for 2020 ....................................................................................................................................... 48
Balance sheet structure ............................................................................................................................... 51
Appendix .......................................................................................................................................................... 53
ADO Properties S.A. (Adler Real Estate Group)
Page 4 of 62
Investment Thesis ADO Properties is a listed residential real estate company active solely in the Berlin
market. The lion’s share of its portfolio consists of centrally located properties or
properties located in interesting areas on the city’s outskirts.
The ADO Properties Group, with the help of its subsidiaries, covers the entire
property asset management value chain, from screening to acquisitions to the
administration of suitable properties. ADO Properties’ strategic focus is to increase
the value of the real estate portfolios. By investing in the modernisation of its
portfolios it can achieve higher rents and lower vacancies. ADO Properties has
roughly 18,000 units. Another business is the privatisation business, which was
launched in 2014.
After ADLER took over ADO Group (a listed holding in Israel), ADO Properties’ major
shareholder, ADO Properties then announced on 15 December 2019 a voluntary
public takeover bid for ADLER. According to its announcement dated 30 March,
ADO now owns 91.93% of ADLER. The deal was settled and the shares were
delivered on 09 April.
The integration of ADLER and rebranding as ADLER Real Estate Group will result in
one of the largest German real estate companies, with a gross asset value (GAV) of
currently EUR 8.5bn. For the sake of comparison, ADO’s stand-alone GAV stood at
EUR 3.6bn at the end of 2019, while ADLER will contribute GAV of EUR 4.9bn.
Together, the two companies currently own 75,721 units, with ADLER accounting
for 58k.
In order to simplify the group structure somewhat, ADO submitted a public bid a
few days ago for the remaining 3% of WESTGRUND (market value of roughly EUR
25m). The majority of WESTGRUND’s shares were bought by ADLER in 2015. We
consider this a step towards a more simplified company structure for ADLER Real
Estate Group.
ADO expects to achieve net rental (NRI) income post ADLER merger of around
EUR 280-300m in 2020. On an annualised basis management sees NRI of EUR 340-
360m. In 2019 ADLER generated NRI of EUR 248.7m, while ADO achieved
EUR 134.1m. On a combined basis, their NRI in 2019 stood at EUR 382.8m. As ADO
sold the Carlos portfolio (5,900 units) at the end of 2019 for EUR 920m,
management estimates its 2020 net rental income (stand-alone) at just under
EUR 106m. We estimate ADO’s NRI in 2020e at EUR 105.6m, and ADLER’s at
EUR 256.7m.
Assuming ADLER is consolidated for just under 8 months in 2020, its contribution
to consolidated NRI in 2020e would be ~EUR 180m. Adding to this ADO’s EUR
105.6m, we currently estimate NRI for 2020e at EUR 286m, which puts us within
management’s range. On an annualised basis we estimate NRI of EUR 360m.
For combined FFO 1 (ADO+ADLER), management expects a range of EUR 105-125m
for 2020. In 2019 ADO and ADLER achieved FFO 1 of EUR 63m and ~EUR 84m
respectively or EUR 147m combined. For 2020e, the company targets annualised
ADO Properties is a listed
residential real estate
company
ADO Properties covers the
entire property asset
management value chain
ADO Properties’ takeover bid
for ADLER
Renaming to ADLER Real
Estate Group with GAV of EUR
8.5bn
Public bid by ADO Properties
for the remaining 3% of
WESTGRUND
ADLER Real Estate Group
expects net rental income of
EUR 280-300m in 2020e
Assuming ADLER is
consolidated for just under
8 months in 2020
Estimations in line with
management expectations
ADO Properties S.A. (Adler Real Estate Group)
Page 5 of 62
FFO 1 of EUR 120-140m. We estimate 2020e FFO 1 of EUR 46.9m for ADO and
EUR 96.6m for ADLER. On an annualised basis we estimate combined FFO 1 of EUR
143m in 2020e but assume FFO 1 of EUR 111.3m (ADLER will be consolidated for 8
months in 2020e) in our valuation model. Thus, our estimates are in line with
management’s NRI and FFO 1 targets both for ADO and ADLER individually and on
a combined basis.
With regard to EPRA NAV, for 2019 ADLER Real Estate Group reported combined
EPRA NAV of EUR 4.9bn (2018: EUR 4.1bn), with ADO contributing EUR 2.9bn and
ADLER EUR 2.0bn.
Our current estimate for combined 2020e EPRA NAV – i.e. EUR 4.9bn – matches the
2019 numbers. For 2021e we estimate EPRA NAV to increase to EUR 5.3bn and for
2022e to EUR 5.7bn. On a per-share basis we expect EPRA NAV to exceed the
EUR 100 mark for the first time in 2022e (FMRe: EUR 103.35).
As per 31.12.2019 ADO Properties has a stable financial structure and a strong
liquidity position of EUR 500m in directly accessible cash (ADO cash stand-alone:
EUR 387m; ADLER stand-alone: EUR 237m). The company has no major refinancing
scheduled until the end of 2021 – a 2017 ADLER bond of EUR 500m is due in
December 2021.
ADO Properties’ LTV stands at 27% (end of 2019) and its average interest rate is
1.6%. The average term to maturity of its debt obligations is ~4.2 years. Virtually all
of its debt is either fixed interest or interest-rate hedged. ADO Properties intends
to continue this sustainable financing strategy and targets an LTV of no more than
50%. For ADO stand-alone we expect its LTV below 25% for the next few years.
Although ADO’s and ADLER’s fundamental data look strong, both stand-alone and
combined, the shares’ performance over the past few weeks has been clearly
negative. Many investors are afraid of having difficulties with the tenants due to
the Covid-19 crisis. Nonetheless, so far we have not noticed any significant effects
on the residential rental market. Residential property companies have stated that
currently they are not experiencing payment issues or have problems with only a
limited number of tenants. Furthermore, the rent prices remain stable despite the
pandemic and as per end of March there were no fluctuations in prices that were
caused by the current health situation. ADLER appears to be more protected
against the pandemic as a large portion of its portfolio is rented to people with low
to medium income, which have either already received government support or are
going to be protected in this phase. Although the risk for commercial real estate is
larger, the new ADLER Group has only a limited risk exposure.
Obviously, COVID-19 has rattled the entire equity market, but all three individual
shares (ADO, ADLER, Consus) have fallen more strongly – in some cases far more
strongly – than their peers. It seems the market has either reacted completely
negatively to the merger, or the timing of the deal proved to be bad due to the
Corona crisis, thus leading to the shares’ strong negative reactions.
ADLER Real Estate Group
reported EPRA NAV of EUR
4.9bn
…2020e EUR 4.9bn
2021e: EUR 5.3bn
2022e: EUR 5.7bn
ADO has a stable financial
structure and a strong
liquidity position
2019 LTV stands at 27% and its
average interest rate is 1.6%
Negative share performance
over the past few weeks
ADO Properties S.A. (Adler Real Estate Group)
Page 6 of 62
Stock impact amid the corona crisis
Source: Factset, FMR
All three shares are currently trading at discounts to EPRA NAV of >60% whereas
most peers are trading at discounts of around 30%. We see no reason why the
ADLER Real Estate Group should trade at a deeper discount than the peers. We see
a structural deficit only in the Company's lack of institutional investors to date, but
this also offers a considerable opportunity for the new ADLER to attract larger
investors as partners.
Several points clearly indicate fundamental strength and a promising strategic
outlook: a GAV of EUR 8.5bn, a free float of 80% after the transaction is closed, and
an option to bring Consus – Germany’s most successful project developer – on
board in the next few months (option expires in mid-2021). Admittedly, the
integration of Consus would increase LTV somewhat (1.9% for ADO + ADLER), but
on the other hand ADO and ADLER would gain an advantage in terms of new
projects. We see this trade-off as positive for the business model, and this is also
reflected in our valuation.
On a stand-alone basis we value ADO at EUR 35.00, ADLER at EUR 17.50 and Consus
at EUR 10.50 per share. Each of these valuations suggest significant undervaluation.
While it may take a while for normalcy and calm to return to the equity market, all
three shares still look very interesting in the long term. An important assumption
here is that the current health crisis does not lead to a deep economic crisis.
Combining ADO and ADLER, we derive a fair value per share (FVpS) of EUR 46.58,
which in Corona times should probably be viewed as a best-case scenario (current
upside: almost 100%). Nonetheless, we believe that going forward, especially in H2
2020e and in 2021e as well, the merged entity will achieve significant synergies that
should further increase the attractiveness of the share. One should not forget that
prior to the announcement of the deal and prior to COVID-19, the ADO share was
already trading above EUR 30.
We initiate coverage with a BUY recommendation and a target price of EUR 35.00
(based solely on our stand-alone valuation of ADO Properties), which nonetheless
suggests upside of currently around 50%.
CompanyStock at start of Corona-
crisisLowest price Current stock price
21.02.2020 21.04.2020
ADO Properties 31.38 13.00 -58.6% 23.88
ADLER Real Estate 13.00 5.57 -57.2% 12.50
Consus 7.08 3.74 -47.2% 5.00
Vonovia SE 53.66 36.71 -31.6% 44.45
Deutsche Wohnen SE 38.91 27.66 -28.9% 35.11
Grand City Properties SA 23.94 13.82 -42.3% 18.58
LEG Immobilien AG 117.80 75.12 -36.2% 103.24
TAG Immobilien AG 25.04 14.16 -43.5% 18.52
Aroundtown SA 8.78 2.88 -67.1% 4.73
CORESTATE Capital Holding SA 42.05 21.20 -49.6% 26.16
PATRIZIA AG 23.34 16.08 -31.1% 19.60
Stock decline
amid corona-crisis
All three shares are currently
trading at discounts to EPRA
NAV of >60%
GAV of EUR 8.5bn, a free float
of 80% and Consus-option→
promising strategic outlook
ADO at EUR 35.00, ADLER at
EUR 17.50 and Consus at EUR
10.50
Fair value for ADO and ADLER
combined: EUR 46.58 (Best-
Case Scenario)
We initiate coverage with a
BUY recommendation and a
target price of EUR 35.00
ADO Properties S.A. (Adler Real Estate Group)
Page 7 of 62
SWOT
Strengths
• Strong and experienced management team: Co-CEOs from ADO and ADLER
• Improved corporate governance; 5 out of 7 board members are fully
independent
• Higher liquidity in the stock (around 80% free-float post-merger) and
potential MDAX-candidate according to the criteria set by the German
stock exchange (Deutsche Börse)
• Combination of FFO 1 from ADO and ADLER increases the value for ADO’s
shareholders
• One of the largest European residential real estate companies
• Owning properties across Germany decreases the regional risks (ADO
focuses on Berlin’s real estate market)
• ADO has a strong liquidity position of EUR 500m with directly accessible
cash as a result of the Carlos portfolio sale in 2019
• No large refinancing until end of 2021 (maturing bond of EUR 500m)
• ADLER has a strong and traceable M&A track-record since 2011; ADLER
made the first steps on the merger with ADO by acquiring ADO Group
Weaknesses
• Around 25% of the portfolio is exposed to the regulated market of Berlin
• Increased interest rates for ADO after the takeover of ADLER (from 1.6% to
1.9% in 2019), which is likely to further increase once Consus is acquired
• Lacking institutional investors in the scale of larger investment companies
ADO Properties S.A. (Adler Real Estate Group)
Page 8 of 62
Opportunities
• Starting a more simplified company structure through the takeover bid to
Westgrund
• Further simplification of the company structure by overall takeover of the
old ADLER Real Estate
• 25% stake in Consus with an option to acquire 51% in order to transition
into a “build-to-hold” strategy
• Project development strategies with the help of Consus to tackle the
housing shortage in the Top 7 cities
• The merger between ADO/ADLER/Consus has the potential to lead to
significant synergy effects and market advantages given that an efficient
strategic objective is pursued
Treats
• Increased risk due to the takeover bid to Consus could lead to higher
interest rates
• Effects of Covid-19 pandemic on the overall economic stability; at first
effects on rental income from the commercial real estate could be noticed,
followed by residential real estate in the mid-term as well as on the
purchasing of properties and on project developers.
ADO Properties S.A. (Adler Real Estate Group)
Page 9 of 62
The ADO/ADLER/Consus takeover process On 30 March 2020 ADO Properties S.A. announced the final results of its voluntary
public takeover bid for ADLER Real Estate AG, which will lead to the creation one of
the largest listed real estate groups in Europe. In response to ADO’s voluntary public
takeover bid, ADLER shareholders tendered a total of 66,404,915 shares, equating
to ~91.93% of ADLER’s nominal capital. The free-float is capitalised at EUR 810m.
The merged group is to be registered under the name ADLER Real Estate Group and
its operating headquarters will remain in Berlin. The merged entity will be led by an
experienced management team with Maximilian Rienecker and Thierry
Beaudemoulin as co-CEOs and Sven-Christian Frank as chief operating officer, a
line-up which unites the competencies of ADLER and ADO.
The new ADLER Real Estate Group will have a high-quality portfolio with a GAV of
~EUR 8.5bn, diversified across key German cities with attractive growth potential.
Through its strategic partnership with real estate developer Consus Real Estate AG,
the new group has access to a market-leading development platform with a
pipeline of more than 15.000 rental dwellings. Once the fully integrated business
model is established, the group will be able to manage and develop high-quality
housing facilities in Germany’s key markets and thus enter a value-enhancing
growth path.
The settlement and closing of the deal took place on 9 April 2020.
The takeover bid consists of two phases: Phase I includes the purchase of ADLER
(completed), and Phase II refers to the voluntary takeover arrangement between
ADO and Consus.
Overview of the takeover offer
1
Adler takes over
Ado Group
Takeover bid of
ADO Properties
1. Acceptance
period
2. Acceptance
periodOffer will be settled
Announcement
15.12.2019 06.02.2020
09.04.202023.09.2019
Settlement of the offer
11.03.202010.12.2019
Announcement
Approval of
the BaFin
07.02.2020
Start of the 1st
acceptance
period
Publication of
the result
06.03.2020
End of the 1st
acceptance
period
12.03.2020
Start of the 2nd
acceptance
period
Q2 – Q3
Publication of
the result
25.03.2020
End of the 2nd
acceptance
period
Expiration of the
option agreement
16.06.2021
Delivery of the
shares
30.03.2020
Capital increase
up to EUR 500m
Source: Documents from ADO Properties’ bid, FMR
Phase I: ADO and ADLER (completed)
On 23 September 2019 ADLER announced the takeover of ADO Group, ADO
Properties’ major shareholder. As part of this deal, ADO Properties repurchased its
own shares from ADO Group, reducing ADO Group’s stake in ADO Properties to
4.91% (this was a condition for the merger). The reason for the share buybacks was
to avoid exceeding the key control threshold of 33-1/3 % under Luxembourg law.
ADLER shareholders tendered
a total of 66,404,915 shares
(~91.93% of ADLER’s nominal
capital)
Merged group is to be
registered under the name
ADLER Real Estate Group
ADLER Real Estate Group with
GAV of ~EUR 8.5bn; through
Consus access to development
platform with pipeline of over
15,000 rental dwellings
Deal closing: 9 April 2020
The takeover bid consists of
two phases
Through the acquisition of
ADO Group, ADLER received
33.25% of ADO Properties
ADO Properties S.A. (Adler Real Estate Group)
Page 10 of 62
On 10 December 2019 this deal was completed, and as a result ADLER held 33.25%
of the voting rights in ADO Properties. ADLER financed the takeover with new
shares, internally available funding, and debt.
On 15 December 2019 it was announced that ADO Properties had made a voluntary
takeover bid for ADLER at EUR 11.10 per ADLER share. This price corresponds to the
3-month average share price prior to the announcement of the takeover. Under a
business combination agreement, a share ratio was set at 0.4164 ADO shares = 1
ADLER share. The share ratio was agreed on the basis of each company’s diluted
EPRA NAV per share (as per end of September 2019). The NAV p/s calculation
assumes the conversion of ADLER’s outstanding convertible bonds. The business
combination agreement is valid for two years from its signing and can be
terminated by either party if one of the parties fails to adhere to its terms or the
deal is not consummated by the end of June 2020.
The takeover was secured by irrevocable acceptance commitments representing a
total of 52.2% of the shares. These include the shares of ADLER Co-CEO Tomas de
Vargas Machuca. On 14 February ADO announced that these shareholders have
already submitted declarations that they have accepted the deal to their custodian
banks. The shares held by ADO Group will be deemed non-voting treasury stock
(own shares) once the takeover is successfully completed. On 6 January Germany’s
federal financial supervisory authority BaFin examined the offer documentation
and permitted its publication.
On 6 March 2020 the first acceptance period ended. The results were published on
11 March. One day later the second acceptance period began, which ended on 25
March. On 9 April 2020 the offer was settled and the shares (91.93% of total) were
delivered. The combined entity will bear the name ADLER Real Estate Group
The new company owns 75.721 rental units in its portfolio. Since the shares of the
new company will have more trading volume (market cap of ~EUR 1.8bn), it will be
a candidate for inclusion in the MDAX index. Considering the criteria of market
value (ADO standalone: rank 119) and turnover (ADO standalone: rank 109), ADO
is likely to be included in the index soon from technical perspective.
The free float should be around 80%. 33% of the ADLER shares in ADO will become
treasury stock post takeover, so these shares are not included in shareholder
structure calculation. Existing and new shareholders in ADO will be entitled to
dividends for 2019. Since ADLER stand-alone has not distributed any dividends so
far, dividend payments are unlikely to be made in the short or medium term.
Once the takeover is done, a capital increase of EUR 500m is planned in order to
further strengthen the balance sheet structure. This capital increase has already
been discussed with banks and the new shares’ issue is expected in Q2 or Q3 2020.
The exact date depends on the market situation.
ADO can secure the share-financed part of the offer through capital increases from
authorised capital (EUR 750m). On 06 Feb 2020 ADO Properties had cash totalling
EUR 500m, which it can use to cover the offer costs (EUR 20m).
ADO Properties had made a
voluntary takeover bid for
ADLER at EUR 11.10 per
ADLER share
The takeover was secured by
irrevocable acceptance
commitments
On 6 March 2020 the first and
on 25 March 2020 the second
acceptance period ended
Market cap of ~EUR 1.8bn →
ADLER Real Estate Group will
be a candidate for inclusion in
the MDAX index
Capital increase of EUR 500m
is planned
ADO Properties S.A. (Adler Real Estate Group)
Page 11 of 62
To refinance ADLER’s financial obligations in the case of a change of control, a
bridge financing facility was agreed with J. P. Morgan with a face value of up to
EUR 2.963bn. This facility can also be used for bonds issued via the ADO Group.
On 25 March 2020 ADO had announced a voluntary, public takeover bid to
Westgrund shareholders. ADLER had acquired the majority of Westgrund in 2015.
By taking over ADLER, ADO acquired an indirect stake of 96.9% in Westgrund. ADO
will finance the acquisition with cash and the full acquisition of Westgrund will
serve to simplify the structure of the new group. The current market capitalisation
of Westgrund is over EUR 825m and hence, a takeover of 3% of the stocks will cost
roughly EUR 25m. We consider the offered purchase price of EUR 11.71 per
Westgrund share to be fair and see only minor risks that are financially negligible
for the new group as part of the upcoming review of the takeover offer.
Phase II: ADO and Consus
On 15 December 2019 ADO Properties acquired 22.18% of Consus’s shares for an
average price of EUR 9.72, paying a total of EUR 294m. This purchase was paid in
cash which basically came from the sale of the Carlos portfolio. ADO closed the sale
of the Carlos portfolio (rental residential properties) on 29 November 2019. The
price for the transaction was EUR 920m (less net debt of the sold companies
totalling EUR 340m). Hence, the proceeds after the sale of Carlos portfolio and the
purchase of Consus should amount to EUR 580m.
Together with the shares that ADLER Real Estate already has, this amounts to a
stake of ~25% in Consus. Additionally, ADO and Consus have signed a strategic
cooperation agreement under which the two parties agree to collaborate on
current and future projects. In the case of projects where both parties have already
collaborated, ADO has the right to match the bid of a third party in order to be able
to acquire capital assets that pertain to the project. In addition, ADO and Consus’
main shareholder Aggregate Holdings Luxemburg have entered the following
option agreements:
Call option for ADO: If ADO exercises this option, it will acquire a 50.97%
stake in Consus at a share ratio of 0.2390 ADO share = 1 Consus share.
Aggregate Holdings currently holds 50.97% of Consus. The exercise of this
option will also trigger a voluntary bid by ADO to the minority shareholders
at the same share ratio of 0.2390 (obligatory).
Put option for Aggregate Holdings: This option agreement is contingent on
a change of control at ADO. By exercising this put option, Aggregate would
sell its stake in Consus Real Estate to ADO at a price of either i) EUR 8.35
per share in cash or ii) at a share ratio of 1 newly issued ADO share = 0.2390
Consus share, whichever ADO chooses.
The option agreements expire on 16 June 2021.
A bridge financing facility was
agreed with J. P. Morgan
Public takeover bid by ADO
Properties for the remaining
3% of Westgrund
ADO Properties acquired
22.18% of Consus’s shares
plus call option for further
50.97%
ADO Properties S.A. (Adler Real Estate Group)
Page 12 of 62
Through its cooperation agreement with Consus, ADO aims to implement a “build-
to-hold” strategy and expand it in the future. This should serve to reduce its
marketing and distribution costs and ultimately make it more cost-efficient.
On 17 January 2020 ADO signed a letter of intent with Consus Swiss Finance AG to
acquire 89.90% of all companies belonging to the Holsten Quartier development
project. The preliminary purchase price for 100% of the shares stands at EUR 350m.
Part of the bridge financing facility agreed with J. P. Morgan – namely EUR 1.428bn
– can also be used for the debt of Consus Real Estate if ADO acquires a majority of
Consus.
Current Group structure Chart of the current group structure
Ado Group
ADO Properties
ADLER Real Estate
BCP Accentro Westgrund
Consus
CG GroupConsus Swiss
Finance
25,0% (incl. 3% shares of ADLER)94,2% (incl. Treasury stocks)
75% 93%96,9%69,8%
33,3%
3,1%
Holding Takeover bid
100%
4,8%
Source: ADO, ADLER, Consus, FMR
Through its cooperation
agreement with Consus, ADO
aims to implement a “build-
to-hold” strategy
LOI to acquire the Holsten
Quartier development project
Part of the bridge financing
facility can also be used for
the debt of Consus Real Estate
ADO Properties S.A. (Adler Real Estate Group)
Page 13 of 62
Valuation Note regarding the merger:
Since there is still no joint income statement, balance sheet and cash flow
statement, it is more difficult to come to an overall outlook (especially as a result of
the fair value adjustments of the properties and assets). Therefore, our income
statement, balance sheet and cash flow estimates in the appendix are limited to
ADO Properties Standalone. At this point in time, we also did not include Consus in
the group, as the option had not yet been executed and it is therefore not possible
to make a more detailed assessment of the new planned group. In particular, no
reliable statements can be made about the interest-bearing liabilities (net debt,
interest rate and LTV). Currently no reliable statements about the market situation
can be made either because of the distortions caused by Covid-19 and planned
capital increase and the execution of the option on Consus need to be carried out.
For the valuation of ADO we have considered solely the current situation as of 2019
as well as the already completed points from phase 1.
Summary To derive the fair value of the individual companies and of the new ADLER Real
Estate Group, we applied one valuation approach, EPRA NAV. We focused on the
multiples for the year 2022e, as this would be the first year in which ADO, ADLER
and Consus would be fully integrated.
EPRA NAV is a good model for real estate companies, because it incorporates net
asset value based on the attributable market values of the property assets.
Since the takeover process is still in progress, we have decided to conduct both
stand-alone valuations for all companies and a combined valuation. With regard to
our combined valuation, we would point out that we do not include any potential
synergy effects given that certain data points are missing due to the integration of
ADO and ADLER which is still to follow.
In the following sections we have valued all companies both individually and on a
combined basis. Our target price for ADO stand-alone works out to EUR 35.00; for
ADO + ADLER, i.e. the new ADLER Real Estate Group, we derive a fair value per share
of EUR 46.58. Under normal circumstances we would base our target price on a
combined entity valuation, since this is corresponding to the new group. But these
are not normal circumstances. The ADO share continues to trade at ~EUR 24, and
even we assume that COVID-19 has no negative operating impact on the group, the
equity market at large remains in negative territory compared to pre-Corona levels.
And since there is currently no way of knowing how long the lockdown, the worries,
fears, and panic will continue to dominate the market, we have cautiously decided
to use ADO’s stand-alone fair value as our TP, as we assume that in least in H2 2020e
the equity markets will “normalise” and investors will no longer be purely risk-off
on mid-cap shares but will return to the segment with a view to its fundamental
strength. In the current period of market uncertainty, we consider our stand-alone
FVpS for ADO of EUR 35.54, which still suggests upside of around 50%, a more
EPRA NAV valuation approach
applied to derive the fair
value
EPRA NAV is a good model for
real estate companies
We have decided to conduct
stand-alone valuations for all
companies and a combined
valuation
Our target price for ADO
stand-alone: EUR 35.00;
ADLER Real Estate Group:
EUR 46.58
Cautiously decided to use
ADO’s stand-alone fair value
as our TP
ADO Properties S.A. (Adler Real Estate Group)
Page 14 of 62
realistic price target than our fair value per share for the “new group”. In view of
this upside, we initiate coverage with a clear BUY recommendation. Our price target
stands at EUR 35. Nonetheless, we would point out that the share could outperform
strongly once the markets have fully freed themselves from COVID-19.
ADO: stand-alone valuation ADO: EPRA NAV valuation
Source: Factset, FMR
ADO sold its largest portfolio, the Carlos portfolio, in 2019, and so we expect its NRI
to be lower in 2020e. The core of ADO’s business model is modernisation. That is
why we assume that despite the Berlin rent cap ADO will achieve slight rent
increases in its portfolio in the coming years. ADO itself projects a decrease in its
2020 NRI of not quite EUR 1m, which will be largely offset going forward by positive
modernisation effects.
ADO KPIs
Source: ADO, Factset, FMR *Share prices for 2020-2022e are the current Factset’s Consensus for the target share price
We continue to estimate no major impact from the Berlin rent cap either on fair
values of the real estate assets or on the current large gap between market values
and rent prices. Consequently, we estimate a diluted EPRA NAV p/s of EUR 47.82
for 2022e. Discounting this value back to present at ROE, we derive an absolute
value per share of EUR 35.54, which corresponds to upside of more than 50%.
kEUR 2017 2018 2019 2020 (currently) 2020e 2021e 2022e
Share price 42,28 45,52 32,10 24,32 26,80 26,80 26,80
Market cap 1.864.548 2.007.478 1.417.247 1.350.116 1.487.792 1.487.792 1.487.792
Lettable area in sqm 1.066.014 1.315.357 1.528.613 1.125.391 1.181.660 1.240.743 1.240.743
Market cap/sqm 1,75 1,53 0,93 1,20 1,32 1,26 1,20
Enterprise Value 3.551.318 3.694.248 3.115.267 3.359.524 3.497.200 3.521.028 3.527.362
EV/sqm 3,33 2,81 2,04 3,11 3,11 2,98 2,84
EPRA NAV 1.988.757 2.429.544 2.905.699 3.510.518 3.510.518 3.619.658 3.731.043
EPRA NAV per share 45,10 55,05 65,79 63,24 63,24 65,20 67,21
Book value per share 40,71 48,73 59,93 58,30 58,30 59,96 61,64
Lower NRI expected for 2020e
No major impact on market
values expected
ADO Properties S.A. (Adler Real Estate Group)
Page 15 of 62
The reason for this high upside is that ADO is currently trading at a discount to EPRA
NAV of more than 60%, while peers are trading at discounts of around 30%. While
the share prices of many companies have been hit by COVID-19, ADO’s share price
has plunged by as much as 60% in the last 2 months. In our opinion, investors in
this current phase have perceived the uncertainty related to the ongoing takeover
process for ADLER as a negative signal, and this is probably what drove the sell-off.
But now, as the deal is closed, we see no reason why ADO should not return to a
normal discount level of 30%. For even without synergies and excluding ADLER’s
NAV, ADO is currently favourably valued and thus a clear BUY.
ADLER: stand-alone valuation ADLER: EPRA NAV valuation
Source: Factset, FMR
Our stand-alone valuation of Adler renders a fair value per share of EUR 23.90
based on diluted EPRA NAV per share in 2022e. After discounting this value back to
present value at ROE, we derive an absolute value per share of EUR 17.77.
Despite a good underlying business performance in 2019, the share is trading at a
discount to EPRA NAV of more than 60%. We see this discount as exaggerated, even
on a stand-alone basis, since ADLER should continue to generate growth in 2020e,
2021e, and 2022e, according to our estimates.
Upside exists, as ADO is
currently trading at a discount
to EPRA NAV of more than
60%, while peers are trading
at discounts of around 30%
ADLER stand-alone -
EUR 17.77 per share
Positive outlook for
the next years
ADO Properties S.A. (Adler Real Estate Group)
Page 16 of 62
ADLER KPIs
Source: ADLER, Factset, FMR * Share prices for 2020-2022e are the current Factset’s Consensus for the target share price
Consus: stand-alone valuation Consus: NAV valuation
Source: Factset, FMR
Consus has announced that by 2022 it should begin construction on projects worth
more than EUR 4bn, and complete properties with a GDV (gross development
value) of more than EUR 2bn. Currently, it is cannot be reliably assessed the extent
to which the current market situation will affect these plans, even it is only from
the perspective of timeline. With the base case scenario, we expect growing income
from project development and growth in the projected-related inventory. We
assume that material and personnel costs will increase, also due to the bigger
pipeline. In calculating NAV we have also included goodwill, since Consus’
subsidiaries CG Gruppe and SSN Group have been tasked with constructing the
projects.
Our stand-alone valuation of Consus renders a fair value per share of EUR 14.71
based on diluted NAV per share in 2022e. After discounting this value back to
present value at ROE, our model renders an absolute value per share of EUR 10.94.
Since the shares are currently trading at EUR 5, this equates to upside to our FVpS
of ~ 100%. Similar to ADO and ADLER, Consus is also currently trading at a discount
to NAV of 60%, which in our view does not adequately reflect the company’s growth
EURm 2017 2018 2019 2020 (currently) 2020e 2021e 2022e
Stock price 13,29 13,02 13,68 12,90 14,55 14,55 14,55
Market cap 901,36 891,61 950,22 896,04 1.010,65 1.010,65 1.010,65
Lettable area in sqm 3,10 4,09 4,02 4,02 4,02 4,02 4,02
Market cap/sqm 290,31 217,93 236,38 222,90 251,41 251,41 251,41
Enterprise Value 3.642,00 5.168,12 6.256,62 3.389,64 3.504,25 3.504,42 3.504,59
EV/sqm 1.173,02 1.263,18 1.556,41 843,21 871,72 871,76 871,81
EPRA NAV 1.207,18 1.692,23 1.972,57 2.215,84 2.215,84 2.470,93 2.733,22
EPRA NAV per share 17,80 24,71 28,40 31,90 31,90 35,57 39,35
Book Value per share 14,16 17,78 20,82 24,33 24,33 28,01 31,78
Increasing income from
project development expected
due to Consus pipeline
Consus stand-alone -
EUR 10.94 per share
Upside to our FVpS
of nearly 100%
ADO Properties S.A. (Adler Real Estate Group)
Page 17 of 62
opportunities. Even if the discount to NAV should “only” shrink to 30%, the shares
could double in value. Questionable is whether the investors are willing to grant
project developers like Consus a low discount on the NAV.
Project developers, for example in UK, the Netherlands or Austria, are traded on
average at a discount of 30% to the NAV, which also reflects the increased risk
appetite among investors there. In Germany, real estate project developers have
had difficulties in all of the pervious real estate stock cycles.
Consus KPIs
Source: Consus, Factset, FMR * Share prices for 2020-2022e are the current Factset’s Consensus for the target share price
Peer group valuation To incorporate a market-based approach into our valuation, we have introduced a
peer multiple. The peer group consists of other real estate companies which rent
flats throughout Germany. Most of the peer group companies focus on residential
properties and as such are comparable to ADO and ADLER. PATRIZIA should be
viewed with caution, however, since it has a very broad business mix with
residential properties making up only a fourth of its total real estate portfolio.
Our peer group includes 30 companies. Having said that, a large share of peers
either have no consensus estimates available or only stale ones, which means it
makes little sense to use these companies for comparison purposes.
Peer group overview
Source: Factset, FMR
EURm 2017 2018 2019e 2020 (currently) 2020e 2021e 2022e
Stock price 8,07 7,60 7,32 5,00 7,00 7,00 7,00
Market cap 263,5 649,9 984,9 672,8 941,9 941,9 941,9
Project volume (GDV) 4,5 9,6 10,3 10,3 10,3 10,3 10,3
Market cap/project volume 58,0 67,7 95,6 65,3 91,4 91,4 91,4
Enterprise Value 2.073,5 3.232,4 5.531,6 5.167,2 5.436,3 5.648,4 6.183,7
EV/project volumes 456,1 336,7 537,0 501,7 527,8 548,4 600,4
NAV incl. Goodwill 749,8 1.125,3 2.247,7 2.333,3 2.333,3 2.515,3 2.782,8
NAV per share 22,97 13,16 16,70 17,34 17,34 18,69 20,68
Book value per share 19,79 11,82 7,54 8,02 8,02 8,02 8,02
Peer group includes
companies with a focus on
renting properties
Reduced peer group due to
database
ADO Properties S.A. (Adler Real Estate Group)
Page 18 of 62
ADO + ADLER: combined valuation ADO + ADLER: EPRA NAV valuation
Source: Factset, FMR
Our valuation of ADO and ADLER combined renders a fair value per share of
EUR 65.79 based on diluted EPRA NAV per share in 2022e. Discounting this back to
present value at ROE, our model renders an absolute value per share of EUR 46.58.
This would be almost 31% above our stand-alone fair value for ADO.
In this calculation we have include no potential takeover synergies since the
integration has not provided many data points yet. Management assumes there
will be significant synergy effects from the integration – an assumption we also
consider realistic – but at present we cannot reliably quantify such effects. In
contrast to our stand-alone valuation of ADO, we have stripped ADLER’s value back
out of ADO in 2019, which we had factored in for 2019, since here we include ADLER
as a separate entity.
This valuation shows that this deal is a clear BUY, and that as soon as the equity
market and the company return to a certain “normalcy” post COVID-19 and the
shares are analysed again based on underlying fundamentals, the new ADLER Real
Estate Group will be one of the most interesting shares in the real estate space. Not
only will the new group be a direct MDAX candidate, but it will also have massive
catch-up potential given that the shares of all three constituent companies (ADO,
ADLER, Consus) have fallen drastically.
For investors who wish to position themselves for the long term now, the new
ADLER Real Estate is well worth looking at. Because these elevated discounts
compared to most other peers will only be temporary – of that we are very
confident.
Fair value per share of ADLER
Real Estate Group: EUR 46.58
Scenario without consi-
deration of synergy effects
Valuation shows that this deal
is a clear BUY
For investors who wish to
position themselves for the
long term now, the new
ADLER Real Estate is well
worth looking at
ADO Properties S.A. (Adler Real Estate Group)
Page 19 of 62
EPRA NAV valuation including all three companies
Source: Factset, FMR
Assuming the group acquires, as planned, a majority interest in Consus by mid-
2021, we estimate the fair value of the new group (all three companies, 2022e
estimates), at EUR 52.58, which is another nearly 14% on top of our calculated fair
value for ADO+ADLER.
ADO Properties S.A. (Adler Real Estate Group)
Page 20 of 62
ADO’s company profile ADO Properties is a listed residential real estate company active solely in the Berlin
market. The lion’s share of the ADO Properties portfolio consists of centrally
located properties or properties in interesting peripheral locations.
The ADO Properties Group, with the help of its subsidiaries, covers the entire
property asset management value chain, from screening to acquisitions to the
administration of suitable properties. The strategic focus of the ADO Properties
Group is increasing the value of its real estate portfolios. By investing in the
modernisation of its portfolios, it can achieve higher rents and lower vacancies.
ADO Properties has about 18,000 units (source: Fact Sheet dated 20 February
2020). Another business, launched by ADO Properties in 2014, is the privatisation
business.
After ADLER acquired the ADO Group (a listed holding from Israel), ADO Properties’
main shareholder, ADO Properties, publicly announced on 15 December 2019 a
voluntary public takeover bid for ADLER. According to its announcement dated 30
March, ADO now owns 91.93% of ADLER. On 09 April the deal was settled and the
shares were delivered.
With the cooperation agreement that it signed on 15 December 2019 with project
developer Consus Real Estate, ADO Properties intends to pursue a “build-to-hold”
strategy. Options agreed with the Consus’s main shareholder, Aggregate Holding,
could, if exercised, make ADO the main shareholder in Consus.
ADO Properties was founded in 2007, first as a limited liability company (GmbH)
under the name of “Swallowbird Trading & Investments Limited“ with domicile in
Cypress. In 2015 the company moved its domicile to Luxembourg and changed its
legal form to that of a limited liability company under Luxembourg law. After that
it became a public company limited by shares (Aktiengesellschaft) and changed its
name to “ADO Properties.”
Group structure ADO Properties is a holding company of the ADO Properties group. Its operating
activities are generally carried out by its 197 subsidiaries (date of information: 30
September 2019). ADO Properties provides management and administrative
functions. The organisational chart below shows the group’s key subsidiaries.
ADO Properties covers the
entire property management
value chain
ADO Properties’ takeover bid
for ADLER
Cooperation agreement with
Consus Real Estate
Founded in 2007, listed since
2015
The holding company of the
ADO Properties Group
ADO Properties S.A. (Adler Real Estate Group)
Page 21 of 62
Group structure
ADO Properties S.A.(Luxembourg)
ADO Lux-EEME S.a.r.l.
(Luxembourg)
ADO FC Management Unlimited Company
(Ireland)
ADO Lux FinanceS.a.r.l.
(Luxembourg)
ADO Malta Limited (Malta)
ADO Properties GmbHADO Immobilien Management GmbHCCM City Construction Management
Central Facility ManagementADO Treasury GmbH
ADO Living GmH(Germany)
31SPVs (GmbH) Plus 2 BV and 2 ApS
(Germany/NL/DK)
30 SPV s (29 GmbH and1 S.a.r.l.) Plus 1 BV
(Germany/LU/NL)
4 SPVs (BV) (Netherlands)
50 SPVs (GmbH) Plus 1 BV
(Germany/NL)
EPF Acqusition Co 86 S.a.r.l.
(Luxembourg)
ADO SBI Holdings S.A. & Co. KG (Germany)
Consus Real Estate AG (Germany)
59 SPVs (GmbH) (Germany)
Residential properties
Berlin
Residential properties
Berlin
Residential properties
Berlin
Residential properties
Berlin
Residential properties
Berlin
6% Kommanditist
94%
94%
6%
100% 100%94,9% 93,7% - 94,9% 60%
100%100%
100%100%
22,18%
Source: ADO Properties, FMR (date of information: 07 Feb 2020)
Management/supervisory board Thierry Beaudemoulin has been CEO at ADO Properties since 10 December 2019.
After earning his master’s degree in real estate and urban planning, Thierry
Beaudemoulin’s positions included special advisor to the chief executive officer
(Batigere), head of property management (Foncia), asset manager (ING REIM) and
managing director France (ING REIM). His last position before he became CEO at
ADO Properties was that of executive board member from 2006 to 2019 at Covivio
and CEO of Covivio Deutschland. He will be Co-CEO at the newly created ADLER Real
Estate Group (which will integrate ADLER and change its name from ADO to ADLER
Real Estate Group).
At present ADO Properties’ supervisory board has seven members. The supervisory
board chairman is Dr Peter Maser. Dr Maser received his doctorate from the
University of Tübingen. He is admitted to the German bar. Prior to partnerships at
a law firm in Freiburg im Breisgau and at Deloitte Legal Rechtsanwaltsgesellschaft
mbH, he was employed at various auditing firms, trust firms, and the Ebner Media
Group. Dr. Maser is also currently deputy chairman of the supervisory board at
Volksbank Stuttgart eG, and supervisory board chairman at both BF direkt AG and
EURAM Bank AG.
Dr. Ben Irle, after his academic training at a partnership, founded a law firm in
Berlin (2005-2011). In the ensuing years he was a managing partner at Irle
Kalckreuth LLP (2012-2013) and Irle Moser Rechtsanwälte PartG (since 2014). Dr.
Ben Irle currently holds additional positions at ADO Group Ltd. (member of
supervisory board) and Focus Hören AG (chairman of supervisory board).
Florian Sitta successfully completed his legal studies in 2002. The following year he
was admitted to the German bar. He began his professional career as a legal counsel
and head of the legal department at Beate Uhse AG (2004-2015). He has been the
head of the legal department at Adler Real Estate AG in Hamburg and Berlin since
Thierry Beaudemoulin - CEO
Dr. Peter Maser - Chairman of
Supervisory Board
Dr. Ben Irle -
Supervisory board member
Florian Sitta -
Supervisory board member
ADO Properties S.A. (Adler Real Estate Group)
Page 22 of 62
2016. He also currently holds positions at ADO Group Ltd. (member of supervisory
board) and Sitta & Partner Gesellschaft für Logistik mbH (managing director).
Arzu Akkemik began her career as an analyst at Barings Securities in London after
completing her studies of international finance and accounting. Besides her
activities as an analyst, she was active in the company areas of corporate finance
and fund management. From 2005 to 2013 she was employed in London at Rexiter
Capital as a director/senior fund manager. In 2013 she founded Cornucopia
Advisors Limited and Cornucopia Asset Management Limited.
Dr. Michel Bütter has a doctorate in law. He is admitted to the German bar and has
gathered experience at various law firms (2001-2008). He has also held numerous
other positions in corporate management bodies. Currently Dr. Bütter holds
positions at ASSMANN BERATEN+ PLANEN AG (deputy chairman of supervisory
board), RCIS (member of board of management), Realconnext.com (chairman of
advisory council) and Bots4YouGmbH (member of advisory council and
shareholder).
Jörn Stobbe began his professional career in 1995 after completing his law studies
and passing his second state law examination. His first employer was
Landgesellschaft Schleswig-Holstein mbH. In the years thereafter we worked at the
law firm Clifford Chance (2000-2013) and RREEF Management GmbH (2013-2017).
Mr Stobbe currently holds additional positions at Union Investment Real Estate
GmbH (executive board member), Union Investment Institutional Properties GmbH
(management member) and at 1. FC Köln KGaA (chairman of supervisory board).
Shareholder structure The shareholder structure of the company includes a substantial free float
component of 80%. ADLER Real Estate holds 20.45% of the shares. Further
shareholders are Klaus Rudolf Wecken (5.74%), Mirabella Malta Ltd. (5.52%),
Mezzanine IX Investors S.A. (5.31%) and Union Investment Privatfonds GmbH
(4.37%).
Current shareholder structure
Source: ADO Properties, FMR (date of information: 31 March 2020)
20,45%
5,74%
5,52%
5,31%
4,37%
58,61%
ADO Group Ltd. Klaus Rudolf Wecken Mirabella
Mezzanine IX Union Investment Freefloat
Arzu Akkemik -
independent member of
supervisory board
Dr. Michael Bütter -
independent member of
supervisory board
Jörn Stobbe -
Independent member of
supervisory board
Shareholder structure: free
float of about 80%
ADO Properties S.A. (Adler Real Estate Group)
Page 23 of 62
ADLER’s company profile ADLER Real Estate has been active in the real estate industry for more than 20
years. Its focus lies on buying residential properties and managing permanently
held properties. At present ADLER manages more than 58,000 rental units
throughout Germany. ADLER’s business model also includes the purchase of real
estate portfolios and interests in other real estate companies.
Since the end of 2018 ADLER has invested in development projects in A-locations,
which constitute ~14% of its GAV (gross asset value). It pursues a “build-and-hold”
strategy, which will lead to growth in the existing residential portfolio. The
acquisition of 70% of the Brack Capital Properties N.V. (BCP) in 2018 brought new
development projects into the portfolio.
Since the group has a strict residential focus, it is selling BCP’s commercial portfolio.
67% of the commercial properties have already been sold, and the remaining assets
will follow as soon as possible. The disposal proceeds will be used mainly to pay
down bank debt, leading to a lower LTV ratio.
ADLER invests primarily in peripheral locations and growing metropolitan areas in
northern western, and eastern Germany. The idea here is to benefit from the
favourable real estate growth in B cities. The company’s geographic focus is on
Lower Saxony and North Rhine-Westphalia. Most of the properties are acquired in
a finished state with initially higher vacancies. The company endeavours to reduce
vacancies through active asset management. Its facility and property management
services are provided by the group’s subsidiaries.
Company history In 1880, Adlerwerke vorm. H. Kleyer AG was founded in Frankfurt and
manufactured automobiles, motor cycles, bicycles and typewriters.
In 1993 the company was sold to the real estate investor Roland Ernst and the
Philipp Holzmann construction group.
In 1998 typewriter production was discontinued and the company’s main business
became property rental. The company had already discontinued its other product
areas long ago: cars in 1945, motorcycles in 1958, and bicycles in 1945.
In 2002 the company’s name was changed to ADLER Real Estate, and its corporate
domicile was relocated to Berlin. ADLER’s real estate portfolio has grown strongly
in the last five years through the acquisition of real estate companies:
2014: Takeover of 92.7% of Accentro Real Estate (at the time: ESTAVIS AG) for
EUR 23.2m
2015: Acquired Mountain Peak Trading Ltd. (an investment holding company).
This acquisition gave ADLER a minority (24.79%) interest in Conwert
Immobilien Invest SE.
Acquired Treuhaus Hausbetreuungs-GmbH, which oversees the property
management activities for south-western Germany.
ADLER Real Estate focuses on
the management of properties
held on a long-term basis
2018 ADLER has invested in
development projects, which
constitute ~14% of its GAV;
ADLER pursues a “build-and-
hold” strategy
BCP’s commercial portfolio
will be sold
ADLER invests primarily in
peripheral locations and
growing metropolitan areas in
northern western, and eastern
Germany
1880 the Adlerwerke was
founded
1993 the company was sold
1998 the company’s main
business became property
rental
2002 the name was changed
and 2016 its corporate domi-
cile was relocated to Berlin
2014 Takeover of Accentro
2015 Takeover of Mountain
Peak Trading Ltd.
2015 Takeover of Treuhaus
Hausbetreuungs-GmbH
ADO Properties S.A. (Adler Real Estate Group)
Page 24 of 62
Acquired ~95% of Wohnungsbaugesellschaft JADE with a portfolio of 6,750
residential units. Wohnungsbaugesellschaft JADE’s subsidiary JADE
Immobilien Management is the property manager for properties in north-
western Germany.
Acquired the vast majority of WESTGRUND AG. At the end of 2016 ADLER’s
interest in WESTGRUND exceeded 95%, and so it acquired the remaining
shares in a squeeze-out. WESTGRUND focuses on acquiring, managing, and
servicing German residential properties.
2017: Sold Accentro Real Estate AG to Vestigo Capital Advisors.
2018: Acquired ~70% of Brack Capital Properties NV. (BCP) BCP is a private equity
company focusing on properties in Germany. This acquisition added
~12,000 residential units to ADLER’s portfolio.
2019: Acquired ADO Group, which gave ADLER Real Estate a minority (33.25%)
interest in ADO Properties
Group structure The ADLER Group encompasses nearly 230 individual companies and contribute to
a high level of complexity, also due to the many acquisitions made. Most of these
subsidiaries are property companies whose portfolios represent the entirety of
ADLER Real Estate’s property assets. The acquired companies Westgrund and BCP
still exist as sub-groups. Property management of the residential units is carried out
primarily by ADLER Wohnen Service. ADLER Gebäude Service performs facility
management functions at nearly all locations. Heating and energy supply is
concentrated at ALDER Energie Service.
ADLER reports on two main segments: Portfolio and Other. The Portfolio segment
includes existing properties from which rental income is generated. This also
includes the asset and property management activities. This segment also includes
the BCP properties earmarked for disposal as well as project developments. The
“Other” segment includes older development projects or other group activities that
cannot be formed into a separate segment.
Management Tomas de Vargas Machuca (1974) has been the chairman of the executive
committee since 2013 and Co-CEO since the end of 2017. He completed his studies
of business and economics at Bocconi University in Milan (Italy) and has more than
15 years’ experience in the real estate industry. Tomas de Vargas Machuca has 10
years of experience in executive positions. His areas of activity have included
banking, private equity, finance and investment.
Maximilian Rienecker (1985) has been head of corporate finance & strategy since
February 2017 and Co-CEO since December. He completed his management studies
at the University of Nottingham. Rienecker has been employed in the areas of sales
& marketing, corporate strategy and M&A. He has four years of experience in the
real estate industry. On 9 April 2020 he was appointed as Co-CEO of the newly
created ADLER Real Estate Group.
2015 Acquired JADE
2015 Acquired WESTGRUND
2017 Sold Accentro
2018 Acquired BCP
2019 Acquired ADO Group
Tomas de Vargas Machuca –
Co-CEO
Maximilian Rienecker –
Co-CEO
Two segments: Portfolio and
Other
The ADLER Group encompasses
nearly 230 individual companies
ADO Properties S.A. (Adler Real Estate Group)
Page 25 of 62
Sven-Christian Frank (1965) has been COO since June 2016. He has been with the
company since 2015 and had previously served in management positions at real
estate companies such as Gestrim Deutschland AG and Deutsche Real Estate AG.
Sven-Christian Frank completed his law studies at Ludwig Maximilian University of
Munich.
Shareholder structure The shareholder structure of the company includes a substantial free float
component of 43.11%. The company’s anchor shareholders are Mezzanine IX,
Wecken and Fairwater, which together hold 42.95% of its shares. ADLER Real Estate
holds 2.3% of its own shares, Thomas Bergander has another 6.7%, and the
investment management company Fil Investments International holds a stake of
5% of shares in issue.
Current shareholder structure
Source: ADLER Real Estate, FMR (date of information: 31 Dec 2019)
Consus’s company profile Consus Real Estate AG is the fastest growing real estate developer and has a
pipeline of more than 15,000 residential units (a total of 67 projects) in Germany’s
Top 9 cities (Berlin, Munich, Frankfurt, Düsseldorf, Cologne, Hamburg, Stuttgart,
Leipzig and Dresden). These locations represent Germany’s most important cities
for the real estate economy.
One of Consus’s key points of focus is the development of quartiers (entire
neighbourhoods or districts) and standardised multi-story flat blocks. The company
develops mixed-use development projects that incorporate commercial and retail
space. Additionally, Consus develops residential properties by repurposing and
reconstructing former commercial and industrial properties. Most of these
properties are sold forward to institutional clients. Such forward sales are intended
to minimise project development risks.
Free Float; 43,11%
Wecken; 14,97%
Mezzanine IX; 14,44%
Fairwater; 13,54%
Thomas Bergander;
6,66%
FIL; 5,02%Treasury
Shares; 2,26%
Sven-Christian Frank –
COO
Shareholder structure of the
company includes a
substantial free float
component of 43.11%
Consus Real Estate AG is the
leading real estate developer
and has a pipeline of more
than 15,000 residential units
Consus: focus on development
of quartiers and standardised
multi-story flat blocks
ADO Properties S.A. (Adler Real Estate Group)
Page 26 of 62
Thanks to the process of digitalisation in the construction industry and the
company’s own construction expertise, Consus covers the entire real estate
development value chain. The individual steps along the value chain are performed
by subsidiaries CG Gruppe AG and Consus Swiss Finance AG.
Group structure Consus Real Estate had already acquired 50.0% of the project developer CG Gruppe
in 2017. The following year, in 2018, it increased its holding to 71.0%. The company
founder Christoph Gröner (“CG”) is still committed with 25.0%
In December 2018 Consus Real Estate acquired 93.4% of the small project
developer SSN for EUR 245m. After it was acquired, SSN became a segment at
Consus Real Estate. In 2019 SSN Group was renamed “Consus Swiss Finance“.
Group structure
Source: Consus, FMR
The group generates its revenue from the following five segments:
property rental, changing portfolio assets, property sales, project development as
well as service, maintenance and management activities.
The company is organised into three segments:
1. Consus Real Estate: The focus of this segment is to support the subsidiaries
by performing centralised functions and in letting out properties mainly for
commercial use.
2. CG Gruppe: This includes the development of residential and commercial
properties. CG also lets out properties and provides the services that this
entails.
3. Consus Swiss Finance: This segment is involved in project development,
planning, construction and building technology. It also operates in the area
of letting out residential and commercial properties.
Management Andreas Steyer has been Consus’s CEO since May 2018 and has more than 30 years
of experience in the real estate industry. Prior to joining Consus he was the
Consus covers the entire real
estate development value
chain
Acquisition of CG Gruppe and
SSN Gruppe
Revenues from five segments
Three segments
Andreas Steyer – CEO
ADO Properties S.A. (Adler Real Estate Group)
Page 27 of 62
managing director of the listed real estate company DEMIRE, CEO of Deka
Immobilien Invest and a partner at Ernst & Young Real Estate. Prior to becoming
CEO, Steyer was COO at Consus.
Benjamin Lee has been CFO at Consus since April 2018. Lee has 25 years of
experience in the financial industry including 14 years in investment banking at
UBS. Before joining Consus he was the investment director at Aggregate Holdings,
Consus’s main shareholder. Lee already has experience as a CFO at a listed
company.
Theo Gorens has been the CRO and deputy CFO since May of 2019. Since 2012 he
has sat on the supervisory board and is responsible for risk management and
corporate development of Consus subsidiary SSN Group. Prior to that he held
executive positions in the financial services industry including CFO at Fortis ABN
AMRO and he was a member of Bethmann Bank’s expanded executive board
responsible for structured finance.
Shareholder structure The shares of Consus Real Estate AG are listed in the Scale Segment of Frankfurter
Börse. As shown in the chart below, Aggregate Group owns 51% of the shares. ADO
Properties (22.18%) and ADLER Real Estate (~3.00%) hold another 25%. Christoph
Gröner, CEO of CG Gruppe, holds 6%. The free float is 18% of shares in issue.
Current shareholder structure
Source: Consus, FMR (date of information: 01 Feb 2020)
Aggregate Group; 51%
ADO Properties& ADLER Real Estate; 25%
Christoph Gröner; 6%
Free Float; 18%
Benjamin Lee – CFO
Theo Gorens – CRO and
Deputy CFO
ADO Properties S.A. (Adler Real Estate Group)
Page 28 of 62
ADO’s business model ADO Properties is focused solely on the Berlin residential real estate market. It
specialises in letting out residential properties within Berlin’s city limits. Although
residential units account for just under 95% of the ADO’s portfolio, it also has some
commercial properties. In the past 5 years the number of commercial properties in
the portfolio has doubled and commercial rents have increased by more than 10%.
Thus, the company does not plan to sell any of its commercial portfolio in the
foreseeable future.
ADO also offers a broad spectrum of services. It not only lets out properties, but
also offers property and asset management services. Through active portfolio
management, ADO achieves stable rental growth and declining vacancies.
The company focuses on modernising and renovating its existing portfolio. As a
result, such properties are repositioned and generate higher rental income. Be
letting freshly modernised properties to new tenants, rents increased in 2019 by
2.6%. This strategy could prove to be especially successful in light of the new rent
cap in Berlin. The new regulation in Berlin allows rents to be increased by up to
EUR 1 per sqm. if the property has been renovated. Thus, by modernising the older
flats in its portfolio ADO can increase its rental income despite the new legislation.
ADO is currently investing more than EUR 40 per square meter for modernisation
and repairs, but it intends to lower this figure.
Its vacancy rate stands at 2.5% for residential and 4.6% for commercial properties.
In most cases, the vacant units are under construction, and some are for sale. As a
result, the vacancy rate for rental units is only 0.8%, which is in line with the city of
Berlin’s overall average vacancy rate.
ADO has also been in the privatisation business since 2014. The sale of individual
flats permits higher earnings compared to the sale of portfolios.
At the end of 2019 ADO sold its largest portfolio, the Carlos portfolio, to Gewobag
Wohnungsbau - a company owned by the city of Berlin - for EUR 920m. It had
acquired this portfolio in 2015 for EUR 375m. The Carlos portfolio includes just
under 6,000 residential units and 70 commercial units located in Berlin’s peripheral
districts. With this disposal ADO financed its takeover of ADLER. The ADLER
acquisition increases ADO’s portfolio to ~70,000 rental units Germany-wide, with a
Berlin exposure of more than 25%.
At the end of 2019 ADO made a voluntary offer to Consus’s main shareholder. If the
acquisition is realised, ADO plans to become active in project development. It plans
to build not only in Berlin, but in other large German cities as well. Germany’s
metropolitan markets are characterised by very strong demand and steadily rising
rent prices. As a result, ADO sees this investment as a huge opportunity.
ADO invests mainly in central locations within Berlin’s city limits. Most of its
residential units are located in the Berlin districts of Mitte, Charlottenburg and
Friedrichshain-Kreuzberg. It also has rental properties in the Innenstadtring (city
centre ring). Many of the portfolio properties up for sale are located north of the
ADO is active solely on the
residential real estate market
in Berlin
… and offers Property- and
Asset-Management
Focus on modernisation and
renovation
Vacancy rate of residential
units (0.8%) is comparable to
Berlin’s average vacancy rate
Privatisation business since
2014
Sale of Carlos portfolio in 2019
for 920 million Euro
Project development as new
potential strategy
ADO invests primary in central
location
ADO Properties S.A. (Adler Real Estate Group)
Page 29 of 62
Berlin Tegel airport. This is to say that the portfolio’s focus is on the centre of Berlin,
because that is where housing demand is especially high and where, through
renovation, it will be possible to achieve higher rental income.
ADLER’s business model ADLER is real estate company with focus on residential properties. The lion’s share
of its portfolio is in locations in northern, eastern, and western Germany, largely in
metropolitan areas and their peripheral districts. More than 30% of the units are in
Lower Saxony and around 24% are located in North Rhine-Westphalia. Peripheral
locations in particular offer enormous potential for value enhancement by
measures such as reducing vacancies or raising rents. In past years ADLER was able
to benefit from the positive trends in the real estate market and steadily expand its
property portfolio.
ADLER aims to generate sustainable rental income with long-term leases in its
residential portfolio. In addition, it expects to achieve positive cash flows from
project developments. Its project development focus, however, lies on the real
estate market in A-cities. Moreover, ADLER may, given the opportunity, alter its
residential portfolio through acquisitions and disposals in order to preserve and to
further expand the economic viability of its business model.
The properties it acquires offer in many cases valuation appreciation potential
achievable through active portfolio management. Property, facility and energy
management services are provided by the subsidiaries ADLER Wohnen Service
GmbH, ADLER Gebäude Service GmbH and ADLER Energie Service GmbH. The BCP
portfolio, however, has so far been managed by RT Facility Management GmbH
since the merger of BCP and ADLER is not yet fully completed.
The residential portfolio ADLER’s target customer group is tenants with medium to low income. This limits
risk since tenants who earn too little income receive state support to pay their rent.
Thus, ADLER is well equipped for these Corona virus times. Landlords of commercial
space can expect considerably higher revenue declines. ADLER is also aligning its
residential portfolio to the growing trend toward one-person households. For
example, its flats are about 60 sqm on average, which conforms to the
aforementioned trend and the preferences of its target tenant group.
ADLER enhances the quality of its portfolio through investment, maintenance and
renovation. This should also serve to reduce vacancies and lift rent levels. BCP’s
commercial portfolio does not fit with ADLER’s business model, and so the
remaining BCP properties will be sold as soon as possible. Roughly two-thirds of
these properties have already been sold.
Acquisition strategy ADLER intends to expand its residential portfolio going forward. The focus of that
expansion will be on core properties, although core-plus properties will also be
considered given their higher value-enhancement potential. Properties must be
already income-positive when they are purchased. Additionally, ADLER aims to
ADLER owns property across
Germany
… and focuses on peripheral
locations with potential for
value growth
Project developments in A-
cities
Offers asset, property, facility
and energy management
services
Target group: tenants with
medium to low income
Aligning its portfolio toward
one-person households
Sale of the commercial
portfolio
Investment in properties with
core and core-plus market
quality
ADO Properties S.A. (Adler Real Estate Group)
Page 30 of 62
expand its portfolio in the future through developments and infill (rededication of
land in an urban environment, usually open space, to new construction).
ADLER has authorised and contingent capital that can be used for acquisition
currency. Treasury stock acquired under share buyback programmes can also be
used as acquisition currency.
In 2015 ADLER took over 94,9% of Westgrund shares as part of its acquisition
strategy. At the end of 2019 ADLER increased its position to 96,88%. The market
cap of Westgrund is currently over EUR 825m (remaining 3% hence EUR 25m) and
the focus of the company lies in property management, improving administrative
cost efficiency and reducing vacancies. It takes care of the residential units in
northern and eastern Germany and hence, it represents the interests of ADLER’s
“non-core” portfolio. Westgrund also owns 731 residential units, but those
represent only 4% of the total portfolio it supervises.
Financing strategy ADLER targets an investment grade credit rating. To achieve it, the company needs
a healthy ratio of equity to debt. Hence, the company targets a ratio that is
commensurate with an investment grade rating.
ADLER targets a long-term time frame for the repayment of its debt obligations. It
aims to reduce its interest expense either by prepaying or refinancing existing debt
at more favourable rates.
ADLER can raise capital via secured bank loans and unsecured instruments.
Key management metrics ADLER uses both financial and non-financial metrics to keep itself on track. The
financial metrics are EPRA net asset value (EPRA NAV), funds from operations I (FFO
I) and loan to value (LTV).
Non-financial metrics are important in property management. If actual values
deviate from target values, measures are taken to correct the disparity. Examples
of non-financial metrics include the percentage of rented units and the number of
lease terminations. A number of metrics are also applied to acquisitions that
influence the decision whether to buy or not to buy. Such metrics include
demographic or labour market forecasts.
Employees Most employees are not employed at the holding company ADLER Real Estate AG,
but at the subsidiaries ADLER Real Estate Service, ADLER Wohnen Service GmbH,
ADLER Gebäude Service GmbH, ADLER Energie Service GmbH and BCP. The number
of employees increased significantly in 2019 due to the in-sourcing of property
portfolio services (Q3 2018: 815 employees, Q3 2019: 904 employees).
Research and development To be ready for the coming years ADLER needs to be able to realistically assess
future developments in the real estate market. For this purpose, ADLER makes use
Contingent capital for
acquisitions
2015: Acquisition of
Westgrund
Westgrund manages a large
portion of ADLER’s “non-core”
portfolio
Interest expenses are reduced
by prepaying and refinancing
existing debt
EPRA NAV, FFO I and LTV:
important metrics for ADLER
Increase in the employee
numbers
ADO Properties S.A. (Adler Real Estate Group)
Page 31 of 62
of market analyses and expertise from external sources and also draws on its own
practical experience.
Consus’s business model Consus Real Estate AG's core business activity is project development. Here its
focus lies on the affordable housing market in Germany’s nine largest cities (Top 9).
Consus‘s project development volumes are relatively large, with a growing
exposure to urban quartiers (entire city districts or neighbourhoods). Its main
customers are institutional and private buyers. CONSUS has a gross development
value (GDV) of EUR 10.3bn (date of information: 20 Sep 2019).
Many of the functions of Consus Real Estate AG are carried out from its
headquarters in Berlin. The financing of the group is coordinated with the goal of
the optimal financial structure. The subsidiaries CG Gruppe and SSN Group AG are
responsible mainly for the operating activities. Individual branches are located in
Germany’s large cities and are responsible for carrying out developments in their
respective regions.
Real estate project development for institutional buyers Consus generates the largest share of its GDV with quartier developments. The
company has expertise in large-volume development projects. A quartier
encompasses more than 100 residential units of 50-70 sq.m. each. Besides
developments involving new construction, Consus also realises projects in which
commercial properties are renovated and repurposed or rededicated into
residential properties. For such rededication and renovation projects Consus
developed the concept of the “Vertical Village”. These are commercial properties
which are transformed into modern living and work space in downtown locations.
A key element of Consus’s business model here is forward sales, which means that
institutional customers can purchase real estate projects already before
construction begins so that Consus receives partial payments already during the
construction period. This arrangement significantly reduces financing risk and the
risk of investors exiting prematurely. The majority of forward sale customers are
institutions, which include e.g. pension funds and insurance companies. The
proceeds generated earlier from forward sales can finance the development and
free up funds invested by Consus for redeployment to other purposes. The forward-
sales model tends to focus on affordable housing units.
Consus: project development
in the top 9 German cities
… with GDV of EUR 10.3bn
Subsidiaries – CG Gruppe and
SSN Group are responsible for
the operating activities
Focus on development of
quartiers
… but development of
commercial units as well
Forward sales to institutional
clients
ADO Properties S.A. (Adler Real Estate Group)
Page 32 of 62
Project development steps
I. Purchase
II. Development
Distinguishingcharacteristic
III. Forward-Sales
IV. Construktion
V. Delivery
CONSUSREAL ESTATE AG
Source: Consus
The above chart provides a systematic overview of the steps in a forward-sale
development. The first step is the purchase of land. The next step is to develop a
project concept. Next, Consus coordinates with building authorities and takes the
necessary steps to obtain a building permit. Forward sales to institutional investors
take place already before the start of construction. As the final step, after
construction is completed, the transaction is closed and the keys are handed over.
Consus’s broad business model puts it at an advantage over competitors in terms
of selection, development and completion of development projects.
Real estate development for private buyers Consus’s development projects also target private investors. Sales to private
persons usually provide higher yields than forward sales. Here we are talking about
individual projects or buildings which tend to be priced in the upper segment. The
aforementioned advantages associated with forward sales thus no longer apply.
roughly 20% of Consus’s developments can be purchased by private buyers.
Development of income properties Consus maintains a small portfolio of properties with a volume of EUR 390m (date
of information: 30 September 2019) from which it generates rental income. These
properties are located mainly in Berlin and Leipzig.
Cost advantages from digitalisation and prefabrication Consus applies building information modelling 6 (BIM 6) in order to drive the
digitalisation of project development processes. The goal is to make these
processes leaner without sacrificing quality. The result is cost and time savings.
Mitigating the financing risk
through forward sales
Ca. 20% of the projects can be
sold to private buyers
Rental of properties
Digitalisation of building
processes through BIM 6
ADO Properties S.A. (Adler Real Estate Group)
Page 33 of 62
In addition, the company wants to build up production capacity for the
prefabrication of individual construction modules used in the construction of multi-
story flat blocks. For this purpose, Consus has entered a cooperation agreement
with European Modular Constructions GmbH.
Consus’s goal in applying BIM and its pursuit of batch production of construction
modules is to become the cost leader as a producer of affordable housing in the
medium to long term.
Portfolio There are 67 projects in portfolio of Consus as of 30.09.2019 (please see
attachment). The three largest projects are Vai Campus, Holsten Quartier and
Benrather Gardens. All three projects are still in the planning phase.
The VAI CAMPUS project is developing a city complex in Stuttgart-Vaihingen. In
addition to residential and commercial spaces, office units will be built as well. The
rental or sales area is around 185,000 sqm. Construction work is scheduled to begin
as early as 2021. The completion of the project is expected in 2026. The GDV for
the project is approximately EUR 981m and thus corresponds to about 10% of the
Consus’s total GDV.
The Holsten Quartier project is based on constructing residential and commercial
spaces in Hamburg. The developed area amounts to approximately 133,000 sqm.
Construction is planned to start next year. The Holsten Quarter is due to be
completed in 2026. The GDV amounts to approximately EUR 840m. This
corresponds to about 8% of the total GDV. On January 17, 2020, ADO signed a letter
of intent for the purchase of almost 90% of the Holsten Quartier project. The
provisional purchase price for the complete project is EUR 350m. A share purchase
agreement is to be signed after a due diligence has been successfully carried out.
The Benrather Gardens project is developing a city complex in Dusseldorf.
Residential, commercial and office units will be built that will total to approximately
159,000 sqm. Construction is scheduled to begin in 2022 and completion is
expected in 2029. The GDV amounts to roughly EUR 662m. and corresponds to
about 7% of the total GDV.
On February 13, 2019 we visited the sites of the following projects: NewFrankfurt
Towers VauVau and Wested Ensemble Grand Ouest. The completion of the
NewFrankfurt Towers VauVau is planned for the next year 2021. Construction
activities are not expected to end in the first months of the year, as the project is
currently still under construction. It can be assumed that if the construction is
carried out quickly, the projects could be completed in Q3 or Q4 2020. The
construction of the Westend Ensemble-Gran Ouest is scheduled for this year.
The table below represents the most important projects for Consus and their
current status:
Standardization and
prefabrication of construction
modules
Consus has 67 projects with
GDV of over EUR 10bn.
VAI Campus in Stuttgart-
Vaihingen
Holsten Quartier in Hamburg
Benrather Gardens in
Dusseldorf
ADO Properties S.A. (Adler Real Estate Group)
Page 34 of 62
Source: Consus, FMR
Consus’ pipeline divided by cities
Source: Consus, FMR
Location Name Area GDV in k EUR % of total GDV Construction start Completion Status
Berlin The Wilhelm 15,912 439,530 4% 2019 2023 Running project
Hamburg Neuländer Quarree 81,315 356,917 3% 2020 2024 Running project
Berlin Forum Pankow 36,205 219,124 2% 2020 2025 Running project
Berlin Bundesalle Project 28,668 164,437 2% 2016 2020 Forward sold
Frankfurt New Frankfurt Towers VauVau 37,745 218,102 2% 2017 2021 Forward sold
Berlin Steglitzer Kreisel Tower 27,284 209,631 2% 2017 2021 Forward sold
Cologne Cologne I Part 1 54,321 241,415 2% 2017 2022 Forward sold
Frankfurt Westend Ensemble-Upper West 19,843 207,601 2% 2020 2022 Forward sold
Duesseldorf UpperNord Tower VauVau 25,066 175,000 2% 2019 2022 Forward sold
Frankfurt 2stay 27,600 359,311 4% 2021 2023 Building land
Munich Covent Garden 29,273 313,005 3% 2021 2023 Building land
Hamburg Billwerder Neuer Deich 44,475 231,457 2% 2021 2024 Building land
Hamburg New Yorker 45,374 219,066 2% 2021 2024 Building land
Cologne Cologneo II 71,583 350,779 3% 2022 2025 Building land
Frankfurt Ostend 42,700 300,790 3% 2023 2025 Building land
Stuttgart Otto Quartier 73,360 275,195 3% 2021 2025 Building land
Stuttgart Vai Campus Stuttgart-Vaihingen 185,415 1,127,400 11% 2021 2026 Building land
Hamburg Holsten Quartier 133,517 883,787 9% 2021 2026 Building land
Karlsruhe Quartier C 111,249 370,649 4% 2021 2026 Building land
Duesseldorf Benrather Gärten 158,989 661,786 6% 2025 2029 Building land
Stuttgart/Karlsruhe Berlin Munich
GDV in EURm: 2,139 GDV in EURm: 1,355 GDV in EURm: 483
Area in k m2: 545 Area in k m2: 207 Area in k m2: 67
Avg. Sales Price: 3.923 Avg. Sales Price: 6.534 Avg. Sales Price: 7.233
% of total GDV: 21% % of total GDV: 13% % of total GDV: 5%
Projects: 9 Projects: 9 Projects: 3
Hamburg Cologne Leipzig/Erfurt
GDV in EURm: 1,960 GDV in EURm: 1,081 GDV in EURm: 531
Area in k m2: 359 Area in k m
2: 240 Area in k m
2: 321
Avg. Sales Price: 5.464 Avg. Sales Price: 4.500 Avg. Sales Price: 3.139
% of total GDV: 19% % of total GDV 11% % of total GDV: 5%
Projects: 6 Projects: 7 Projects: 16
Frankfurt/Offenbach Duesseldorf Dresden
GDV in EURm: 1,365 GDV in EURm: 1,002 GDV in EURm: 345
Area in k m2: 182 Area in k m2: 218 Area in k m2: 72
Avg. Sales Price: 7.493 Avg. Sales Price: 4.590 Avg. Sales Price: 4.815
% of total GDV: 13% % of total GDV: 10% % of total GDV: 3%
Projects: 7 Projects: 5 Projects: 5
ADO Properties S.A. (Adler Real Estate Group)
Page 35 of 62
Consus: Estimated completions in the coming years
1
2020 2021 2022 2023 2024 2025 2026 2027-2029
Completion of 413.000 sqm
with a GDV of EUR 2.0 bn
Completion of 246.000 sqm
with a GDV of EUR 1.2 bnCompletion of 209.000 sqm
with a GDV of EUR 1.0 bn
Completion of 159.000 sqm
with a GDV of EUR 0.8 bn
Completion of 363.000 sqm
with a GDV of EUR 1.8 bn
Completion of 219.000 sqm
with a GDV of EUR 1.1 bn
Completion of 220.000 sqm
with a GDV of EUR 1.1 bn
Completion of 261.800 sqm
with a GDV of EUR 1.3 bn
Source: Consus, FMR
By the end of 2022 around 43% (or EUR 4.4bn) of the pipeline is expected to be
completed.
Year 2020 2021 2022 2023 2024 2025 2026 2027-2029
Sellable area (sqm) 261.800 413.000 220.000 246.000 219.000 209.000 363.000 159.000
GDV (EURbn) 1,3 2,0 1,1 1,2 1,1 1,0 1,8 0,8
% of Total GDV 12,5% 19,8% 10,5% 11,8% 10,5% 10,0% 17,4% 7,6%
ADO Properties S.A. (Adler Real Estate Group)
Page 36 of 62
Market environment Supply and demand, at least regionally, remain out of balance. A pan-German view
of the situation should be treated with caution since regional differences are very
pronounced. Nonetheless, a pan-German reading indicates a tendency that can be
reflected in the individual cites.
Demand for residential properties exceeds supply in many of Germany’s cities,
pushing up real estate prices. Residential property prices rose again in 2019
although the country’s economic performance fell short of expectations.
Germany’s gross domestic product (GDP) grew just 0.6% in 2019 and the consumer
price index (CPI) increased by 1.4%. The number of unemployed persons has
decreased continually over the past decade. The unemployment rate currently
stands at 5.3%. Forecasts for 2020 are more positive and the government expects
the economy to stabilise, which could strengthen the growth of the real estate
market.
After the pandemic was announced, economic forecasts have become more
negative and a deeper recession is now expected for 2020. According to the
International Monetary Fund (IMF), the German economy will shrink by 7% this
year due to the Covid-19 pandemic. Given that the coronavirus is contained by the
second half of 2020, the IMF expects that the German economy will grow by 5.2%
in 2021. The German institute of international economy (IfW) has considered two
possible scenarios for the pandemic development in Germany - the first with a
lockdown until the end of April and the second – until the end of July. Looking at
the more pessimistic case, the IfW anticipates a decrease of GDP in 2020 by 8.7%
vs. 2019. The negative economy outlooks imply that the willingness to purchase
real estate properties and to invest in them will decrease, which in turn will have
an impact on the whole sector.
Supply of residential real estate Residential real estate development volume in A locations increased yoy in 2019,
and the number of building permits Germany-wide was up not quite 4% yoy. That
makes 2019 the first year to show positive growth since the peak in 2016. As of the
end 2019 there were more than 693,000 dwellings in Germany that were approved
and waiting to be built. In 2018 about 250,000 dwellings were completed, which
suggests it will take at least another three years to work off the backlog as of end-
2019. Since 2016 the trend in permits for construction projects had been negative.
The yoy increase in permits in 2019 is a positive sign for the market, but rising
construction costs and the growing shortage of qualified workers in the
construction industry could impede the real estate sector.
Increase in the demand for
residential real estate
Increase in GDP and decrease
in the unemployment rates
Negative economic outlook
for 2020
Increase in the building
permits by 4% in 2019
ADO Properties S.A. (Adler Real Estate Group)
Page 37 of 62
Building permits and completed dwellings in Germany
Source: bulwiengesa, FMR
According project developer study 2020 from bulwiengesa, the residential segment
in the top 7 German cities is not as attractive to project developers as it used to be.
In the past two years, the area that is planned for project development has been
decreasing. The expectations are that this trend will become even more
pronounced in 2020 and that the housing market will decline by 2.9%. If so, this
would be the first negative development in over 10 years. Furthermore, a
stagnation of the total project development volumes in the seven largest German
cities is expected and the market growth would be only 1.1% in 2020 (2019: 7.2%).
All of these estimates were made without taking into account the economic impacts
that the pandemic might have. Thus, the market decline could be even more
pronounced in 2020 in case the pandemic is not contained soon.
Demand for residential properties On the one hand, Germany has a birth deficit and an ageing society. On the other
hand, the immigration is growing. Hence, the expectation for the short and medium
term is that the population will increase. Population growth can lead to increased
demand for housing units. Moreover, there is a trend toward ever-smaller
households. According to Germany’s Federal Statistical Office (Destatis), the
number of one-person households will increase to 44% by 2035. Urbanisation
remains the new megatrend, and causes regional clustering, especially in the
vicinity of A-locations.
Further, new regulations are being introduced that could impact demand for
residential real estate. The government has introduced climate change mitigation
legislation that relieves commuters. The legislation envisages an increase in the
standard deductions for commuters’ travel expenses and a VAT reduction on train
tickets. Combining the above with rising prices in A-locations, this could boost
demand for residential real estate outside the large cities.
Decrease in the project
development on the
residential market
Population growth despite the
aging society
Urbanisation and smaller
households – the current
megatrends
New legislation introduces
changes for the commuters
ADO Properties S.A. (Adler Real Estate Group)
Page 38 of 62
Low financing costs are an additional factor that could increase demand. The yield
on 10-year bonds has been at 0% since 2016, and interest rates on real estate loans
are at a historical low. According to the Bundesbank, more than EUR 260bn housing
loans were issued to private households in 2019. The situation is different for
institutional borrowers. According to BF.Quartalsbarometer, institutional real
estate groups’ propensity to finance decreased in the Q1 2020 qoq. This was
attributed mainly to the large number of outstanding loan obligations.
Housing loans and its yearly change
Source: Bundesbank, FMR
The residential market Investors last year assessed the state of the real estate market positively.
Transaction volume in the residential market totalled EUR 91.3bn, representing a
15.4% yoy increase vs 2018. More than half (58%) of the transactions last year
occurred in Germany’s Top 7 cities.
Lower financing costs for
housing loans
Growth of the residential real
estate market by 15.4%
ADO Properties S.A. (Adler Real Estate Group)
Page 39 of 62
Transaction volumes on the German real estate market
Source: JLL, FMR
A-locations also exhibit the lowest vacancy rates. In Munich just 0.2% of all existing
dwellings were vacant, and Frankfurt it was 0.3%. In 2018 Germany hit a new
national low (2.8%) in terms of its residential vacancy rate. The vacancy rates in
Germany’s various federal states have remained relative stable. The one exception
is Berlin, where the percentage of vacant flats plunged from ~50% in 2014 to 0.8%
in 2018.
Vacancy rate across Germany
Source: CBRE-empirica-Lerrstandsindex (vacancy index), FMR
That also leads to higher rent prices. Although the annual price inflation in
Germany’s Top 7 cities is similar to the national average, Top 7 rents are 40% above
the national average in the case of newly constructed properties, and nearly 60%
above it in the case of existing dwellings. This strong difference in rent prices
Housing shortage in the
A-cities
Housing shortage in the
A-cities
ADO Properties S.A. (Adler Real Estate Group)
Page 40 of 62
illustrates the severe housing shortage in metropolitan areas. The depleted buffer
in the housing stock means that new dwellings must be built soon.
Rent prices for newly constructed properties and for existing dwellings
Source: Colliers, empirica-systema GmbH, FMR
Rising construction costs can explain the difference in rent prices between newly
constructed residential properties and existing dwellings. Over the last three years
construction costs have risen an average of 2.4% per quarter. The driver here is
rising labour costs.
North Rhine-Westphalia & Lower Saxony North Rhine-Westphalia, with a population of just under 18m, is Germany’s most
populous federal state. Its role in the real estate market is accordingly important.
ADLER Real Estate has a large number (13,811) of portfolio properties in NRW. Like
Germany in general, NRW exhibits strong regional differences in terms of economic
strength. The state’s population shrinkage in the wake of structural change in the
past seems to have halted. NRW’s inhabitant numbers are growing again. The
increases are mostly occurring in the large cities. The regional housing markets also
exhibit considerable differences. Lower Saxony presents a similar picture. Its
number of inhabitants has grown every year since 2011. This trend has been carried
by a few cities, but there are also regions that have seen their populations shrink.
The housing vacancy rates in both German states have been constant in recent
years. For Germany as a whole, the average vacancy rate in 2018 was 2.8%. Lower
Saxony’s vacancy rate in 2018 stood at 3.3%, and NRW’s at 3.0%
NRW’s unemployment rate stands at 6.6% (January 2020), sixth highest among all
states. All the states with higher unemployment rates are in eastern Germany,
however. Lower Saxony’s unemployment rate is 5.3%, i.e. lower than NRW’s. The
following figure provides an overview of the unemployment rates of all of Germany
federal states.
Construction costs make
newly build dwellings more
expensive
NRW: the largest federal state
with a population of roughly
18m
Vacancy rates in NRW (3.0%)
and in Lower Saxony (3.3%)
are above the national
average
Unemployment rate in NRW is
5.3% and in Lower Saxony –
6.6%
ADO Properties S.A. (Adler Real Estate Group)
Page 41 of 62
Unemployment rates across Germany
Source: Statista, Bundesagentur für Arbeit, FMR
NRW’s per capital GDP has growth continually. The same can be said for Lower
Saxony. With the exception of 2015 Lower Saxony has seen yoy growth in GDP per
capita every year. Nonetheless, NRW and Lower Saxony have lagged the other
states in this metric. Their growth figures are below the national average.
GDP per capital in North Rhine-Westphalia and Lower Saxony
Source: Statista, Agentur für erneuerbare Energien (Agency for Renewable Energies), FMR
Despite its high unemployment rate and lower per-capital GDP growth, NRW’s
residential real estate market is following the national trend. Due to migration, the
supply of residential units has remained under pressure in some economically
prosperous locations such as Cologne or Düsseldorf. The construction of multi-story
NRW and Lower Saxony have
GDP per capital below the
national average
Increase in the dwellings’
purchase prices in NRW and
Lower Saxony
ADO Properties S.A. (Adler Real Estate Group)
Page 42 of 62
flat blocks continues to lag despite accelerating residential construction activity and
has not been able to meet the growing demand. The gap between the growing
number of households and housing completions will lead to further rent and
purchase price increases in certain regions. The same goes for the large cities of
Lower Saxony (e.g. Wolfsburg, Hannover, Braunschweig). Here too, urbanisation is
leading to regional bottlenecks in the housing supply. For existing dwellings, rent
and purchase prices have increased in both states over the past five years. In Lower
Saxony the price increases have been roughly twice as high as in NRW.
Median purchasing prices of dwellings in NRW and Lower Saxon
Source: Statista, Agentur für erneuerbare Energien FMR
To meet future demand, housing construction activity must be increased in certain
regions.
The Big 8 In 2019 housing purchase and rent prices both increased again in Germany’s Big 8
cities. According to JLL, the purchase price of a dwelling in a Big 8 city increased by
10.2% This puts the 2019 housing purchase price inflation rate significantly above
the 5-year average (8.2% for 2014-18) The strongest purchase price inflation
occurred in Düsseldorf: 13.3% to EUR 4,270 per sq.m. The lowest rate of inflation
in housing purchase prices was in Berlin: +8.4%, rising to EUR 4,700 per sq.m. For
the Big 8 cities as a whole, the purchase price for a square meter of housing ranged
from EUR 2,260 (Leipzig) to EUR 8,130 (Munich).
Increase in purchase prises in
Top 8 cities
ADO Properties S.A. (Adler Real Estate Group)
Page 43 of 62
Purchase prices in the Big 8 cities
Source: IDN Immodaten, empirica systeme, JLL, FMR
Big 8 rent prices, by contrast, increased at a rate of 4.1% in 2019, which was lower
than the 5-year average rate of increase (5.0%). The strongest increase in rent
prices among the Big 8 cities was in Cologne. Cologne’s rent prices increased by 8%
in 2019 to a monthly average of EUR 12.55 per sq.m. (5yr average rate of increase:
33%). Munich continues to have Germany’s highest rent prices, despite a smaller
yoy increase (3.8%) in 2019. Munich’s average monthly rent stands at EUR 20 per
sqm. The smallest rent price increase in 2019 was in Leipzig, where rent prices
increased by 1.4% yoy to EUR 7.25 per sqm per month vs a 5yr average rate of
increase of +6.2%. All other Big 8 cities in Germany showed rent price increases
somewhere between Cologne and Leipzig. For 2020 JLL forecasts a similar rent price
trend as in 2019, with rent prices increasing more slowly than their 5yr average. JLL
also expects considerable regional differences to persist in 2020 among the Big 8
cities.
… and increase of the rent
prices by more than 4% last
year
ADO Properties S.A. (Adler Real Estate Group)
Page 44 of 62
Rent prices in the Big 8
Source: IDN Immodaten, empirica systeme, JLL, FMR
Both rents and housing purchase prices continue to trend upwards. With regard to
rents, a weakening of the upward momentum of recent years is observable. As for
purchase prices, however, the rate of increase is above its 5-year average, leading
to a widening disconnect between housing purchase prices and rent prices. Supply
and demand remain in disequilibrium. This applies both to purchases and rentals of
residential properties. And further increases in rents and purchase prices are to be
expected going forward.
Berlin
After ADO’s takeover of ADLER, Berlin will be the main market for the new merged
entity, Adler Real Estate Group. Consequently, the performance of Berlin’s real
estate market is especially important. In 2019, Berlin’s purchasing power per
inhabitant increased by more than 3% yoy to EUR 21,687, which is 8% below the
German average. The increase was attributable in part to a falling unemployment
rate. As of January 2020 Berlin’s unemployment rate stood at 8.2% These factors
are important prerequisites for the economic situation to improve in the future.
Berlin’s growing number of inhabitants has continued to drive up housing demand.
Its stock of residential units increased by ~3.5% from 2013 to 2018. This increase
was not sufficient to offset increased demand, however, and less than 1.0% of all
existing flats were vacant. The supply shortfall relative to demand caused rent and
purchase prices to rise. Since 2017 rent prices in Berlin have increased at an annual
rate of more than 6.5% across all market segments. Housing purchase prices
increased in the same period by 11.5% p.a. Hence, Berlin’s rent prices are above
the German average, but below levels in other A-locations such as Munich or
Frankfurt, where monthly rents are as much as EUR 27 per sq.m.
Difference between rent and
purchase prices in the largest
8 cities
Increase in Berlin’s purchasing
power
Disparity between demand
and supply on the residential
market
… has led to increase in rent
and purchase prices
ADO Properties S.A. (Adler Real Estate Group)
Page 45 of 62
Development of rent and purchase prices in Berlin
Source: ZBI, Federal Statistical Office, State Statistical Offices, empirica-systeme market data base, apollo valuation & research GmbH, FRM (bars indicate: offered rent prices; lines indicate: offered purchase price)
Taking a closer look at the individual city districts of Berlin’s real estate market, we
notice differences in market trends. ADO invests primarily in Berlin’s central city
districts such as Mitte and Charlottenburg-Wilmersdorf. Since these are popular
districts, their housing purchase and rent prices lie above the Berlin average. The
Mitte district is characterised by several development projects, which account for
more than 20% of all new residential construction in Berlin. The location’s
attractiveness and its many new buildings have led to elevated rent prices of up to
EUR 18 per sq.m. per month for the middle market segment. Due to strongly
growing rent prices, the population of the areas surrounding Berlin has grown at a
rate of 6.4% since 2011.
Berlin’s rent cap, which came into force in February 2020, could alter the Berlin
market’s growth. This legislation diminishes the attractiveness of residential rental
properties as an investment. Kholodilin, Weber and Sebastian (2018) analysed the
impact of regulation on rental housing markets over a period of 100 years in 27
OECD countries. According to their findings, demand increases for condominiums
occupied housing and fewer flats are rented. Thus, we could expect to see more
investors opting for development projects in the medium term.
Forecast The rising number of households and positive demographic growth could lead to
increased demand for housing properties. Furthermore, the growing number of
building permits last year could be interpreted as a positive sign for the real estate
market. On the other hand, the Ifo Business Climate Index indicates that
companies’ scepticism regarding the year 2020 has increased and the Covid-19 has
started taking its toll on the economy. In particular, companies of the construction
industry assessed their current business situation very pessimistically.
The key determinants of future property prices are credit financing and the
performance of the economy. The ECB’s zero interest rate policy reduces the cost
of capital and impacts the profitability of real estate investments. Germany’s
Many development projects in
Mitte
Population growth in areas
surrounding Berlin due to the
increasing housing prices
Berlin’s rental cap came into
force in February 2020
… and it could lead to growth
in condominiums occupied
housing
Positive demographic growth
and increasing demand for
residential properties
Low cost of capital under the
zero-interest rate policy
ADO Properties S.A. (Adler Real Estate Group)
Page 46 of 62
revised land tax could turn investors away from A-locations while the new rebates
and tax cuts for commuters provide an additional incentive for people to look for
dwellings in peripheral areas. As a result, demand could increase for hitherto risky
B- and C-locations.
As long as interest rates remain low, investors will probably continue to opt for
investments in the real estate industry. Nevertheless, the market has reached its
current limits and we expect lower growth rates in 2020e than in 2019. If the
interest rate environment should change, the growth of real estate market could
even become negative.
In the short term, however, real estate will probably remain attractive for investors
given that the pandemic does not cause a significant or permanent damage to the
economy. We tend to expect that there will be a demand for residential real estate,
leading to a slight increase in the prices, and not only in Germany’s large cities.
Nonetheless, we expect a stagnation in the real estate purchase and rent prices.
Expectations for 2020: lower
growth rates
ADO Properties S.A. (Adler Real Estate Group)
Page 47 of 62
Financials
ADO FY 2019 The income from rental activities of ADO Properties increased by 5.2% in 2019 to
EUR 141.6m (2018: EUR 134.6m) due to strong like-for-like rental growth of 5.0%
as well as further reduced vacancy. The net rental income increased to EUR 134.1m
(2018: EUR 128.0m).
ADO Properties' EBITDA from rental activities fell by 2.5% to EUR 92m (2018: EUR
93.8m) in 2019. FFO 1 (from rental activities) decreased by 5.4% to EUR 63.2m
(2018: EUR 66.8m) equivalent to an FFO 1 of EUR 1.43 per share (2018: EUR 1.51
per share).
The average in-place rent of the residential portfolio increased to EUR 7.39 per sqm
per month at the end of the year 2019 (31 December 2018: EUR 6.73). The vacancy
rate for the residential portfolio decreased to 2.7% as of 31 December 2019 due to
active lettings, sales and modernisation activities (31 December 2018: 3.2%).
As at 31 December 2019, the fair value of ADO Properties' portfolio stood at EUR
3,664m (31 December 2018: EUR 4,092m). It comprised 17,637 units at the end of
the reporting period, of which are 16,255 residential units (31 December 2018:
22,238 residential units). The average fair value per sqm of the residential portfolio
increased to EUR 2,966 (31 December 2018: EUR 2,488). The EPRA Net Asset Value
of the portfolio amounted to EUR 2.9bn or EUR 65.80 per share as of 31 December
2019 (31 December 2018: EUR 55.05).
ADO Properties has an LTV of 27% by the end of the reporting period and an
average interest rate of 1.6%. The average maturity of the outstanding debts is
approximately 4.2 years. Almost all loans have fixed interest rates or are hedged.
ADO Properties will continue with this sustainable financing strategy and targets an
LTV of maximum 50%.
Transformational business combination with ADLER and Consus
On 15 December 2019, ADO Properties announced its business combination with
ADLER and a strategic cooperation agreement with Consus to create one of the
largest listed real estate companies in Europe. As announced on 30 March, ADO
Properties' offer received strong support from ADLER shareholders with 91.93% of
investors in the company tendering their shares. Together with the treasury shares
held by ADLER the offer has been accepted by 94.15% of ADLER's share capital. The
business combination with ADLER brings together two high-quality and
complimentary portfolios diversified across key German cities with attractive
growth potential. The combined company will have a larger free float market
capitalization and will be a potential MDAX candidate in near term, while investors
will benefit from enhanced liquidity. Through its strategic partnership with Consus,
the company will gain access to a market leading development platform with a
pipeline of over 15,000 residential rental units that will support the combined
group's efforts to reduce the current housing imbalance in Germany. In anticipation
of the new group structure, Maximilian Rienecker, Co-CEO of ADLER, was appointed
Increase of the rental income
by 5,2% to EUR 141.6m
FFO I decreased by 5.4% to
EUR 1.43 per share in 2019
Increase of the average in-
place rent of the residential
portfolio
EPRA NAV for 2019 amounted
to EUR 65.80 per share
ADO Properties has an LTV of
27% and an average interest
rate of 1.6%
ADO holds 94.15% of ADLER
shares (including treasury
stock)
The combined company will
be a potential MDAX
candidate
ADO Properties S.A. (Adler Real Estate Group)
Page 48 of 62
Co-CEO of ADO Properties by ADO Properties' Board of Directors on 30 March 2020.
Mr. Rienecker's appointment became effective on 9 April 2020.
Through the business combination with ADLER and the strategic cooperation with
Consus, ADO will progress from a Berlin-focused property company into one of the
largest residential real estate groups in Europe, benefitting from greater scale and
enhanced growth prospects. By diversifying the group’s portfolio through the
combination, they are de-risking from a regulatory and operational perspective
while also generating easily attainable synergies.
Adler FY 2019 As of FY 2019, ADLER's portfolio comprised of 58,083 units. Net rental income
increased by 4.3% YoY to EUR 248.7m for the year 2019. This significant increase
was driven by operational improvements with all our main key performance
indicators improved. ADLER achieved l-f-l rental growth of 2.4%, and a 60bps YoY
decrease in vacancy rate to 5.4%. The average in-place rent increased to EUR 5.60
per sqm/month (FY 2018: EUR 5.49 sqm/month).
FFO I amounted to EUR 84.4m, representing 13.7% YoY increase (FY 2018: EUR
74.2m). Fully diluted FFO I per share amounted to EUR 1.06 (FY 2018: EUR 0.94).
The strong growth in FFO reflects our positive operational performance and
ongoing management to reduce our cost of debt.
Average rent was on target at EUR 5.60 per sqm per month and the vacancy rate
came to 5.4%, better than the target of 6%. LTV (excl. convertibles) as of 31
December 2019 stood at 51.4%, better than the 55% target.
As of 31 December 2019, EPRA NAV (excl. goodwill and fully diluted) amounted to
EUR 2,283.6m, a 39.3% increase compared to EUR 1,639.0m as of FY 2018. Diluted
EPRA NAV per share (excl. goodwill) was EUR 28.59 (FY 2018: EUR 20.77).
With the proceeds from the sale of the non-core portfolio and large parts of BCP's
commercial portfolio ADLER was able to reduce debt. Furthermore, consolidation
of ADO Properties had a positive impact on net financial liabilities and
correspondingly LTV, which has reduced by 10ppts to 51.4% as of Q4 2019.
Guidance for 2020 Note regarding the merger:
Since there is still no joint income statement, balance sheet and cash flow
statement, it is more difficult to come to an overall outlook (especially as a result of
the fair value adjustments of the properties and assets). Therefore, our income
statement, balance sheet and cash flow estimates in the appendix are limited to
ADO Properties Standalone. At this point in time, we also did not include Consus in
the group, as the option had not yet been executed and it is therefore not possible
to make a more detailed assessment of the new planned group. In particular, no
reliable statements can be made about the interest-bearing liabilities (net debt,
interest rate and LTV). Currently no reliable statements about the market situation
can be made either because of the distortions caused by Covid-19 and planned
capital increase and the execution of the option on Consus need to be carried out.
ADLER Real Estate Group will
progress into one of the
largest residential real estate
groups in Europe
Net rental income increased
to EUR 248.7m
Decrease of the vacancy rate
to 5.4%
Increase of the FFO I to EUR
84.4m
Decrease of the LTV to 51.4%
Increase of the EPRA NAV by
39.3% to EUR 28,59 per share
With the proceeds from the
sale of the commercial
portfolio ADLER was able to
reduce debt
ADO Properties S.A. (Adler Real Estate Group)
Page 49 of 62
ADO expects to achieve NRI of ~EUR 280-300m in 2020 given its merger with
ADLER. On an annualized basis management sees NRI of EUR 340-360m. In 2019
ADLER generated NRI of EUR 248.7m, ADO EUR 134.1m. Thus, their combined NRI
in 2019 stood at EUR 382.8m Given that ADO sold the Carlos portfolio (5,900 units)
at the end of 2019, management estimates its 2020 (stand-alone) NRI at just under
EUR 106m. Based on our estimates we derive a NRI value for ADO of EUR 105.6m
For ADLER we estimate 2020e rental income of EUR 256.5m.
Assuming ADLER is consolidated for just under 8 months in 2020, its 2020e
contribution to consolidated net rental income would be ~EUR 180m. Including
ADO’s EUR 105.6m, we currently expect group NRI of EUR 286m, which puts us
within management’s range. On an annualised basis we estimate combined rental
income of EUR 360m.
Rental income
Source: ADO, Adler, FMR
Management expects a combined FFO 1 (ADO + ADLER) of EUR 105-125m for 2020.
In 2019 ADO and ADLER achieved FFO 1 of EUR 63m and ~EUR 84m respectively or
EUR 147m combined. For 2020 on an annualised basis the company targets FFO 1
of EUR 120-140m. We estimate 2020e FFO 1 of EUR 46.9m for ADO and EUR 96.6m
for ADLER. On an annualised basis we estimate combined FFO 1 of EUR 143m in
2020e, but assume FFO 1 of EUR 111.3m for the combined company when it comes
together. Thus, our estimates are in line with management’s rental income and
FFO 1 targets for ADO and ADLER, both on a stand-alone and a combined basis.
FFO 1
Source: ADO, Adler, FMR
in m EUR 2018 2019 2020e 2021e 2022e
ADO 128.0 134.1 105.6 109.5 113.6
YoY grow th 23.9% 4.8% -21.3% 3.7% 3.8%
ADLER 238.4 248.7 256.5 263.2 270.0
YoY grow th 40.0% 4.3% 3.1% 2.6% 2.6%
ADLER Real Estate Group 382.9 362.1 372.7 383.6
YoY grow th -5.4% 3.0% 2.9%
in m EUR 2018 2019 2020e 2021e 2022e
ADO 66.8 63.2 46.9 48.5 50.0
YoY grow th 22.9% -5.4% -25.8% 3.5% 3.1%
ADLER 74.2 84.4 96.6 102.3 108.1
YoY grow th 83.2% 13.8% 14.4% 5.9% 5.6%
ADLER Real Estate Group 147.6 143.5 150.8 158.1
YoY grow th -2.8% 5.1% 4.8%
NRI guidance for 2020 is
EUR 280-300m for the
combined company
NRI according to our
estimation should be
~EUR 180m
Combined FFO 1 target for
EUR 105-125m
ADO Properties S.A. (Adler Real Estate Group)
Page 50 of 62
With regard to EPRA NAV, ADLER Real Estate Group reported combined EPRA NAV
of EUR 4.9bn (2018: EUR 4.1bn), with ADO contributing EUR 2.9bn and ADLER
EUR 2.0bn.
For 2020e we also currently expect combined EPRA NAV of EUR 4.9bn. For 2021e
and 2022e we estimate further increases to EUR 5.3bn and EUR 5.7bn respectively.
On a per-share basis we estimate EPRA NAV to exceed EUR 100 for the first time in
2022e (EUR 103.35).
EPRA NAV
Source: ADO, Adler, FMR
Berlin’s rent cap legislation came into force on 23 Feb 2020 and freezes rents at
their 18 June 2019 levels for a period of five years. ADO Properties maintains its
view that this legislation is not only unconstitutional but also unsuited to overcome
Germany’s current housing shortage. On a combined basis (ADO + ADLER), NRI of
EUR 119m or 35% of the company’s total NRI is exposed to the rent cap. The
company projects that due to the rent cap its FFO 1 will decrease by EUR 1m in 2020
and by EUR 9m in 2021. In our view, however, ADO should be able to offset most
of the negative rent cap effect in 2021e with modernisation, so that overall, the
adverse impact from the rent cap should be marginal.
ADO Properties is keeping a close eye on the spread of COVID-19 and is taking all
steps necessary to ensure the safety and health of all of its employees and tenants.
It has steady and reliable rental income and a lower tenant turnover is anticipated
in the coming months. Hence, the management is confident the pandemic will have
no significant impact on its 2020 FFO. ADO Properties’ financial structure is stable
and it has a strong liquidity position of EUR 500m in directly accessible cash. As a
result, ADO Properties does not expect the pandemic to have any significant impact
on the company, and it is confident that its rental income will continue to grow in
2020 outside of Berlin.
For 2019 ADO will propose a dividend per share of EUR 0.75 and its target dividend
for 2020 is 50% of FFO 1. This would imply a dividend per share for 2020e of
EUR 1.00 based on our current estimate for group’s (ADO+ADLER) FFO 1 per share
of EUR 2.00.
in EURm 2018 2019 2020e 2021e 2022e
ADO 2,429.5 2,905.7 2,747.5 2,856.7 2,968.0
YoY grow th 22.2% 19.6% -5.4% 4.0% 3.9%
ADLER 1,639.0 1,925.4 2,166.6 2,421.6 2,683.9
YoY grow th 23.1% 17.5% 12.5% 11.8% 10.8%
ADLER Real Estate Group 4,831.1 4,914.1 5,278.3 5,652.0
YoY grow th 1.7% 7.4% 7.1%
Combined EPRA NAV target
for 2020: EUR 105-125m
Berlin’s rental cap – an
important factor for the
decrease in FFO estimates by
EUR 1m in 2020 and by
EUR 9m in 2021
Reliable rental income despite
COVID-19
No significant effects of the
pandemic on FFO 1
Dividends: 50% of the FFO 1
ADO Properties S.A. (Adler Real Estate Group)
Page 51 of 62
Dividend estimates
Source: ADO, Adler, FMR
The combined portfolio’s GAV in 2019 stood at EUR 8.5bn. For 2022e we expect it
to increase to EUR 9.8bn. If Consus should be consolidated in 2020/2021e, GAV
could surpass EUR 10bn (FMRe: EUR 11.2bn)
GAV
Source: ADO, ADLER, FMR
As of the end of 2019 ADO and ADLER had combined 75,721 units net of the 5,900
units from the Carlos portfolio, which ADO sold. Given the strong geographic
diversification of the portfolio across all of Germany, we expect rental income
growth to remain stable in the coming years. Due to the integration of the ADLER
portfolio, the group’s Berlin exposure will decrease to ~25%, which is positive
against the backdrop of the rent cap. All in all, both companies have shown they
can successfully set up development strategies to counter Germany’s housing
shortage in all Top 7 cities (portfolio expansion, renovation, new development
projects, strategic cooperation agreement with Consus), and initial integration
steps and synergies are visible.
Balance sheet structure ADO Properties’ financial structure is stable and the company also has a strong
liquidity position of EUR 500m in directly accessible cash (ADO stand-alone:
EUR 387m; ADLER stand-alone: EUR 237m) as of 31 December 2019.
ADO Properties’ LTV stands at 27% (end-2019) and its average interest rate is 1.6%.
The average term to maturity of its debt obligations is ~4.2 years. Virtually all of its
debt is either fixed interest or is interest-rate hedged. ADO Properties intends to
continue this sustainable financing strategy and targets an LTV of no more than
50%. For ADO stand-alone we assume an LTV of less than 25% for the next few
years. Since a consolidated balance sheet including ADLER is not available to
in EUR 2018 2019 2020e 2021e 2022e
ADO 0.75 0.75 0.42 0.44 0.45
YoY grow th 0.0% -43.7% 3.5% 3.1%
ADLER Real Estate Group 0.75 0.75 1.00 1.03 1.07
YoY grow th 0.0% 33.3% 2.5% 4.5%
in m EUR 2018 2019 2020e 2021e 2022e
ADO 4,044.0 3,624.5 3,755.0 3,889.6 4,030.3
YoY grow th -10.4% 3.6% 3.6% 3.6%
ADLER 4,989.1 4,920.0 5,218.2 5,516.3 5,816.4
YoY grow th -1.4% 6.1% 5.7% 5.4%
ADLER Real Estate Group 8,544.5 8,973.2 9,405.9 9,846.7
YoY grow th 5.0% 4.8% 4.7%
GAV amounted EUR 8.5bn in
2019
ADO and ADLER have together
over 75,000 units across
Germany
Combined accessible cash
amounting to EUR 500m
ADO: LTV of 27% and average
interest rate of 1,6%
ADO Properties S.A. (Adler Real Estate Group)
Page 52 of 62
indicate fair value adjustments and goodwill, we use ADO’s stand-alone LTV for the
time being. But with regard to EPRA NAV and FFO 1 growth, the company should
stay within its LTV target for the coming years, i.e. no more than 50% growth.
The integration of ADLER is likely to cause a slight increase in the group’s average
interest rate. ADO’s stand-alone average interest rate was just under 1.6%, while
we calculate the combined entity’s average interest rate at around 1,9%, which is
still a respectable level.
ADO: LTV and net debt
Source: ADO, FMR
in m EUR 2018 2019 2020e 2021e 2022e
Net debt 1,639.5 999.0 1,113.2 1,152.5 1,196.9
YoY grow th -39.1% 11.4% 3.5% 3.9%
LTV 40.5% 27.6% 24.6% 24.8% 25.0%
YoY grow th -32.0% -10.6% 0.5% 0.8%
Interest rate of the combined
company: around 1,9%
ADO Properties S.A. (Adler Real Estate Group)
Page 53 of 62
Appendix ADO P&L
Source: ADO, FMR
in TEUR 2016 2017 2018 2019 2020e 2021e 2022e
Revenue 109,775 128,852 154,853 156,520 131,686 138,026 143,561
YoY grow th 44.9% 17.4% 20.2% 1.1% -15.9% 4.8% 4.0%
Net rental income 84,673 103,300 127,982 134,141 105,575 109,507 113,616
as % of revenues 77.1% 80.2% 82.6% 85.7% 80.2%
Selling of condominiums 19,965 19,671 20,265 14,948 17,938 19,731 20,718
as % of revenues 18.2% 15.3% 13.1% 9.6% 13.6% 14.3% 14.4%
Income from facility services 5,137 5,881 6,606 7,431 8,174 8,787 9,227
as % of revenues 25.7% 29.9% 32.6% 49.7% 45.6% 44.5% 44.5%
Gross profit 76,211 92,678 112,857 112,509 84,435 88,170 92,172
as % of revenues 69.4% 71.9% 72.9% 71.9% 64.1% 63.9% 64.2%
General administrative expenses -12,277 -12,762 -18,451 -25,050 -14,780 -15,331 -15,906
as % of revenues -11.2% -9.9% -11.9% -16.0% -11.2% -11.1% -11.1%
Fair value adjustments of investment properties 444,268 383,638 404,936 461,517 92,303 92,303 92,303
as % of revenues 404.7% 297.7% 261.5% 294.9% 70.1% 66.9% 64.3%
EBIT 508,202 463,554 499,342 613,920 161,958 165,143 168,569
as % of revenues 462.9% 359.8% 322.5% 392.2% 123.0% 119.6% 117.4%
Financial result -27,728 -28,007 -31,516 70,100 -30,187 -30,404 -30,718
as % of revenues -25.3% -21.7% -20.4% 44.8% -22.9% -22.0% -21.4%
EBT 480,474 435,547 467,826 684,020 131,771 134,739 137,852
as % of revenues 437.7% 338.0% 302.1% 437.0% 100.1% 97.6% 96.0%
Taxes -69,706 -68,035 -70,362 -77,096 -18,418 -18,833 -19,268
as % of EBT -14.5% -15.6% -15.0% -11.3% -14.0% -14.0% -14.0%
Net income attributable to shareholders 410,768 367,512 397,464 606,924 113,353 115,906 118,584
Minority interests 15,618 11,542 10,550 5,050 1,134 1,159 1,186
Net income before minorities 395,150 355,970 386,914 601,874 112,219 114,747 117,398
Net margin in % 360.0% 276.3% 249.9% 384.5% 85.2% 83.1% 81.8%
Average shares outstanding (time-weighted, thousand) 39,083 44,100 44,101 44,151 55,515 55,515 55,515
Basic earnings per share (EUR) 10.11 8.07 8.77 13.63 2.02 2.07 2.11
FFO before minorities 43,513 54,345 66,777 63,173 46,858 48,500 50,014
FFO I p/s (EUR) before minorities 1.11 1.23 1.51 1.43 0.84 0.87 0.90
Dividend per share (EUR) 0.45 0.60 0.75 0.75 0.42 0.44 0.45
ADO Properties S.A. (Adler Real Estate Group)
Page 54 of 62
ADO Balance Sheet
Source: ADO, FMR
in TEUR 2016 2017 2018 2019 2020e 2021e 2022e
Assets
Noncurrent assets 2,296,648 3,313,865 4,065,815 3,932,141 4,867,459 5,013,725 5,167,253
as % of total assets 89.6% 94.2% 97.5% 89.4% 91.9% 92.7% 93.8%
Investment properties 2,278,935 3,271,298 4,044,023 3,624,453 4,517,988 4,652,580 4,793,281
Advances in respect of investment properties 11,805 34,425 6,300 6,300 16,300 16,300 16,300
Property, plan and equipment 2,148 2,783 3,495 10,927 10,927 10,927 10,927
Other financial assets 3,760 5,359 6,615 98,871 113,702 125,072 137,579
Current assets 259,327 204,398 104,358 464,324 429,199 397,256 342,453
as % of total assets 10.1% 5.8% 2.5% 10.6% 8.1% 7.3% 6.2%
Trading properties 39,718 42,961 35,028 25,860 27,153 29,189 31,379
Restricted bank deposits 28,207 24,352 24,752 26,494 27,024 28,375 29,794
Trade receivables 6,604 10,324 13,313 15,570 15,570 15,570 15,570
Other receivables and other assets 1,377 5,231 3,299 8,842 8,842 8,842 8,842
Cash and cash equivalents 183,421 121,530 27,966 387,558 350,610 315,279 256,869
Total Assets 2,562,394 3,518,263 4,170,173 4,396,465 5,296,658 5,410,981 5,509,706
Shareholders´ equity and liabilities
Total equity 1,486,504 1,831,493 2,197,282 2,698,445 3,287,249 3,377,746 3,470,137
as % of total assets 58.0% 52.1% 52.7% 61.4% 62.1% 62.4% 63.0%
Share capital 55 55 55 55 69 69 69
Share premium 499,520 498,607 499,209 500,608 500,608 500,608 500,608
Capital reserve 333,872 330,638 324,877 250,684 750,684 750,684 750,684
Retained earnings 628,498 966,090 1,326,538 1,895,445 1,985,369 2,077,024 2,170,601
Shareholders equity 1,461,945 1,795,390 2,150,679 2,646,792 3,236,730 3,328,385 3,421,962
Minorities 24,559 36,103 46,603 51,653 50,519 49,360 48,175
Noncurrent liabilities 1,014,062 1,563,910 1,897,902 1,586,306 1,849,730 1,812,174 1,774,846
as % of total equity and liabilities 39.6% 44.5% 45.5% 36.1% 34.9% 33.5% 32.2%
Liabilities from bonds 0 396,396 396,899 397,433 400,000 400,000 400,000
Liabilities from convertible bonds 0 0 154,252 156,334 165,000 165,000 165,000
Financial liabilities to banks 877,326 953,955 1,040,909 740,212 759,873 704,114 648,245
Other noncurrent liabilities 15,137 27,238 40,492 46,416 47,344 48,291 49,257
Liabilities from derivatives 3,926 2,878 16,236 6,091 6,091 6,091 6,091
Current liabilities 61,828 122,860 74,989 111,714 159,679 221,061 264,723
as % of total equity and liabilities 2.4% 3.5% 1.8% 2.5% 3.0% 4.1% 4.8%
Financial liabilities to banks 27,388 72,768 17,064 37,605 83,089 141,867 182,794
Liabilities from derivatives 259 107 103 59 59 59 59
Liabilities from other financial instruments 0 867 1,535 1,535 1,535 1,535 1,535
Trade accounts payables 8,957 13,642 18,497 22,079 22,079 22,079 22,079
Other payables 25,224 35,476 37,790 49,613 52,094 54,698 57,433
Total equity and liabilities 2,562,394 3,518,263 4,170,173 4,396,465 5,296,658 5,410,981 5,509,706
ADO Properties S.A. (Adler Real Estate Group)
Page 55 of 62
ADO Cash Flow Statement
Source: ADO, FMR
in TEUR 2016 2017 2018 2019 2020e 2021e 2022e
Net income 410,768 367,512 397,464 606,924 113,353 115,906 118,584
Depreciation 356 452 527 1,488 1,422 1,493 1,567
Fair value adjustments of investment properties -444,268 -383,638 -404,936 -461,517 -92,303 -92,303 -92,303
Net finance costs 27,728 28,007 31,516 -70,100 30,187 30,404 30,718
Income tax expense 69,706 68,035 70,362 77,096 18,418 18,833 19,268
Share-based payment 859 564 546 1,530 0 0 0
Change in bank deposits related to tenants -2,883 -4,727 -4,944 -6,244 530 1,351 1,419
Change in receivables 2,092 -6,890 -499 -5,890 0 0 0
Change in trading properties 8,588 12,830 13,585 9,168 -11,293 -2,036 -2,189
Change in trade payables and other liabilities 1,509 1,408 4,623 5,632 0 0 0
Other non-cash items 2,276 4,163 -156 15,896 -40,948 -35,012 -36,415
Income tax paid -352 -864 -4,155 -7,087 -1,466 -1,577 -1,692
Cash flow from operating activities 76,379 86,852 103,933 88,764 17,899 37,058 38,956
Change in fixed assets -129,428 -223,952 -118,300 -47,189 -42,768 -47,607 -53,716Purchase and CAPEX of investment
properties -116,839 -189,182 -117,118 -44,068 -42,550 -47,389 -53,497
Purchase of PPE -784 -795 -1,182 -3,121 -219 -219 -219
Change in financial assets and receivables -99,877 -271,086 -215,734 -254,085 -763,782 0 0
Cash flow from investing activities -228,290 -495,038 -334,034 269,061 -591,901 -47,607 -53,716
Net borrowings/retirements of financial debt 5,149 384,243 189,247 61,994 72,969 -532 -18,643
Interest payments made -18,762 -18,103 -24,873 -26,427 0 0 0
Dividend payments -13,475 -19,845 -26,460 -33,098 -23,429 -24,250 -25,007
Cash flow from financing activities 265,887 346,295 136,537 1,767 537,054 -24,782 -43,650
Total change in cash and cash equivalents 113,976 -61,891 -93,564 359,592 -36,948 -35,331 -58,410Cash and cash equivalents at the start of the
period 69,445 183,421 121,530 27,966 387,558 350,610 315,279
Cash equivalents at the end of the period 183,421 121,530 27,966 387,558 350,610 315,279 256,869
ADO Properties S.A. (Adler Real Estate Group)
Page 56 of 62
Consus P&L
Source: Consus, FMR
in EURm 2017 2018 2019e 2020e 2021e 2022e
Overall performance 10 468 905 1,148 1,397 1,680
YoY grow th 4715.8% 93.6% 26.8% 21.8% 20.3%
Income from letting activities 10 33 18 21 25 32
as % of overall performance 7.0% 2.0% 1.8% 1.8% 1.9%
Income from real estate inventory disposal 0 164 292 440 550 715
as % of overall performance 35.0% 32.2% 38.4% 39.4% 42.6%
Income from property development 0 408 444 500 600 690
as % of overall performance 87.3% 49.1% 43.6% 42.9% 41.1%
Income from service, maintenance and management 0 10 12 13 13 14
as % of overall performance 2.2% 1.3% 1.1% 1.0% 0.8%
EBITDA 6 108 279 319 404 497
as % of revenues 66.1% 23.1% 30.8% 27.8% 28.9% 29.6%
Personnel expenses -1 -37 -73 -102 -122 -134
as % of revenues -10.6% -7.9% -8.0% -8.9% -8.7% -8.0%
Expenses from letting activities -5 -16 -9 -10 -12 -14
as % of revenues -49.1% -3.4% -1.0% -0.9% -0.9% -0.9%
Cost of materials 0 -286 -498 -654 -782 -941
as % of revenues 0.0% -61.1% -55.0% -57.0% -56.0% -56.0%
Other operating income 0 13 18 21 25 30
as % of revenues 2.5% 2.8% 2.0% 1.8% 1.8% 1.8%
Other operating expenses -15 -60 -72 -92 -112 -134
as % of revenues -152.3% -12.8% -8.0% -8.0% -8.0% -8.0%
Fair value adjustments of investment properties 17 26 8 9 10 11
as % of revenues 175.7% 5.5% 0.9% 0.8% 0.7% 0.6%
Depreciation and amortisation 0 -2 -7 -8 -10 -12
as % of EBT 0.7% 18.9% -14.5% -8.8% -5.2% -4.4%
EBT -2 -11 48 91 194 285
as % of revenues -25.1% -2.5% 5.3% 7.9% 13.9% 16.9%
Taxes -6 11 -14 -27 -58 -85
as % of EBT 226.2% -97.4% -30.0% -30.0% -30.0% -30.0%
Net income before minorities -8 0 34 64 135 199
Minority interests 0 -13 -17 -22 -47 -70
Net income attributable to shareholders -8 -14 16 41 88 129
Net margin in % -81.8% -2.9% 1.8% 3.6% 6.3% 7.7%
Average shares outstanding (time-weighted, millions) 33 86 135 135 135 135
Basic earnings per share (EUR) -0.24 -0.16 0.12 0.31 0.65 0.96
ADO Properties S.A. (Adler Real Estate Group)
Page 57 of 62
ADLER Real Estate P&L
Source: ADLER Real Estate, FMR
in EURm 2016 2017 2018 2019 2020e 2021e 2022e
Rental revenues 167,5 170,3 238,4 248,7 256,5 263,2 270,0
Income from recoverable expenses 81,2 91,6 107,6 115,0 128,2 131,6 135,0
Other income from property management 3,6 2,5 3,5 6,7 3,8 3,9 4,0
Gross rental income 252,4 264,4 349,6 370,4 388,6 398,8 409,0
Expenses from property lettings -138,8 -138,6 -145,9 -151,0 -163,7 -168,0 -172,3
Earnings from property lettings 113,6 125,8 203,7 219,3 224,9 230,8 236,7YoY growth 24,0% 10,7% 61,9% 7,7% 2,5% 2,6% 2,6%
Income from the sale of properties 160,4 34,9 75,1 533,8 213,5 111,6 114,6
Expenses from the sale of properties -124,0 -34,1 -67,0 -533,3 -213,5 -111,6 -114,6
Proceeds from the sale of properties 36,4 0,8 8,1 0,5 0,0 0,0 0,0YoY growth 55,1% -97,8% 927,2% -93,9% -100,0% 0,0% 0,0%
Other operating income 8,7 9,5 8,9 8,4 8,4 8,4 8,4
Fair value adjustments of investment properties 199,7 235,4 465,1 362,6 300,1 300,1 300,1
Personnel expenses -19,6 -20,3 -35,1 -47,1 -47,1 -47,1 -47,1
Other operating expenses -35,7 -38,5 -66,3 -69,0 -69,0 -69,0 -69,0
EBITDA 303,0 312,6 584,4 474,7 417,2 423,2 429,1as % revenues 202,0% 247,0% 275,9% 216,0% 185,5% 183,3% 181,2%
Depreciation and amortisation -1,2 -0,8 -1,6 -5,7 -1,9 -1,9 0,0
as % of revenues
EBIT 301,8 311,8 582,8 469,0 415,3 421,3 429,1as % of revenues 201,2% 246,3% 275,2% 213,4% 184,7% 182,5% 181,2%
Financial result -125,6 -153,4 -131,2 -110,7 -33,8 -24,3 -21,1
EBT (Earnings before income taxes) 187,5 158,4 454,8 357,0 381,5 397,0 408,0as % of revenues 125,0% 125,2% 214,7% 162,4% 169,6% 172,0% 172,3%
Income taxes -53,7 -52,1 -122,6 -81,2 -75,6 -77,6 -79,6as % of EBT -28,6% -32,9% -27,0% -22,8% -19,8% -19,6% -19,5%
Consolidated net profit from continiuing operations 133,8 106,4 332,2 275,8 305,9 319,3 328,4
Earnings after taxes of discontinued operations 0,0 36,3 0,3 92,0 0,0 0,0 0,0
Net income 133,8 142,6 332,4 367,8 305,9 319,3 328,4
Minority interests -12,8 -15,9 -66,9 -129,4 -61,5 -64,3 -66,1
Net income attributable to shareholders 121,0 126,7 265,6 238,3 244,3 255,1 262,3as % of revenues 80,6% 100,1% 125,4% 108,4% 108,6% 110,5% 110,8%
Earnings per share (EUR), basic 2,07 1,91 3,96 3,46 3,55 3,70 3,81
FFO I 27,30 40,50 74,20 84,40 96,60 102,33 108,07
FFO I per share (EUR) 0,47 0,60 1,08 1,22 1,39 1,47 1,56
ADO Properties S.A. (Adler Real Estate Group)
Page 58 of 62
Consus Pipeline
No. Project Name City Approx. Total Sellable Area
(sqm)
Expected date of completion
1 Miners / Glück-Auf-Haus Köln 2.800 2020
2 Four Living VauVAu Leipzig 20.000 2020
3 Cologne Apart VauVau Köln 22.000 2020
4 Residenz am Ernst-Reuter-Platz Berlin 11.000 2020
5 Carré Sama Riga Berlin 12.000 2020
6 Franklinstraße 26 Berlin 11.000 2020
7 No.1 Mannheim 19.000 2020
8 Bundesallee (inkl. MOMENTE) Berlin 29.000 2020
9 Palatium (Palaisplatz Altbau) Dresden 5.000 2020
10 Wohnen an der Villa Berg Stuttgart 4.000 2020
11 Westend Ensemble – Grand Ouest Frankfurt 9.000 2020
12 UpperNord Hotel Düsseldorf 43.000 2020
13 Schwabenland Tower Stuttgart 9.000 2020
14 Delitzscher Straße B & C Leipzig 65.000 2020
15 Mary Ann Apartments VauVau Dresden 14.000 2021
16 NewFrankfurt Towers VauVau Frankfurt 38.000 2021
17 Vitopia-Kampus Kaiserlei Resi Frankfurt 14.000 2021
18 Steglitzer Kreisel Tower Berlin 27.000 2021
19 Südtribüne Dortmund 25.000 2021
20 Bahrenfelder Carré I
Von-Sauer-Str. Hamburg
4.000 2021
21 GEM Hofgarten Karlsruhe 111.000 2021
22 Böblingen Stuttgart 108.000 2021
23 GlockenGut Bayreuth 16.000 2021
24 Peschl Quartiere Passau 21.000 2021
25 Dessauer/Hamburger Straße Leipzig 10.000 2020/2021
26 Hallesches Ufer BT 1 – 3 Berlin 25.000 2020/2021
27 UpperNord Tower VauVau Düsseldorf 25.000 2022
28 Ostforum Leipzig 18.000 2022
29 Westend Ensemble – Upper West Frankfurt 20.000 2022
30 UpperNord Quartier Düsseldorf 5.000 2022
31 TAP Hochhaus Erfurt 6.000 2022
32 Ritterstraße Leipzig 13.000 2022
33 Neues Korallusviertel Hamburg 34.000 2022
34 Quartier Hoym Dresden 27.000 2021/2022
35 Königshöfe im Barockviertel Dresden 15.000 2021/2022
36 Kreuzstraße Leipzig 3.000 2021/2022
37 Cologneo I Part 1 Köln 54.000 bis 2022
38 Vitopia-Kampus Kaiserlei Comm Frankfurt 31.000 2023
39 Ostplatz – FLI Mensa Leipzig 19.000 2023
40 Zerbster / Wittenberger Straße Leipzig 31.000 2023
41 Braugold Erfurt 17.000 2023
ADO Properties S.A. (Adler Real Estate Group)
Page 59 of 62
No. Project Name City Approx. Total Sellable Area
(sqm)
Expected date of completion
42 2stay Frankfurt 28.000 2023
43 Covent Garden München 29.000 2023
44 The Wilhelm Berlin 16.000 2023
45 COL III (Windmühlenquartier) Köln 23.000 2022/2023
46 Max-Reger-Str. Erfurt 16.000 2022/2023
47 Cologneo I Part 2 Köln 36.000 bis 2023
48 Neuländer Quarre Hamburg 19.000 2024
49 Billwerder Neuer Deich Hamburg 81.000 2024
50 NY Hamburg 44.000 2024
51 Mariannenpark Leipzig 2.000 2024
52
Steglitzer Kreisel Parkhaus & Sockel Berlin 42.000 2023/2024
53 Wachendorff Quartier Bergisch-Gladbach 31.000 2023/2024
54 Cologneo II Köln 72.000 2025
55 Forum Pankow Berlin 36.000 2025
56 Ostend Frankfurt 31.000 2025
57 Otto Quartier Wendlingen 70.000 2024/2025
58 Quartier C Karlsruhe 45.000 2026
59 Holsten Quartiere Hamburg 133.000 2026
60 VAI Campus Stuttgart 185.000 2026
61 Benrather Gärten Düsseldorf 159.000 2027-2029
62 Plagwitz Development Leipzig 99.000 versch.
63 Plagwitz Bestand Leipzig 8.000 -
64 GEM H Portfolio Karlsruhe 20.000 -
No. Project Name City Approx. Total Sellable Area
(sqm)
Completion
1 Residenz am Waldplatz Leipzig 6.000 2019
2 Carré Löbtau Dresden 10.000 2019
3 Katharinenstraße Leipzig 2.000 2019
Source: Consus, FMR
The completed projects were already included in the 9M 2019 figures, Carré Löbtau
was completed in December 2019. Miners Glückauf-Haus was not completed in
2019, the company expects to complete it in 2020.
It appears that the Residenz am Waldplatz has not been fully sold and some
residential units are rented out; we have included this in our estimates.
ADO Properties S.A. (Adler Real Estate Group)
Page 60 of 62
Declaration of liability (disclaimer) and mandatory details pursuant to Section 85 Securities Trading Act (WpHG), EU Market Abuse Regulation (EU
Regulation No. 596/2014), Delegated Regulation 2016/958 and Delegated Regulation 2017/565 including details of possible conflicts of interest
(disclosures), the author and the responsible supervisory authority
The following details inform the reader about the legal provisions that are to be observed when compiling financial analyses.
1. Declaration of liability
When producing an analysis, we have procured the actual details from the sources available to us that are generally deemed to be reliable. We cannot
make any claim regarding the accuracy and completeness of such information. The recommendations and/or prognoses made by us on the basis of
these actual details constitute non-binding value judgments made at the time of compilation of the study and represent the opinion of the author.
Subsequent changes cannot be taken into account. FMR Frankfurt Main Research AG shall not be liable for damages of any kind in relation to any
incomplete or incorrect information and FMR Frankfurt Main Research AG shall not be liable for indirect and/or direct damages and/or consequential
damages. In particular, FMR Frankfurt Main Research AG shall not be liable for statements, plans or other details contained in this investment advice
in relation to the company being investigated, its affiliated companies, strategies, market and/or competition situation, economic and/or legal
framework conditions etc. Although the investment advice was compiled using full diligence, errors or omissions cannot be excluded. FMR Frankfurt
Main Research AG, its shareholders and employees shall not be liable for the correctness or completeness of statements, assessments,
recommendations or conclusions derived from the information contained in this analysis.
If an investment recommendation is provided in the context of an existing contractual relationship, e.g. financial advice or a similar service, FMR
Frankfurt Main Research AG’s liability shall be limited to gross negligence and intent. Should key details be omitted, FMR Frankfurt Main Research AG
shall be liable for ordinary negligence. The liability of FMR Frankfurt Main Research AG shall be restricted to the amount of typical and foreseeable
damages.
The study does not constitute an offer or request to acquire shares. Our information and recommendations in this study do not constitute individual
investment advice and may therefore not be suitable, or may only be of limited suitability, for individual investors depending on the specific
investment goals, the investment horizon or individual investment situation. With the compilation and distribution of this study we are not engaged
in an investment advisor or portfolio management capacity for any persons. This study cannot replace the need for investment advice in any case.
The estimates, particularly prognoses and price expectations, may not be achieved. The work and all parts thereof are protected by copyright. All use
outside the scope of copyright law is impermissible and prosecutable. This shall apply in particular to duplications, translations, microfilms, the saving
and processing of the entire content or parts of the content on electronic media.
It is possible that shareholders, managers or employees of FMR Frankfurt Main Research AG or its affiliated companies have a position of responsibility
in the companies named in the analysis, e.g. as a member of the supervisory board. The opinions contained in this investment advice may be amended
without notice. All rights are reserved.
2. Mandatory details
a) First publication: 22.04.2020,
b) Time conditions of expected updates: quarterly
c) Supervisory authority: Federal Financial Supervisory Authority (Bundesanstalt für Finanzdienstleistungsaufsicht), Lurgiallee 12, 60439 Frankfurt am
Main
d) Previous analyses: No analysis was published in the 12 months before publication of this analysis that contains a recommendation for a specific
investment decision which contradicts this analysis.
e) The analysis was made available to the issuer, to the extent that is legally permissible, before publication and was not amended thereafter.
f) All prices and price developments listed in the analysis are based on closing prices insofar as no contradictory details were provided about prices
and price developments.
3. Disclosures
a) Neither FMR Frankfurt Main Research AG nor an affiliated company, nor any person who contributed to the compilation
(i.) has an involvement in the share capital of the issuer of at least 5 per cent;
(ii.) was involved in the management of a syndicate within the past five months that issued financial instruments of the issuer in the context of a
public tender;
(iii.) managed financial instruments of the issuer on a market by means of concluding purchase or sale agreements:
(iv.) has, within the past twelve months, concluded an agreement regarding services in connection with investment banking business or received a
service or performance promise from such agreement, with issuers which either themselves or the financial instruments thereof, are the subject of
the financial analysis;
ADO Properties S.A. (Adler Real Estate Group)
Page 61 of 62
(v.) is in possession of a net sales or purchase position which exceeds the threshold of 0.5% of the total issued share capital of the issuer;
(vi.) has concluded an agreement regarding the preparation of investment recommendations with the issuer.
(vii.) has other significant interests with regard to the company being analysed, for example clients with the company being analysed.
Company Disclosure(s)
ADO Properties S.A. (ADLER Real Estate Group) -
Recommendation history over last 12 months:
Date Recommendation Share price at publication date Price target
22.04.2020 BUY 23.88 35.00
4. Creation and distribution
a) Responsibility for creation and distribution
FMR Frankfurt Main Research AG
Registered office: Frankfurt am Main; Commercial Register No. HRB 113537, Frankfurt am Main district court; Chairman: Marcus Silbe
b) Issuers
Mariya Lazarova, Analyst
Robel Tesfeom, Analyst
c) This study may only be used for the internal purposes of the addressee within the EEA or Switzerland.
5. Investment recommendation details
Investment recommendation details - stocks:
BUY: In our opinion, the stock will demonstrate an absolute price gain of at least 10 % in a 12-month period.
HOLD: In our opinion, the stock will not exceed or fall below an absolute price gain or loss of 10% in a 12-month period.
Sell: In our opinion, the stock will demonstrate an absolute price loss of at least 10 % in a 12-month period.
6. Sensitivity of the evaluation parameters
The figures from profit and loss calculations, cash flow statements and balance sheets which form the basis of the company evaluation are date-
related estimates and therefore subject to risks. These may change at any time without prior notice. Regardless of the evaluation methods used,
there are significant risks that the price goal/trend will not be achieved within the expected time frame. The risks include unforeseeable changes with
regard to competition pressure, demand for the products of an issuer and the offer situation with respect to materials required for production as well
as non-occurrence of the assumed development. Such deviations may be the result of changes relating to technology and changes relating to the
economy, legal situation and exchange rates. No claim is made that this statement of evaluation methods and risk factors is complete.
7. Key sources of information
We have acquired the information upon which this document is based from sources that we consider in principle to be reliable. However, we have
not verified all this information. Therefore, we cannot guarantee or ensure the accuracy, completeness or correctness of the information or opinions
contained in this document. National and international media and information services (e.g. Factset, Bloomberg etc.), the financial press (e.g.
BörsenZeitung, FAZ, Handelsblatt, Wallstreet Journal, etc.), specialist press, published statistics, the internet, as well as publications, details and
information of the issuer that is the subject of the analysis.
8. Summary of the basis for evaluation
Individual issuers: Current and recognised evaluation methods (e.g. DCF method and Peer Group Analysis) are used for company analysis purposes.
The DCF method calculates the value of the issuer based on the sum of the discounted cash flows, i.e. the cash value of the future cash flows of the
issuer. The value is therefore determined on the basis of expected future cash flows and the applied discount rate. In Peer Group Analysis, issuers
listed on the stock exchange are evaluated by comparing ratios (e.g. price/profit ratio, Enterprise Value/turnover, Enterprise Value/EBITDA, Enterprise
Value/EBIT). The comparability of the ratios is primarily determined with reference to the business activity and economic prospects.
ADO Properties S.A. (Adler Real Estate Group)
Page 62 of 62
9. Internal organisational and regulatory measures for the prevention or management of conflicts of interest
Employees of FMR Frankfurt Main Research AG who are involved with the compilation and/or presentation of financial analyses are subject to the
internal compliance regulations. The internal compliance regulations correspond to the provisions of the directive for the substantiation of the
organisational obligations of investment service companies pursuant to Section 80 Securities Trading Act and EU/ESMA legislation on the basis of the
Market Abuse Regulation.
The analysts of FMR Frankfurt Main Research AG do not receive any direct or indirect remuneration from the investment banking business of FMR
Frankfurt Main Research AG.
On acceptance of the financial analysis, the recipient accepts that the above restrictions are binding.