Formerly BB, Now Under Supervisor’s Scrutiny

Repairs, Reviews

“Because the bonds purchased by the Adler Group no longer meet the requirements of the ECB, the central bank has now thrown them out of its portfolio in a move that caused a stir”, that is what the Börsen-Zeitung writes today.

Only rating reports from S&P Global Ratings are available on the Adler website, the latest reports uploaded by ADLER Real Estate AG are from September 2018.

Back in May 31, 2021 Moody’s Investors Service had withdrawn the Ba2 long-term corporate family rating (CFR), the Not Prime (NP) short-term issuer rating and the Ba2 rating of ADLER Group S.A.‘s 1.5% fixed rate senior unsecured Euronotes due in 2024. Moody’s has also withdrawn the stable outlook. Moody’s has decided to withdraw the ratings for its own business reasons and wrote: “ADLER Group S.A. is one of the largest residential landlords and property developers in Germany. The company owns almost 70,000 residential units and a €11.4 billion real estate portfolio.”

A Berlin rating agency wrote on October 15, 2021:

“Scope Ratings GmbH (Scope) has today downgraded the corporate issuer rating on German real estate company Adler Real Estate AG to BB- from BB and its senior unsecured debt rating to BB from BB+. The Outlook has been revised to Negative. The Ratings and Outlook have also been withdrawn for commercial reasons, as future capital market debt issuance will take place at the Adler Group S.A. level and there is no longer a need for a rating on Adler Real Estate AG.”

With a decision dated June 17, 2022, the Federal Financial Supervisory Authority ordered an audit of the approved consolidated financial statements as of the December 31, 2021 reporting date and the combined management report for the 2021 financial year of ADLER Real Estate Aktiengesellschaft in accordance with Section 107 (1) sentence 1 WpHG.

The reasons for the order are, firstly, indications that relationships and business transactions from this year or earlier years with related persons or companies within the meaning of International Accounting Standard (IAS) 24 may not have been fully and correctly recorded and presented in the group accounting; and secondly, the negative opinion of the group auditor, KPMG AG Wirtschaftsprüfungsgesellschaft, for the consolidated financial statements as of December 31, 2021 and the combined management report for the 2021 financial year.

The balance sheet control audits in relation to the financial statements and management reports for 2020 and 2019 of ADLER Real Estate Aktiengesellschaft are still ongoing.

Investor concerns about the real estate group Adler Group SA are now being underscored by a sale of securities that is a rarity. The European Central Bank has sold a bond issued by the company, which it once bought as part of its corporate bond-buying programme.

““The Adler bond in question no longer fulfills the Eurosystem collateral framework eligibility criteria and is therefore no longer CSPP-eligible,” central bank spokesman William Lelieveldt told Bloomberg, referring to the ECB’s corporate sector purchase program. According to Lelieveldt, the decision to sell is in line with the legal framework for the bond purchases. After that, the ECB could sell bonds if they lose central bank eligibility, but doesn’t have to.

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It Happened the Way it Had To

Actions, Assets, Repairs

The news is not entirely unexpected, as this company became a case for RATING©REPAIR some time ago (see here). Samhällsbyggnadsbolaget i Norden AB (publ) (SBB) is now taking measures to prevent the credit rating from slipping after all.

Now the company is selling two properties in Norrtälje for an agreed property value of approximately SEK 150 million to the real estate company Genova. The properties that are sold are mixed properties containing a practical high school and light industry / warehouse. The properties have an estimated net operating income of approximately SEK 7.2 million, says the company, the average remaining contract period is approximately 4.3 years.

“Our main focus is to achieve a higher credit rating and this sale of non-core holdings in line with book values ​​further contributes to our opportunities to strengthen the balance sheet,” says Oscar Lekander, Vice President and Chief Operating Officer, Samhällsbyggnadsbolaget i Norden AB.

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Seal of Creditworthiness in a Changed Market Environment

Reports

Scope Ratings GmbH (Scope) has assigned a first-time issuer rating of BB/Stable to Luxembourg registered real estate developer MG RE Invest S.A. Scope has also assigned a first-time rating of BB to the company’s senior unsecured debt. It is a bold credit rating at a time when a whole range of general conditions for the industry are about to change.

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Little Risk of Systemic Contagion from the Evergrande Crisis

Reports

“China’s ghost cities” have become a familiar trope in Western media. Beyond Kangbashi, with its other-worldly stadiums and museums, there is Chengchong in southern Yunnan province; Binhai, outside the central city of Tianjin; and Tianducheng, in the Hangzhou suburbs, with its very own replica of the Eiffel Tower.

China’s ghost cities are in the news again because of the financial travails of Evergrande Group, China’s second-largest property developer which, teetering on the brink of default with outstanding debts of more than $305 billion. What effects the crisis can have and how German developers compare requires further analysis. Therefore, in the following some insights into this.

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low angle view of slightly opened door structure

Modular Market Reports – New Product From Industrialport

Reports

“The current Corona development and the associated lockdowns were a real blessing for industrial real estate in 2020”, writes Peter Salostowitz, Managing Director of Industrialport GmbH & Co. KG and lecturer for PropTech and Entrepreneurship at the Fresenius University, the test winner “Private Business Universities “.

“Hardly a week went by in 2020,” says Peter Salostowitz, “without a new large investor, developer or portfolio that has been sold. An end to this development is not yet in sight, as the financial resources from the other usage classes are now largely flowing in industrial properties.”

The decline of the previous supply structure in retail will require new supply channels, predict the experts from Idstein: “Whether these will compensate for the already experienced decline in demand on the part of the key industry in the future and whether the population’s increased financial fear will be an incentive to buy on the Internet is an exciting question.”

Regardless of these future questions, Industrialport emphasizes: “In any case, in the year of the COVID-19 pandemic, the market for industrial real estate has shown itself to be significantly more resilient than other asset markets.” This is shown by the current report “Market in Minutes” industrial real estate market in Germany from Savills and IndustrialPort.

The IndustrialBundle market report from Industrialport is getting a big brother – the IndustrialKIT: “This modular market report enables you to evaluate our IWIP index data set on a daily basis. The evaluation can be created in different designs and in DE / EN. The previous IndustrialBundle elements can be combined with the new evaluation options. Of course, rental developments at the location can also be displayed. For a better classification, we also provide you with the value-driving parameters of the comparison cases that were included in the rent calculation.”

Practical Guide to Ratings of Real Estate Portfolios

Books

Oliver Everling and Raphael Slowik (Editor): Practical Guide to Ratings of Real Estate Portfolios, Immobilien Manager Verlag, Cologne, http://www.immobilienmanager.de/, bound edition, 1st edition 2009, 456 pages, ISBN 978-3-89984-197-8.

The book is in the German-speaking world and probably also internationally the first book for the rating of real estate portfolios. Since real estate is increasingly being actively managed by companies, (regional) corporations and foundations as an own asset class, it depends on the valuation and assessment standards that affect both the individual property / project and the portfolio as a whole.

The approaches that have been developed to this end, despite the growing interest of investors, who have to form judgments under more and more direct and indirect variants of the real estate investment, have so far been little known. The book shows the most important procedures and systems of the rating and aims in particular at the business management and legal design possibilities of real estate transactions for the optimization of real estate portfolios. The book sets standards in relation to the relevant questions and starting points.

Oliver Everling und Raphael Slowik (Herausgeber): Praxishandbuch Rating von Immobilienportfolios, Immobilien Manager Verlag, Köln, http://www.immobilienmanager.de/, gebundene Ausgabe, 1. Auflage 2009, 456 Seiten, ISBN 978-3-89984-197-8.

Rating of Retail Real Estate

Books

Oliver Everling, Olaf Jahn and Elisabeth Kammermeier (publisher): Rating of Retail Real Estate: Quality, Potential and Risks Safe Assessment, Betriebswirtschaftlicher Verlag Dr. med. Th. Gabler, Wiesbaden, http://www.gabler-verlag.de, hardcover, 1st edition 2009, 580 pages, ISBN 978-3-8349-0912-1.

Retail real estate, especially shopping centers, are important factors in business life – as trading platforms and therefore also as an investment opportunity. Their economic success is very important to a large number of interest groups. Not only investors, but also traders themselves, retailers, industry service providers, and cities and communities. It shows that reliable valuations and appraisals of retail real estate are highly significant information for a large group of people.

The aim of this book is to provide the reader with all the procedures and standards that are important in the assessment of retail real estate, and thus an investment decision. Essentially, it is important to make the economically important figures transparent, but also the legal, tax and technical aspects are examined in detail.

The broad spectrum of participating authors from financial institutions, facility management, the consulting world and the retail trade itself provides a perspective-rich and comprehensive presentation. The book is interesting for all potential tenants and investors, but also for local authorities.

Oliver Everling, Olaf Jahn und Elisabeth Kammermeier (Herausgeber): Rating von Einzelhandelsimmobilien: Qualität, Potenziale und Risiken sicher bewerten, Betriebswirtschaftlicher Verlag Dr. Th. Gabler, Wiesbaden, http://www.gabler-verlag.de, gebundene Ausgabe, 1. Auflage 2009, 580 Seiten, ISBN 978-3-8349-0912-1.

Rating German Care Industry

Read, Reports

In Germany, very tenth inhabitant will be at least 80 years old in 2060. The German care industry will soon face a very high investment requirement. By 2060, more than 5,800 additional full-time nursing home places might be needed each year.

The 65-year-olds and older people are steadily increasing. Immigration and a rising birth rate can not prevent the aging of society. In 2060, just under 23.6 million people will be over 65 years old. This represents an increase of 32 percent compared to 2018.

According to nursing statistics, in 2017, 92.5 percent of full-time care-dependent people in care were aged 65 and over, making them the main demand group. The demand for full-time care of 65-year-olds and older people amounted to 4.27 percent in Germany, reaching a new record high.

In a conservative approach, which requires constant proportions of the outpatient and inpatient sector and a constant nursing rate, in the year 2060 around 1 million people in need of care would need a full-time home. This represents an increase of more than 33 percent compared to 2017. With an average size of 80 places per home, around 74 fully residential nursing homes would have to be built annually by 2060. From 2011 to 2017, the nursing rate has increased. If this trend continues, by 2060 there would even be a significantly higher demand for full-time care places.

This does not take account of any federal building regulations, which can once again create an immense additional need for new construction, since, for example, legally required single occupancy rates cause a loss of care places. In addition, due to ramshackle building structures, the increasing demands and the elimination of multiple expiring grandfathering additional buildings are required.

residential location

Scoring Sustainable Residential Locations

Criteria, Read

What constitutes future-oriented residential areas? The answer is complex and can not be answered in a general or even complete manner for all residential real estate between Norderney and Berchtesgaden. A recent study searched for similarities that characterize future-proof and long-term profitable housing, and examines these success criteria more closely.

Ten macro-location and nine micro-location criteria with a particularly large impact on the future viability of residential real estate were identified. These macro and micro factors were evaluated.

This scoring does not just consider the macro criteria that determine the future viability of an entire city. For the first time, the scoring combines these insights with microcriteria that refer to a single location, a self-contained neighborhood or borough. The particular challenge lies in the selection of the set of criteria on the micro level. Living is very individual, the requirements of people vary depending on their life model, age and preferences.

The quantitative basis for the analysis is provided by the scoring, which combines macro and micro aspects using a standardized, specially developed tool for the initial assessment of residential areas. For the analysis, data from 30 German cities (“macro locations”) and 30 city districts according to KGS 12 (“micro locations”) were collected, examined and evaluated. In doing so, attention was paid to a balanced geographical distribution and the inclusion of residential locations from all clusters of cities in order to achieve the most realistic possible representation of the overall market. With regard to residential locations, the approach distinguishes between macro-location and micro-location criteria.

Some of the criteria show an inventory, such as security or affordability. Others are strongly forward-looking, such as forecasts of population growth and sustainable housing demand. Each of the criteria is then evaluated by means of defined value classes on a scale of one to five, one representing the lowest value and five the highest value.

The individual results are aggregated and add up to a score for the selected macro and micro-situation. The microvariable “Attractiveness of the residential area” is overweighted in the model because it consists of different subcriteria. All other variables are included equally in the scoring.

The study may offer helpful pointers and landmarks. From the perspective of long-term oriented investors, approaches for own investment strategies can be derived.