German financial regulator probes Adler over its accounting

Germany’s financial regulator BaFin is investigating real estate group Adler for possible accounting irregularities, the latest blow to a company that last month delayed the publication of its annual results.

BaFin told the Financial Times that it is examining the financial accounts of Adler Real Estate AG, the group’s majority-owned unit listed in Frankfurt. The company is a major owner of residential property in north and western Germany.

Shares in Adler have tumbled almost 40 per cent since short seller Viceroy Research last October published a report questioning the valuation of its assets and outlining its ties to Cevdet Caner, an Austrian entrepreneur who previously presided over one of Germany’s largest-ever real estate insolvencies.

Adler subsequently instructed KPMG, the group’s auditor, to conduct “a comprehensive [forensic] review” into Viceroy’s allegations. Adler has denied all Viceroy’s allegations.

Last month, Adler said the review by KPMG was “ongoing and expected to be finalised not before Q2 2022.” The results are required to complete an audit of the group’s 2021 results.

BaFin had last year initially requested an audit into Adler Real Estate’s accounts from the Financial Reporting Enforcement Panel, according to a person familiar with the matter. However, BaFin has now taken control of the probe after it absorbed FREP in the fallout from the Wirecard scandal.

The BaFin probe is centred on Adler Real Estate’s accounts for 2019 and 2020, according to a second person familiar with the matter.

Adler Group and Adler Real Estate told the FT that they do not comment on regulatory investigations, but said they fully co-operate with relevant authorities.

German newspaper Handelsblatt first reported the probe.

The probe by BaFin is the first time that Germany’s financial watchdog has exercised new powers it was granted after payments group Wirecard collapsed in 2020 in one of Europe’s largest accounting frauds in decades.

Shortly after the delay to the results Michael Bütter, who is the chief executive of Union Investment Real Estate, a real estate arm of Germany’s third largest asset manager Union, resigned as chair of Adler’s audit committee.

Adler and Union said that Bütter’s abrupt exit was unrelated to the accounting probe.

Adler had faced scrutiny before Viceroy published its report. Months earlier an anonymous whistleblower emailed major banks that have transacted with Adler, such as Goldman Sachs and Deutsche Bank. The March emails, which were first reported by Bloomberg, alleged that Caner was concealing his involvement in Adler and several related companies through “complicated opaque structures”.

Caner has rejected all allegations and told the FT last year that he was “never” personally a shareholder of Adler, because a stake in the group was held in a family trust.

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