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Published: 22.04.2020 ADO Properties S.A. (Adler Real Estate Group)
WKN: A14U78 | ISIN: LU1250154413 | Bloomberg: ADJ GY BUY Before: -
Eagles (Adler) are going to fly Price target EUR 35.00 (-) Initial Initial coverage«
Share price* EUR 23.88 (47%) We initiate coverage of ADO Properties S.A. (ADLER Real Estate Group) with a BUY *last XETRA closing price In recommendation and a target price of EUR 35.00 (=~50% upside). Our TP is based Initial 2020e 2021e 2022e on our EPRA NAV valuation (EUR 35.54) for ADO on a stand-alone basis. Rental income 131.7 138.0 143.6 EBIT 162.0 165.1 168.6 NAV per share 63.24 65.20 67.21 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 55 current gross asset value (GAV) of EUR 8.5bn. For comparison: ADO Standalone had 50 45 a GAV of EUR 3.6bn at the end of 2019, while ADLER will integrate a value of EUR 40 35 4.9bn. Together, the two companies currently own 75,721 units, with 58,000 units 30 25 coming from ADLER. ADO previously operated exclusively in the Berlin region. The 20 15 acquisition of ADLER reduces this regional concentration to 25% of the total 10 May-19 Jul-19 Sep-19 Nov-19 Jan-20 Mar-20 portfolio. Overall, ADO/ADLER will become a serious German player in the ADO Properties S.A. Germany SDAX Germany CDAX Source: Factset residential real estate sector. Key share data Option to consolidate Consus offers opportunity for sustainable growth: Number of shares (million) 44.2: Currently, the new ADLER holds about 25% of Consus - with an option for additional Free Float (in %) 80% 51% until the end of June 2021. With this step, the new ADLER would also include Market Cap (in EURm) 1055: 290k the fast-growing project developer Consus into the group, which speaks for a clear Trading volume (Ø) High (EUR, 52 weeks) 49.84 fundamental strength and promising strategic orientation. Since ADO and Consus Low (EUR, 52 weeks) 13.00 have already agreed on a strategic cooperation agreement in which both parties Shareholder structure agree to work together on current and future projects, and ADO also has a right to ADO Group 20,4% follow up on offers, ADO can already benefit from Consus' market strength (at- Free Float 79,6% 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 Corporate calendar Q1 2020 report 20.05.2020 have taken a strategically valuable path with the cooperation plus option, without having to make direct changes in LTV or net debt. Analysts
Impact of COVID-19: As a residential player, ADO assumes only a minor impact Mariya Lazarova Analyst from COVID-19. Which will have an impact, however, is the rent cap in Berlin. [email protected] +49 (0) 69 – 920 389 10 Robel Tesfeom Analyst [email protected] FY end: 31.12.; in EURm CAGR (19-22e) 2017 2018 2019 2020e 2021e 2022e +49 (0) 69 – 920 389 10 Net rental income -5.4% 103.3 128.0 134.1 105.6 109.5 113.6 xxx Contakt EBITDA -3.1% 81.0 96.3 93.8 78.8 82.1 85.2 xx FMR Frankfurt Main Research AG EBIT -35.0% 463.6 499.3 613.9 162.0 165.1 168.6 [email protected] 16 Net income before minorities -42.0% 356.0 386.9 601.9 112.2 114.7 117.4 60313+49 Frankfurt (0) 69 - 920 am 389 Main 12
EPS (EUR) -46.3% 8.07 8.77 13.63 2.02 2.07 2.11 Germany
FFO 1 -7.5% 54.3 66.8 63.2 46.9 48.5 50.0 +49 (0) 69 - 920 389 10 FFO 1 per share (EUR) 1.23 1.51 1.43 0.84 0.87 0.90 www.fmr-research.de
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
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ADO Properties S.A. (Adler Real Estate Group)
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
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ADO Properties S.A. (Adler Real Estate Group)
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
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ADO Properties S.A. (Adler Real Estate Group)
Investment Thesis ADO Properties is a listed residential real estate company active solely in the Berlin ADO Properties is a listed market. The lion’s share of its portfolio consists of centrally located properties or residential real estate properties located in interesting areas on the city’s outskirts. company
The ADO Properties Group, with the help of its subsidiaries, covers the entire ADO Properties covers the property asset management value chain, from screening to acquisitions to the entire property asset administration of suitable properties. ADO Properties’ strategic focus is to increase management value chain 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 ADO Properties’ takeover bid shareholder, ADO Properties then announced on 15 December 2019 a voluntary for ADLER 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 Renaming to ADLER Real one of the largest German real estate companies, with a gross asset value (GAV) of Estate Group with GAV of EUR currently EUR 8.5bn. For the sake of comparison, ADO’s stand-alone GAV stood at 8.5bn 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 Public bid by ADO Properties few days ago for the remaining 3% of WESTGRUND (market value of roughly EUR for the remaining 3% of 25m). The majority of WESTGRUND’s shares were bought by ADLER in 2015. We WESTGRUND 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 ADLER Real Estate Group EUR 280-300m in 2020. On an annualised basis management sees NRI of EUR 340- expects net rental income of 360m. In 2019 ADLER generated NRI of EUR 248.7m, while ADO achieved EUR 280-300m in 2020e 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 Assuming ADLER is to consolidated NRI in 2020e would be ~EUR 180m. Adding to this ADO’s EUR consolidated for just under 105.6m, we currently estimate NRI for 2020e at EUR 286m, which puts us within 8 months in 2020 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 Estimations in line with for 2020. In 2019 ADO and ADLER achieved FFO 1 of EUR 63m and ~EUR 84m management expectations respectively or EUR 147m combined. For 2020e, the company targets annualised
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ADO Properties S.A. (Adler Real Estate Group)
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 ADLER Real Estate Group EPRA NAV of EUR 4.9bn (2018: EUR 4.1bn), with ADO contributing EUR 2.9bn and reported EPRA NAV of EUR ADLER EUR 2.0bn. 4.9bn
Our current estimate for combined 2020e EPRA NAV – i.e. EUR 4.9bn – matches the …2020e EUR 4.9bn 2019 numbers. For 2021e we estimate EPRA NAV to increase to EUR 5.3bn and for 2021e: EUR 5.3bn 2022e to EUR 5.7bn. On a per-share basis we expect EPRA NAV to exceed the 2022e: EUR 5.7bn 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 ADO has a stable financial liquidity position of EUR 500m in directly accessible cash (ADO cash stand-alone: structure and a strong EUR 387m; ADLER stand-alone: EUR 237m). The company has no major refinancing liquidity position 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 2019 LTV stands at 27% and its 1.6%. The average term to maturity of its debt obligations is ~4.2 years. Virtually all average interest rate is 1.6% 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 Negative share performance combined, the shares’ performance over the past few weeks has been clearly over the past few weeks 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.
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ADO Properties S.A. (Adler Real Estate Group)
Stock impact amid the corona crisis
Stock at start of Corona- Company Lowest price Stock decline Current stock price crisis amid corona-crisis 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
Source: Factset, FMR All three shares are currently All three shares are currently trading at discounts to EPRA NAV of >60% whereas trading at discounts to EPRA most peers are trading at discounts of around 30%. We see no reason why the NAV of >60% 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 GAV of EUR 8.5bn, a free float outlook: a GAV of EUR 8.5bn, a free float of 80% after the transaction is closed, and of 80% and Consus-option→ an option to bring Consus – Germany’s most successful project developer – on promising strategic outlook 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 ADO at EUR 35.00, ADLER at at EUR 10.50 per share. Each of these valuations suggest significant undervaluation. EUR 17.50 and Consus at EUR While it may take a while for normalcy and calm to return to the equity market, all 10.50 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, Fair value for ADO and ADLER which in Corona times should probably be viewed as a best-case scenario (current combined: EUR 46.58 (Best- upside: almost 100%). Nonetheless, we believe that going forward, especially in H2 Case Scenario) 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 We initiate coverage with a (based solely on our stand-alone valuation of ADO Properties), which nonetheless BUY recommendation and a suggests upside of currently around 50%. target price of EUR 35.00
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ADO Properties S.A. (Adler Real Estate Group)
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
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ADO Properties S.A. (Adler Real Estate Group)
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.
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ADO Properties S.A. (Adler Real Estate Group)
The ADO/ADLER/Consus takeover process On 30 March 2020 ADO Properties S.A. announced the final results of its voluntary ADLER shareholders tendered public takeover bid for ADLER Real Estate AG, which will lead to the creation one of a total of 66,404,915 shares the largest listed real estate groups in Europe. In response to ADO’s voluntary public (~91.93% of ADLER’s nominal takeover bid, ADLER shareholders tendered a total of 66,404,915 shares, equating capital) 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 Merged group is to be its operating headquarters will remain in Berlin. The merged entity will be led by an registered under the name experienced management team with Maximilian Rienecker and Thierry ADLER Real Estate Group 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 ADLER Real Estate Group with ~EUR 8.5bn, diversified across key German cities with attractive growth potential. GAV of ~EUR 8.5bn; through Through its strategic partnership with real estate developer Consus Real Estate AG, Consus access to development the new group has access to a market-leading development platform with a platform with pipeline of over 15,000 rental dwellings 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. Deal closing: 9 April 2020
The takeover bid consists of two phases: Phase I includes the purchase of ADLER The takeover bid consists of (completed), and Phase II refers to the voluntary takeover arrangement between two phases ADO and Consus.
Overview of the takeover offer
End of the 1st Start of the 2nd Approval of acceptance acceptance Publication of Capital increase Announcement the BaFin period period the result up to EUR 500m
15.12.2019 06.02.2020 06.03.2020 12.03.2020 30.03.2020 Q2 – Q3
Adler takes over Takeover bid of 1. Acceptance 2. Acceptance Offer will be settled Ado Group ADO Properties period period
23.09.2019 10.12.2019 07.02.2020 11.03.2020 25.03.2020 09.04.2020 16.06.2021
Announcement Settlement of the offer Start of the 1st Publication of End of the 2nd Delivery of the Expiration of the acceptance the result acceptance shares option agreement period period 1 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 Through the acquisition of Properties’ major shareholder. As part of this deal, ADO Properties repurchased its ADO Group, ADLER received own shares from ADO Group, reducing ADO Group’s stake in ADO Properties to 33.25% of ADO Properties 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.
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ADO Properties S.A. (Adler Real Estate Group)
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 ADO Properties had made a takeover bid for ADLER at EUR 11.10 per ADLER share. This price corresponds to the voluntary takeover bid for 3-month average share price prior to the announcement of the takeover. Under a ADLER at EUR 11.10 per business combination agreement, a share ratio was set at 0.4164 ADO shares = 1 ADLER share 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 The takeover was secured by total of 52.2% of the shares. These include the shares of ADLER Co-CEO Tomas de irrevocable acceptance Vargas Machuca. On 14 February ADO announced that these shareholders have commitments 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 On 6 March 2020 the first and 11 March. One day later the second acceptance period began, which ended on 25 on 25 March 2020 the second March. On 9 April 2020 the offer was settled and the shares (91.93% of total) were acceptance period ended 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 Market cap of ~EUR 1.8bn → new company will have more trading volume (market cap of ~EUR 1.8bn), it will be ADLER Real Estate Group will a candidate for inclusion in the MDAX index. Considering the criteria of market be a candidate for inclusion in value (ADO standalone: rank 119) and turnover (ADO standalone: rank 109), ADO the MDAX index 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 Capital increase of EUR 500m further strengthen the balance sheet structure. This capital increase has already is planned 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).
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ADO Properties S.A. (Adler Real Estate Group)
To refinance ADLER’s financial obligations in the case of a change of control, a A bridge financing facility was bridge financing facility was agreed with J. P. Morgan with a face value of up to agreed with J. P. Morgan 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 Public takeover bid by ADO Westgrund shareholders. ADLER had acquired the majority of Westgrund in 2015. Properties for the remaining By taking over ADLER, ADO acquired an indirect stake of 96.9% in Westgrund. ADO 3% of Westgrund 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 ADO Properties acquired average price of EUR 9.72, paying a total of EUR 294m. This purchase was paid in 22.18% of Consus’s shares cash which basically came from the sale of the Carlos portfolio. ADO closed the sale plus call option for further of the Carlos portfolio (rental residential properties) on 29 November 2019. The 50.97% 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.
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ADO Properties S.A. (Adler Real Estate Group)
Through its cooperation agreement with Consus, ADO aims to implement a “build- Through its cooperation to-hold” strategy and expand it in the future. This should serve to reduce its agreement with Consus, ADO marketing and distribution costs and ultimately make it more cost-efficient. aims to implement a “build- to-hold” strategy 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 LOI to acquire the Holsten project. The preliminary purchase price for 100% of the shares stands at EUR 350m. Quartier development project
Part of the bridge financing facility agreed with J. P. Morgan – namely EUR 1.428bn Part of the bridge financing – can also be used for the debt of Consus Real Estate if ADO acquires a majority of facility can also be used for Consus. the debt of Consus Real Estate Current Group structure Chart of the current group structure
100% Ado Group
33,3%
ADO Properties 94,2% (incl. Treasury stocks) 25,0% (incl. 3% shares of ADLER)
ADLER Real Consus Estate 3,1%
69,8% 4,8% 96,9% 75% 93% Consus Swiss BCP Westgrund CG Group Accentro Finance
Holding Takeover bid
Source: ADO, ADLER, Consus, FMR
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ADO Properties S.A. (Adler Real Estate Group)
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 EPRA NAV valuation approach Estate Group, we applied one valuation approach, EPRA NAV. We focused on the applied to derive the fair multiples for the year 2022e, as this would be the first year in which ADO, ADLER value and Consus would be fully integrated.
EPRA NAV is a good model for real estate companies, because it incorporates net EPRA NAV is a good model for asset value based on the attributable market values of the property assets. real estate companies
Since the takeover process is still in progress, we have decided to conduct both We have decided to conduct stand-alone valuations for all companies and a combined valuation. With regard to stand-alone valuations for all our combined valuation, we would point out that we do not include any potential companies and a combined synergy effects given that certain data points are missing due to the integration of valuation ADO and ADLER which is still to follow.
In the following sections we have valued all companies both individually and on a Our target price for ADO combined basis. Our target price for ADO stand-alone works out to EUR 35.00; for stand-alone: EUR 35.00; ADO + ADLER, i.e. the new ADLER Real Estate Group, we derive a fair value per share ADLER Real Estate Group: of EUR 46.58. Under normal circumstances we would base our target price on a EUR 46.58 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, Cautiously decided to use fears, and panic will continue to dominate the market, we have cautiously decided ADO’s stand-alone fair value to use ADO’s stand-alone fair value as our TP, as we assume that in least in H2 2020e as our TP 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
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ADO Properties S.A. (Adler Real Estate Group)
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 Lower NRI expected for 2020e 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
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 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 No major impact on market values of the real estate assets or on the current large gap between market values values expected 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%.
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ADO Properties S.A. (Adler Real Estate Group)
The reason for this high upside is that ADO is currently trading at a discount to EPRA Upside exists, as ADO is NAV of more than 60%, while peers are trading at discounts of around 30%. While currently trading at a discount the share prices of many companies have been hit by COVID-19, ADO’s share price to EPRA NAV of more than has plunged by as much as 60% in the last 2 months. In our opinion, investors in 60%, while peers are trading at discounts of around 30% 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 ADLER stand-alone - based on diluted EPRA NAV per share in 2022e. After discounting this value back to EUR 17.77 per share 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 Positive outlook for discount to EPRA NAV of more than 60%. We see this discount as exaggerated, even the next years on a stand-alone basis, since ADLER should continue to generate growth in 2020e, 2021e, and 2022e, according to our estimates.
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ADO Properties S.A. (Adler Real Estate Group)
ADLER KPIs
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 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 Increasing income from more than EUR 4bn, and complete properties with a GDV (gross development project development expected value) of more than EUR 2bn. Currently, it is cannot be reliably assessed the extent due to Consus pipeline 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 Consus stand-alone - based on diluted NAV per share in 2022e. After discounting this value back to EUR 10.94 per share 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 Upside to our FVpS of ~ 100%. Similar to ADO and ADLER, Consus is also currently trading at a discount of nearly 100% to NAV of 60%, which in our view does not adequately reflect the company’s growth
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ADO Properties S.A. (Adler Real Estate Group)
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
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 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 group includes peer multiple. The peer group consists of other real estate companies which rent companies with a focus on flats throughout Germany. Most of the peer group companies focus on residential renting properties 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 Reduced peer group due to either have no consensus estimates available or only stale ones, which means it database makes little sense to use these companies for comparison purposes.
Peer group overview
Source: Factset, FMR
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ADO Properties S.A. (Adler Real Estate Group)
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 Fair value per share of ADLER EUR 65.79 based on diluted EPRA NAV per share in 2022e. Discounting this back to Real Estate Group: EUR 46.58 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 Scenario without consi- integration has not provided many data points yet. Management assumes there deration of synergy effects 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 Valuation shows that this deal market and the company return to a certain “normalcy” post COVID-19 and the is a clear BUY 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 For investors who wish to ADLER Real Estate is well worth looking at. Because these elevated discounts position themselves for the compared to most other peers will only be temporary – of that we are very long term now, the new confident. ADLER Real Estate is well worth looking at
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ADO Properties S.A. (Adler Real Estate Group)
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.
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ADO Properties S.A. (Adler Real Estate Group)
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 ADO Properties covers the property asset management value chain, from screening to acquisitions to the entire property management administration of suitable properties. The strategic focus of the ADO Properties value chain 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’ ADO Properties’ takeover bid main shareholder, ADO Properties, publicly announced on 15 December 2019 a for ADLER 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 Cooperation agreement with developer Consus Real Estate, ADO Properties intends to pursue a “build-to-hold” Consus Real Estate 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) Founded in 2007, listed since under the name of “Swallowbird Trading & Investments Limited“ with domicile in 2015 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 The holding company of the activities are generally carried out by its 197 subsidiaries (date of information: 30 ADO Properties Group September 2019). ADO Properties provides management and administrative functions. The organisational chart below shows the group’s key subsidiaries.
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ADO Properties S.A. (Adler Real Estate Group)
Group structure
EPF Acqusition Co 86 ADO ADO FC Management S.a.r.l. ADO Properties S.A. 100% 100% (Luxembourg) (Luxembourg) Lux-EEME S.a.r.l. Unlimited Company (Luxembourg) (Ireland) 6% Kommanditist 100% 100% ADO SBI Holdings S.A. ADO Lux Finance 94% Consus Real Estate AG 22,18% ADO Malta Limited & Co. KG (Germany) S.a.r.l. (Malta) (Germany) (Luxembourg)
94% 100% 94,9% 93,7% - 94,9% 60% 100%
50 SPVs (GmbH) Plus 30 SPV s (29 GmbH and 31SPVs (GmbH) ADO Properties GmbH 59 SPVs (GmbH) 4 SPVs (BV) 1 BV Plus 2 BV and 2 ApS ADO Immobilien Management GmbH (Germany) (Netherlands) 1 S.a.r.l.) Plus 1 BV 6% (Germany/NL) (Germany/LU/NL) (Germany/NL/DK) CCM City Construction Management Central Facility Management ADO Treasury GmbH ADO Living GmH (Germany) Residential Residential Residential Residential Residential properties properties properties properties properties Berlin Berlin Berlin Berlin Berlin
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. Thierry Beaudemoulin - CEO 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 Dr. Peter Maser - Chairman of board chairman is Dr Peter Maser. Dr Maser received his doctorate from the Supervisory Board 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 Dr. Ben Irle - Berlin (2005-2011). In the ensuing years he was a managing partner at Irle Supervisory board member 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 Florian Sitta - was admitted to the German bar. He began his professional career as a legal counsel Supervisory board member 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
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ADO Properties S.A. (Adler Real Estate Group)
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 Arzu Akkemik - completing her studies of international finance and accounting. Besides her independent member of activities as an analyst, she was active in the company areas of corporate finance supervisory board 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 Dr. Michael Bütter - gathered experience at various law firms (2001-2008). He has also held numerous independent member of other positions in corporate management bodies. Currently Dr. Bütter holds supervisory board 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 Jörn Stobbe - and passing his second state law examination. His first employer was Independent member of Landgesellschaft Schleswig-Holstein mbH. In the years thereafter we worked at the supervisory board 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 Shareholder structure: free component of 80%. ADLER Real Estate holds 20.45% of the shares. Further float of about 80% 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
20,45% 5,74% 58,61% 5,52%
5,31% 4,37%
ADO Group Ltd. Klaus Rudolf Wecken Mirabella Mezzanine IX Union Investment Freefloat
Source: ADO Properties, FMR (date of information: 31 March 2020)
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ADO Properties S.A. (Adler Real Estate Group)
ADLER’s company profile ADLER Real Estate has been active in the real estate industry for more than 20 ADLER Real Estate focuses on years. Its focus lies on buying residential properties and managing permanently the management of properties held properties. At present ADLER manages more than 58,000 rental units held on a long-term basis 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, 2018 ADLER has invested in which constitute ~14% of its GAV (gross asset value). It pursues a “build-and-hold” development projects, which strategy, which will lead to growth in the existing residential portfolio. The constitute ~14% of its GAV; acquisition of 70% of the Brack Capital Properties N.V. (BCP) in 2018 brought new ADLER pursues a “build-and- hold” strategy development projects into the portfolio.
Since the group has a strict residential focus, it is selling BCP’s commercial portfolio. BCP’s commercial portfolio 67% of the commercial properties have already been sold, and the remaining assets will be sold 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 ADLER invests primarily in northern western, and eastern Germany. The idea here is to benefit from the peripheral locations and favourable real estate growth in B cities. The company’s geographic focus is on growing metropolitan areas in Lower Saxony and North Rhine-Westphalia. Most of the properties are acquired in northern western, and eastern Germany 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 1880 the Adlerwerke was manufactured automobiles, motor cycles, bicycles and typewriters. founded
In 1993 the company was sold to the real estate investor Roland Ernst and the 1993 the company was sold Philipp Holzmann construction group.
In 1998 typewriter production was discontinued and the company’s main business 1998 the company’s main became property rental. The company had already discontinued its other product business became property areas long ago: cars in 1945, motorcycles in 1958, and bicycles in 1945. rental
In 2002 the company’s name was changed to ADLER Real Estate, and its corporate 2002 the name was changed domicile was relocated to Berlin. ADLER’s real estate portfolio has grown strongly and 2016 its corporate domi- in the last five years through the acquisition of real estate companies: cile was relocated to Berlin
2014: Takeover of 92.7% of Accentro Real Estate (at the time: ESTAVIS AG) for 2014 Takeover of Accentro EUR 23.2m
2015: Acquired Mountain Peak Trading Ltd. (an investment holding company). 2015 Takeover of Mountain This acquisition gave ADLER a minority (24.79%) interest in Conwert Peak Trading Ltd. Immobilien Invest SE.
Acquired Treuhaus Hausbetreuungs-GmbH, which oversees the property 2015 Takeover of Treuhaus management activities for south-western Germany. Hausbetreuungs-GmbH
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ADO Properties S.A. (Adler Real Estate Group)
Acquired ~95% of Wohnungsbaugesellschaft JADE with a portfolio of 6,750 2015 Acquired JADE 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 2015 Acquired WESTGRUND 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. 2017 Sold Accentro
2018: Acquired ~70% of Brack Capital Properties NV. (BCP) BCP is a private equity 2018 Acquired BCP 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%) 2019 Acquired ADO Group interest in ADO Properties Group structure The ADLER Group encompasses nearly 230 individual companies and contribute to The ADLER Group encompasses a high level of complexity, also due to the many acquisitions made. Most of these nearly 230 individual companies 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 Two segments: Portfolio and includes existing properties from which rental income is generated. This also Other 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 Tomas de Vargas Machuca – committee since 2013 and Co-CEO since the end of 2017. He completed his studies Co-CEO 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 Maximilian Rienecker – February 2017 and Co-CEO since December. He completed his management studies Co-CEO 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.
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ADO Properties S.A. (Adler Real Estate Group)
Sven-Christian Frank (1965) has been COO since June 2016. He has been with the Sven-Christian Frank – company since 2015 and had previously served in management positions at real COO 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 Shareholder structure of the component of 43.11%. The company’s anchor shareholders are Mezzanine IX, company includes a Wecken and Fairwater, which together hold 42.95% of its shares. ADLER Real Estate substantial free float holds 2.3% of its own shares, Thomas Bergander has another 6.7%, and the component of 43.11% investment management company Fil Investments International holds a stake of 5% of shares in issue.
Current shareholder structure
Treasury Thomas FIL; 5,02% Shares; 2,26% Bergander; 6,66%
Fairwater; 13,54% Free Float; 43,11%
Mezzanine IX; 14,44%
Wecken; 14,97% 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 Consus Real Estate AG is the pipeline of more than 15,000 residential units (a total of 67 projects) in Germany’s leading real estate developer Top 9 cities (Berlin, Munich, Frankfurt, Düsseldorf, Cologne, Hamburg, Stuttgart, and has a pipeline of more Leipzig and Dresden). These locations represent Germany’s most important cities than 15,000 residential units for the real estate economy.
One of Consus’s key points of focus is the development of quartiers (entire Consus: focus on development neighbourhoods or districts) and standardised multi-story flat blocks. The company of quartiers and standardised develops mixed-use development projects that incorporate commercial and retail multi-story flat blocks 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.
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ADO Properties S.A. (Adler Real Estate Group)
Thanks to the process of digitalisation in the construction industry and the Consus covers the entire real company’s own construction expertise, Consus covers the entire real estate estate development value development value chain. The individual steps along the value chain are performed chain 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 Acquisition of CG Gruppe and in 2017. The following year, in 2018, it increased its holding to 71.0%. The company SSN Gruppe 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: Revenues from 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: 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 Andreas Steyer – CEO of experience in the real estate industry. Prior to joining Consus he was the
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ADO Properties S.A. (Adler Real Estate Group)
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 Benjamin Lee – CFO 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 Theo Gorens – CRO and has sat on the supervisory board and is responsible for risk management and Deputy CFO 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
Free Float; 18%
Christoph Gröner; 6% Aggregate Group; 51%
ADO Properties & ADLER Real Estate; 25%
Source: Consus, FMR (date of information: 01 Feb 2020)
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ADO Properties S.A. (Adler Real Estate Group)
ADO’s business model ADO Properties is focused solely on the Berlin residential real estate market. It ADO is active solely on the specialises in letting out residential properties within Berlin’s city limits. Although residential real estate market residential units account for just under 95% of the ADO’s portfolio, it also has some in Berlin 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 … and offers Property- and also offers property and asset management services. Through active portfolio Asset-Management management, ADO achieves stable rental growth and declining vacancies.
The company focuses on modernising and renovating its existing portfolio. As a Focus on modernisation and result, such properties are repositioned and generate higher rental income. Be renovation 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. Vacancy rate of residential In most cases, the vacant units are under construction, and some are for sale. As a units (0.8%) is comparable to result, the vacancy rate for rental units is only 0.8%, which is in line with the city of Berlin’s average vacancy rate Berlin’s overall average vacancy rate.
ADO has also been in the privatisation business since 2014. The sale of individual Privatisation business since flats permits higher earnings compared to the sale of portfolios. 2014
At the end of 2019 ADO sold its largest portfolio, the Carlos portfolio, to Gewobag Sale of Carlos portfolio in 2019 Wohnungsbau - a company owned by the city of Berlin - for EUR 920m. It had for 920 million Euro 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 Project development as new acquisition is realised, ADO plans to become active in project development. It plans potential strategy 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 ADO invests primary in central residential units are located in the Berlin districts of Mitte, Charlottenburg and location 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
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ADO Properties S.A. (Adler Real Estate Group)
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 ADLER owns property across of its portfolio is in locations in northern, eastern, and western Germany, largely in Germany 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 … and focuses on peripheral measures such as reducing vacancies or raising rents. In past years ADLER was able locations with potential for to benefit from the positive trends in the real estate market and steadily expand its value growth property portfolio.
ADLER aims to generate sustainable rental income with long-term leases in its Project developments in A- residential portfolio. In addition, it expects to achieve positive cash flows from cities 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 Offers asset, property, facility achievable through active portfolio management. Property, facility and energy and energy management management services are provided by the subsidiaries ADLER Wohnen Service services 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 Target group: tenants with risk since tenants who earn too little income receive state support to pay their rent. medium to low income 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 Aligning its portfolio toward example, its flats are about 60 sqm on average, which conforms to the one-person households aforementioned trend and the preferences of its target tenant group.
ADLER enhances the quality of its portfolio through investment, maintenance and Sale of the commercial renovation. This should also serve to reduce vacancies and lift rent levels. BCP’s portfolio 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 Investment in properties with expansion will be on core properties, although core-plus properties will also be core and core-plus market considered given their higher value-enhancement potential. Properties must be quality already income-positive when they are purchased. Additionally, ADLER aims to
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ADO Properties S.A. (Adler Real Estate Group)
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 Contingent capital for currency. Treasury stock acquired under share buyback programmes can also be acquisitions used as acquisition currency.
In 2015 ADLER took over 94,9% of Westgrund shares as part of its acquisition 2015: Acquisition of strategy. At the end of 2019 ADLER increased its position to 96,88%. The market Westgrund 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 Westgrund manages a large northern and eastern Germany and hence, it represents the interests of ADLER’s portion of ADLER’s “non-core” “non-core” portfolio. Westgrund also owns 731 residential units, but those portfolio 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 Interest expenses are reduced aims to reduce its interest expense either by prepaying or refinancing existing debt by prepaying and refinancing at more favourable rates. existing debt
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 EPRA NAV, FFO I and LTV: financial metrics are EPRA net asset value (EPRA NAV), funds from operations I (FFO important metrics for ADLER 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, Increase in the employee but at the subsidiaries ADLER Real Estate Service, ADLER Wohnen Service GmbH, numbers 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
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ADO Properties S.A. (Adler Real Estate Group)
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 Consus: project development focus lies on the affordable housing market in Germany’s nine largest cities (Top 9). in the top 9 German cities Consus‘s project development volumes are relatively large, with a growing exposure to urban quartiers (entire city districts or neighbourhoods). Its main … with GDV of EUR 10.3bn 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 Subsidiaries – CG Gruppe and headquarters in Berlin. The financing of the group is coordinated with the goal of SSN Group are responsible for the optimal financial structure. The subsidiaries CG Gruppe and SSN Group AG are the operating activities 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 Focus on development of company has expertise in large-volume development projects. A quartier quartiers 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 … but development of developed the concept of the “Vertical Village”. These are commercial properties commercial units as well 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 Forward sales to institutional institutional customers can purchase real estate projects already before clients 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.
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ADO Properties S.A. (Adler Real Estate Group)
Project development steps
V. Delivery I. Purchase
CONSUS REAL ESTATE AG IV. Construktion II. Development
Distinguishing characteristic
III. Forward- Sales
Source: Consus
The above chart provides a systematic overview of the steps in a forward-sale Mitigating the financing risk development. The first step is the purchase of land. The next step is to develop a through forward sales 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 Ca. 20% of the projects can be persons usually provide higher yields than forward sales. Here we are talking about sold to private buyers 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 Rental of properties 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 building digitalisation of project development processes. The goal is to make these processes through BIM 6 processes leaner without sacrificing quality. The result is cost and time savings.
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ADO Properties S.A. (Adler Real Estate Group)
In addition, the company wants to build up production capacity for the Standardization and prefabrication of individual construction modules used in the construction of multi- prefabrication of construction story flat blocks. For this purpose, Consus has entered a cooperation agreement modules 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 Consus has 67 projects with attachment). The three largest projects are Vai Campus, Holsten Quartier and GDV of over EUR 10bn. Benrather Gardens. All three projects are still in the planning phase.
The VAI CAMPUS project is developing a city complex in Stuttgart-Vaihingen. In VAI Campus in Stuttgart- addition to residential and commercial spaces, office units will be built as well. The Vaihingen 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 Holsten Quartier in Hamburg 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. Benrather Gardens in Residential, commercial and office units will be built that will total to approximately Dusseldorf 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:
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ADO Properties S.A. (Adler Real Estate Group)
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 Source: Consus, FMR
Consus’ pipeline divided by cities
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 m2: 240 Area in k m2: 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
Source: Consus, FMR
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ADO Properties S.A. (Adler Real Estate Group)
Consus: Estimated completions in the coming years
Completion of 413.000 sqm Completion of 246.000 sqm Completion of 209.000 sqm Completion of 159.000 sqm with a GDV of EUR 2.0 bn with a GDV of EUR 1.2 bn with a GDV of EUR 1.0 bn with a GDV of EUR 0.8 bn
2020 2021 2022 2023 2024 2025 2026 2027-2029
Completion of 261.800 sqm Completion of 220.000 sqm Completion of 219.000 sqm Completion of 363.000 sqm with a GDV of EUR 1.3 bn with a GDV of EUR 1.1 bn with a GDV of EUR 1.1 bn with a GDV of EUR 1.8 bn
1
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%
Source: Consus, FMR
By the end of 2022 around 43% (or EUR 4.4bn) of the pipeline is expected to be completed.
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ADO Properties S.A. (Adler Real Estate Group)
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, Increase in the demand for pushing up real estate prices. Residential property prices rose again in 2019 residential real estate 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 Increase in GDP and decrease stands at 5.3%. Forecasts for 2020 are more positive and the government expects in the unemployment rates 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 economic outlook negative and a deeper recession is now expected for 2020. According to the for 2020 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, Increase in the building and the number of building permits Germany-wide was up not quite 4% yoy. That permits by 4% in 2019 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.
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ADO Properties S.A. (Adler Real Estate Group)
Building permits and completed dwellings in Germany
Source: bulwiengesa, FMR
According project developer study 2020 from bulwiengesa, the residential segment Decrease in the project in the top 7 German cities is not as attractive to project developers as it used to be. development on the In the past two years, the area that is planned for project development has been residential market 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 Population growth despite the hand, the immigration is growing. Hence, the expectation for the short and medium aging society 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 Urbanisation and smaller number of one-person households will increase to 44% by 2035. Urbanisation households – the current remains the new megatrend, and causes regional clustering, especially in the megatrends vicinity of A-locations.
Further, new regulations are being introduced that could impact demand for New legislation introduces residential real estate. The government has introduced climate change mitigation changes for the commuters 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.
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ADO Properties S.A. (Adler Real Estate Group)
Low financing costs are an additional factor that could increase demand. The yield Lower financing costs for on 10-year bonds has been at 0% since 2016, and interest rates on real estate loans housing 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. Growth of the residential real Transaction volume in the residential market totalled EUR 91.3bn, representing a estate market by 15.4% 15.4% yoy increase vs 2018. More than half (58%) of the transactions last year occurred in Germany’s Top 7 cities.
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ADO Properties S.A. (Adler Real Estate Group)
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 Housing shortage in the dwellings were vacant, and Frankfurt it was 0.3%. In 2018 Germany hit a new A-cities 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 Housing shortage in the Germany’s Top 7 cities is similar to the national average, Top 7 rents are 40% above A-cities 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
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ADO Properties S.A. (Adler Real Estate Group)
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 Construction costs make constructed residential properties and existing dwellings. Over the last three years newly build dwellings more construction costs have risen an average of 2.4% per quarter. The driver here is expensive rising labour costs. North Rhine-Westphalia & Lower Saxony North Rhine-Westphalia, with a population of just under 18m, is Germany’s most NRW: the largest federal state populous federal state. Its role in the real estate market is accordingly important. with a population of roughly ADLER Real Estate has a large number (13,811) of portfolio properties in NRW. Like 18m 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 Vacancy rates in NRW (3.0%) by a few cities, but there are also regions that have seen their populations shrink. and in Lower Saxony (3.3%) The housing vacancy rates in both German states have been constant in recent are above the national years. For Germany as a whole, the average vacancy rate in 2018 was 2.8%. Lower average 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 Unemployment rate in NRW is states. All the states with higher unemployment rates are in eastern Germany, 5.3% and in Lower Saxony – however. Lower Saxony’s unemployment rate is 5.3%, i.e. lower than NRW’s. The 6.6% following figure provides an overview of the unemployment rates of all of Germany federal states.
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ADO Properties S.A. (Adler Real Estate Group)
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 NRW and Lower Saxony have Saxony. With the exception of 2015 Lower Saxony has seen yoy growth in GDP per GDP per capital below the capita every year. Nonetheless, NRW and Lower Saxony have lagged the other national average 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 Increase in the dwellings’ residential real estate market is following the national trend. Due to migration, the purchase prices in NRW and supply of residential units has remained under pressure in some economically Lower Saxony prosperous locations such as Cologne or Düsseldorf. The construction of multi-story
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ADO Properties S.A. (Adler Real Estate Group)
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 Increase in purchase prises in cities. According to JLL, the purchase price of a dwelling in a Big 8 city increased by Top 8 cities 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).
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ADO Properties S.A. (Adler Real Estate Group)
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 … and increase of the rent than the 5-year average rate of increase (5.0%). The strongest increase in rent prices by more than 4% last prices among the Big 8 cities was in Cologne. Cologne’s rent prices increased by 8% year 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.
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ADO Properties S.A. (Adler Real Estate Group)
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 Difference between rent and rents, a weakening of the upward momentum of recent years is observable. As for purchase prices in the largest purchase prices, however, the rate of increase is above its 5-year average, leading 8 cities 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 Increase in Berlin’s purchasing entity, Adler Real Estate Group. Consequently, the performance of Berlin’s real power 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. Disparity between demand Its stock of residential units increased by ~3.5% from 2013 to 2018. This increase and supply on the residential was not sufficient to offset increased demand, however, and less than 1.0% of all market 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 … has led to increase in rent increased in the same period by 11.5% p.a. Hence, Berlin’s rent prices are above and purchase prices 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.
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ADO Properties S.A. (Adler Real Estate Group)
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 Many development projects in notice differences in market trends. ADO invests primarily in Berlin’s central city Mitte 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 Population growth in areas EUR 18 per sq.m. per month for the middle market segment. Due to strongly surrounding Berlin due to the increasing housing prices 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 Berlin’s rental cap came into market’s growth. This legislation diminishes the attractiveness of residential rental force in February 2020 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 … and it could lead to growth in condominiums occupied occupied housing and fewer flats are rented. Thus, we could expect to see more housing investors opting for development projects in the medium term. Forecast The rising number of households and positive demographic growth could lead to Positive demographic growth increased demand for housing properties. Furthermore, the growing number of and increasing demand for building permits last year could be interpreted as a positive sign for the real estate residential properties 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 Low cost of capital under the performance of the economy. The ECB’s zero interest rate policy reduces the cost zero-interest rate policy of capital and impacts the profitability of real estate investments. Germany’s
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ADO Properties S.A. (Adler Real Estate Group)
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 Expectations for 2020: lower investments in the real estate industry. Nevertheless, the market has reached its growth rates 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.
Page 46 of 62
ADO Properties S.A. (Adler Real Estate Group)
Financials ADO FY 2019 The income from rental activities of ADO Properties increased by 5.2% in 2019 to Increase of the rental income EUR 141.6m (2018: EUR 134.6m) due to strong like-for-like rental growth of 5.0% by 5,2% to EUR 141.6m 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 FFO I decreased by 5.4% to 93.8m) in 2019. FFO 1 (from rental activities) decreased by 5.4% to EUR 63.2m EUR 1.43 per share in 2019 (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 Increase of the average in- per month at the end of the year 2019 (31 December 2018: EUR 6.73). The vacancy place rent of the residential rate for the residential portfolio decreased to 2.7% as of 31 December 2019 due to portfolio 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 EPRA NAV for 2019 amounted 3,664m (31 December 2018: EUR 4,092m). It comprised 17,637 units at the end of to EUR 65.80 per share 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 ADO Properties has an LTV of average interest rate of 1.6%. The average maturity of the outstanding debts is 27% and an average interest approximately 4.2 years. Almost all loans have fixed interest rates or are hedged. rate of 1.6% 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 ADO holds 94.15% of ADLER ADLER and a strategic cooperation agreement with Consus to create one of the shares (including treasury largest listed real estate companies in Europe. As announced on 30 March, ADO stock) 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 The combined company will capitalization and will be a potential MDAX candidate in near term, while investors be a potential MDAX will benefit from enhanced liquidity. Through its strategic partnership with Consus, candidate 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
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ADO Properties S.A. (Adler Real Estate Group)
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 ADLER Real Estate Group will Consus, ADO will progress from a Berlin-focused property company into one of the progress into one of the largest residential real estate groups in Europe, benefitting from greater scale and largest residential real estate enhanced growth prospects. By diversifying the group’s portfolio through the groups in Europe 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 Net rental income increased increased by 4.3% YoY to EUR 248.7m for the year 2019. This significant increase to EUR 248.7m 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 of the vacancy rate decrease in vacancy rate to 5.4%. The average in-place rent increased to EUR 5.60 to 5.4% 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 Increase of the FFO I to EUR 74.2m). Fully diluted FFO I per share amounted to EUR 1.06 (FY 2018: EUR 0.94). 84.4m 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 Decrease of the LTV to 51.4% 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 Increase of the EPRA NAV by EUR 2,283.6m, a 39.3% increase compared to EUR 1,639.0m as of FY 2018. Diluted 39.3% to EUR 28,59 per share 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 With the proceeds from the commercial portfolio ADLER was able to reduce debt. Furthermore, consolidation sale of the commercial of ADO Properties had a positive impact on net financial liabilities and portfolio ADLER was able to correspondingly LTV, which has reduced by 10ppts to 51.4% as of Q4 2019. reduce debt 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.
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ADO Properties S.A. (Adler Real Estate Group)
ADO expects to achieve NRI of ~EUR 280-300m in 2020 given its merger with NRI guidance for 2020 is ADLER. On an annualized basis management sees NRI of EUR 340-360m. In 2019 EUR 280-300m for the ADLER generated NRI of EUR 248.7m, ADO EUR 134.1m. Thus, their combined NRI combined company 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 NRI according to our contribution to consolidated net rental income would be ~EUR 180m. Including estimation should be ADO’s EUR 105.6m, we currently expect group NRI of EUR 286m, which puts us ~EUR 180m within management’s range. On an annualised basis we estimate combined rental income of EUR 360m.
Rental income
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% Source: ADO, Adler, FMR
Management expects a combined FFO 1 (ADO + ADLER) of EUR 105-125m for 2020. Combined FFO 1 target for In 2019 ADO and ADLER achieved FFO 1 of EUR 63m and ~EUR 84m respectively or EUR 105-125m 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
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% Source: ADO, Adler, FMR
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ADO Properties S.A. (Adler Real Estate Group)
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 Combined EPRA NAV target and 2022e we estimate further increases to EUR 5.3bn and EUR 5.7bn respectively. for 2020: EUR 105-125m On a per-share basis we estimate EPRA NAV to exceed EUR 100 for the first time in 2022e (EUR 103.35).
EPRA NAV
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% Source: ADO, Adler, FMR
Berlin’s rent cap legislation came into force on 23 Feb 2020 and freezes rents at Berlin’s rental cap – an their 18 June 2019 levels for a period of five years. ADO Properties maintains its important factor for the view that this legislation is not only unconstitutional but also unsuited to overcome decrease in FFO estimates by Germany’s current housing shortage. On a combined basis (ADO + ADLER), NRI of EUR 1m in 2020 and by EUR 9m in 2021 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 Reliable rental income despite steps necessary to ensure the safety and health of all of its employees and tenants. COVID-19 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 No significant effects of the pandemic on FFO 1 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 Dividends: 50% of the FFO 1 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.
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ADO Properties S.A. (Adler Real Estate Group)
Dividend estimates
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% Source: ADO, Adler, FMR
The combined portfolio’s GAV in 2019 stood at EUR 8.5bn. For 2022e we expect it GAV amounted EUR 8.5bn in to increase to EUR 9.8bn. If Consus should be consolidated in 2020/2021e, GAV 2019 could surpass EUR 10bn (FMRe: EUR 11.2bn)
GAV
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% Source: ADO, ADLER, FMR
As of the end of 2019 ADO and ADLER had combined 75,721 units net of the 5,900 ADO and ADLER have together units from the Carlos portfolio, which ADO sold. Given the strong geographic over 75,000 units across diversification of the portfolio across all of Germany, we expect rental income Germany 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 Combined accessible cash liquidity position of EUR 500m in directly accessible cash (ADO stand-alone: amounting to EUR 500m 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%. ADO: LTV of 27% and average The average term to maturity of its debt obligations is ~4.2 years. Virtually all of its interest rate of 1,6% 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
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ADO Properties S.A. (Adler Real Estate Group)
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 of the combined interest rate. ADO’s stand-alone average interest rate was just under 1.6%, while company: around 1,9% we calculate the combined entity’s average interest rate at around 1,9%, which is still a respectable level.
ADO: LTV and net debt
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% Source: ADO, FMR
Page 52 of 62
ADO Properties S.A. (Adler Real Estate Group)
Appendix ADO P&L 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
Source: ADO, FMR
Page 53 of 62
ADO Properties S.A. (Adler Real Estate Group)
ADO Balance Sheet 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
Source: ADO, FMR
Page 54 of 62
ADO Properties S.A. (Adler Real Estate Group)
ADO Cash Flow Statement
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
ChangePurchase in fixed and assets CAPEX of investment -129,428 -223,952 -118,300 -47,189 -42,768 -47,607 -53,716 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 -58,410 Cash 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
Source: ADO, FMR
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ADO Properties S.A. (Adler Real Estate Group)
Consus P&L
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
Source: Consus, FMR
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ADO Properties S.A. (Adler Real Estate Group)
ADLER Real Estate P&L
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 113,6 125,8 203,7 219,3 224,9 230,8 236,7 YoY 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 0,0 YoY 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 303,0 312,6 584,4 474,7 417,2 423,2 429,1 as % 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 301,8 311,8 582,8 469,0 415,3 421,3 429,1 as % 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) 187,5 158,4 454,8 357,0 381,5 397,0 408,0 as % 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 -79,6 as % 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 121,0 126,7 265,6 238,3 244,3 255,1 262,3 as % 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
Source: ADLER Real Estate, FMR
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ADO Properties S.A. (Adler Real Estate Group)
Consus Pipeline
Approx. Total Expected date No. Project Name City Sellable Area of completion (sqm) 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 Bahrenfelder Carré I Hamburg 4.000 2021 20 Von-Sauer-Str. 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
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ADO Properties S.A. (Adler Real Estate Group)
Approx. Total Expected date No. Project Name City Sellable Area of completion (sqm) 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 Steglitzer Kreisel Parkhaus & 52 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 -
Approx. Total
No. Project Name City Sellable Area Completion (sqm) 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.
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ADO Properties S.A. (Adler Real Estate Group)
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
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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.
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(i.) has an involvement in the share capital of the issuer of at least 5 per cent;
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(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;
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ADO Properties S.A. (Adler Real Estate Group)
(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;
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(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
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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.
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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.
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ADO Properties S.A. (Adler Real Estate Group)
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