Adler Group with robust operational performance in 2023

• 5.1% like-for-like rental growth compared to previous year and operational vacancy of 1.1%

• Successful disposals in FY 2023 such as the “Wasserstadt” rental portfolio at close to book value and several development projects at expected prices contributing to c.€530m in gross proceeds

• Stable liquidity position with €377m cash^{as a result of both the “New PIK 1.5L notes” placement and cash inflows from project sales, despite debt repayments in the amount of
  c. €280m in Q4 2023}

• Adler Group expects to generate net rental income in the range of €200m-210m^{in FY 2024}

• Publication of the audited annual reports 2022 and 2023 by 30 September 2024

• Considerable steps taken to reinforce the Group's capacity to continue as a going concern, leading into a non-binding agreement in principle on a restructuring with bondholders

Luxembourg, 25 April 2024 – Adler Group S.A. (“Adler Group”) concluded the fiscal year 2023 with a robust operational performance, underlined by a strong like-for-like rental growth of 5.1% over the financial year and a vacancy rate of just 1.1%. The average residential rent per square meter increased to €7.60 compared to €7.58 in 2022 despite the disposal of the “Wasserstadt” portfolio in Berlin, with c.700 new built units not falling under the Mietspiegel. By year-end 2023, the rental portfolio amounted to 25,043 units, of which 17,738 units are in the Berlin area.

The FY 2023 results reflect Adler Group’s successful disposals of portfolio assets, in order to generate liquidity, cover financial maturities and to reposition the portfolio. The disposal of the Berlin-based “Wasserstadt” rental portfolio was one of the largest transactions in the German residential sector last year.

However, given the tough transaction market environment, disposals are lagging the original plans. In response, Adler Group is proactively revising its restructuring framework, focusing on two key pillars: (i) a revised business plan to restructure the Group’s most difficult assets and to participate in the expected market recovery, and (ii) a financial restructuring which improves the Group’s cash position, stabilises the debt structure by postponement of maturities beyond 2026/27 and provides a sufficient equity position until maturity of Adler Group’s prolonged debt in order to provide a solid foundation for the Group’s going concern for at least, but not limited to the next two years. Management has reached a non-binding agreement in principle on a restructuring with bondholders. Based on the achievement thus far and considering alternative options available, management takes the view that a solution can be implemented until end of September 2024.

Commenting on the 2023 results, Thierry Beaudemoulin, CEO of Adler Group, said: “The perfect storm in the financing and the transaction parts of our industry is not yet over, but market turbulences have calmed down. We are proud of the strong performance of our rental activities, being core business and reflect Adler Group’s strong position in the Berlin residential market.”

Net rental income was €210m compared to €245m in 2022, a decrease which was mainly due to asset disposals, both in 2022 and 2023. Hence, the Company met its FY 2023 guidance of €207m to €219m. Adj. EBITDA from rental income was €110m (2022: €148m). For FY 2024, Adler Group expects net rental income in the range of €200m to €210m.

The gross asset value (GAV) of the yielding portfolio came down from €5.2bn as per December 2022 to €4.2bn as per December 2023 (of which €3.6bn in Berlin), driven by both disposals and the portfolio revaluations. The l-f-l yielding portfolio revaluation amounted to minus 12.8%. However, the pace of devaluation slowed down significantly in the second half of 2023 compared to the first half.

Commenting the financial performance, Thomas Echelmeyer, CFO of Adler Group, said: “We successfully addressed all our financial obligations due in 2023, secured new financing in a challenging environment and ensured sufficient liquidity.” In the fourth quarter 2023, Adler Group placed €191m of 1.5 lien notes with annual PIK interest amount of 21% due end July 2025. Gross proceeds from disposals amount to €530m with associated debt repaid of €270m and net cash generation of €200m. The total cash position at year end 2023 amounts to €377m.

The financial results were, however, negatively impacted by extraordinary expenses related to the restructuring program and its financing. Legal and consultancy costs as well as interest expenses were particularly noticeable here, as well as the significant devaluations of the real estate assets. Overall, the aforementioned expenses resulted in a loss from operating activities of €1,464m in FY 2023 (previous year: minus €1,272m). In addition, there was a negative financial result of €497m (previous year: minus €535m).

The negative earnings situation is also reflected in the key figures FFO, EPRA NTA and EPRA LTV. For the first time, FFO I was negative at minus €43m (previous year: plus €87m) due to the increasing interest burden. The EPRA NTA amounted to €529m, or €3.49 per share, as of 31 December 2023, compared to €2.4bn / €20.77 per share as of 31 December 2022. EPRA LTV was 97.6% (74.5% at the end of 2022).

Referring to the outlook for 2024, Thierry Beaudemoulin explained: “2024 has started with a robust operational performance again. Market conditions and in particular financing of transactions remain somewhat uncertain, even though most analysts expect lower interest rates in 2024, with the first rate cut this summer. Regardless of this development, we will continue our efforts to restructure the Company and will focus on our business.”

The 2023 consolidated financial statements and annual accounts for Adler Group published today are still unaudited. As the auditing process for the 2022 and 2023 consolidated financial statements and annual accounts is ongoing as expected, the Company envisages the publication of these audited figures by 30 September 2024.

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A webcast for analysts and investors will be held today, 25 April 2024, at 14:30 CET.
 

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