Adler Group's residential portfolio proves resilience in challenging 2022 financial year

• FFO 1-development in line with guidance
• Disposals of portfolios in 2021 and 2022 with high impact on net rental income
• Court decision allows implementation of restructuring plan as agreed with bondholders
• Company expects net rental income in the range of €207-219m for 2023
• Financial statements for 2022 are unaudited, restructuring plan envisages the issuance of audited consolidated financial statements and annual accounts for the financial year 2022 by 30 September 2024

Luxembourg, 25 April 2023 - Despite a continued challenging environment, Adler Group S.A. ("Adler Group") achieved its targets concerning the development of its operating business in the fiscal year 2022. The development of the financial figures (unaudited) reflects the sale of larger portfolios closed in the years 2021 and 2022.

Net rental income amounted €244.5m in 2022 (2021: €346.2m) exceeding the guidance of €233-242m. Funds from operations from rental activities (FFO 1) amounted to €86.8m in 2022 (2021: €137.1m), which was in line with the guidance range of €84-88m. For 2022, the FFO 1 translates into a per share basis of €0.74 (2021: €1.17). EBITDA from rental activities was at €148.2m (2021: €227.7m).

The average rent per square-meter for the core portfolio comprising 26,202 units increased from €7.45 to €7.58 over the course of the year. With a sustained low vacancy rate of 1.3% at the end of the year and growth in rental income on a like-for-like basis of 1.5%, Adler Group's core portfolio has again confirmed its quality.

At the end of the financial year 2022, on a like-for-like basis, the fair value of the yielding portfolio decreased by 1.9% compared to the end of previous year and amounted to €5.2bn, based on an independent third-party valuation. Mainly due to the non-cash effective negative revaluation of the Group’s real estate assets as well as the one-off impairment of receivables, the net result amounted to €-1,674.8m for the fiscal year 2022 (€-1,165.0m in FY21). The EPRA NTA amounted to €2,440.1m (€20.77 per share) at the end of fiscal year 2022, compared to €4,268.6m (€36.33 per share) at year-end 2021.

As of 31 December 2022, the newly adopted EPRA Loan-to-value (LTV) ratio of Adler Group stood at 74.5% (2021: 62.7%). The incurrence-based bond covenant LTV for FY 2022 was at 60.9%.

“2022 was a special and in many ways not an easy year for Adler Group. The year was characterized by a challenging market environment with rising interest rates and prices as well as the ongoing shortage of supply and skilled labor, which placed a particular burden on real estate companies like Adler Group”, comments Thierry Beaudemoulin, CEO of Adler Group. “Additionally, the year was marked by the strategic portfolio disposals that we initiated back in 2021 and continued to implement last year. We are fully committed to sensibly deleveraging the Group. The agreement reached with Adler Group’s bondholders in November 2022 marked the decisive milestone on the way to securing the Group's financial stability. After the decision of the London High Court in April 2023, we are now able to implement our restructuring plan.”

Adler Group will implement the restructuring plan in a way that safeguards the interests of the creditors in the agreed manner. As part of its strategic realignment, Adler Group will evolve over the next two years into a Berlin focused residential real estate company with limited development exposure that will diminish over that time. The restructuring plan envisages the active disposal of selected portfolios and of development projects beyond projects, which are already planned or firmly agreed for sale (e.g. as part of forward sales). Regarding individual developments, the company is aiming for a disposal in a sensible fashion reflecting the fundamental value of the assets. Following the implementation of the proposed amendments pursuant to the restructuring plan, Adler Group is not permitted to declare or pay any dividends to shareholders for the year 2022 and thereafter.

Outlook

Following significant disposals made from the yielding asset portfolio, Adler Group expects to generate net rental income in the range of €207-219 million in 2023. The company refrained from providing a FFO 1 guidance for the year 2023, as the Group's current focus is on steering its liquidity position and deleveraging through asset and portfolio disposals. The agreement with the bondholders provides sufficient time to complete planned disposals.

Note on unaudited financial statements

The consolidated financial statements for the year 2022 are unaudited. This is due to the fact, that KMPG, which was mandated to audit the 2022 financial statements, unexpectedly informed Adler Group in May 2022 that it would no longer carry out the audit of the consolidated financial statements and the annual accounts of Adler Group and its group companies. Since then, Adler Group has done everything in its power to engage an auditor for its consolidated financial statements and annual accounts for the financial year 2022. In the meantime, an agreement has been concluded with a renowned auditing firm for the audit of the annual financial accounts for fiscal year 2022 of the subsidiary Adler Real Estate AG. In addition, the Adler Group is continuing its search. The goal is to present audited financial accounts for fiscal years 2022 and 2023 latest by 30 September 2024.

Earnings call

An Analyst & Investor webcast and conference call will be held today, 25 April 2023, at 10.30am CET / 9.30am GMT. Please use this link for the webcast:

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