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Adler Group S.A. is a Luxembourg-based company that specialised and focused on the purchase, management, and development of income-producing multi-family residential real estate with a portfolio of residential and commercial units. The portfolio of the company and its subsidiaries is situated in or on the outskirts of urban areas in Northern, Eastern, and Western Germany, such as Berlin. It was formerly known as ADO Properties.

The company listed on the Frankfurt Stock Exchange (Xetra) in July 2015 and raised €456.50m in its IPO. The managers of the offering were Barclays, Commerzbank, Kempen & Co NV and UBS Investment Bank/London. Additional share offerings between April 2016 and July 2020 raised €316.80m: (i) 22-Apr-16: €99.75m, (ii) 15-Sep-16: €198.80m, (iii) 21-Jul-20: €18.25m.

On 6 October 2021, shortsellers, Viceroy Research, published a 61 page report; "Adler Group - Bond Villains". Viceroy believed that Adler Group was a hotbed of fraud, deception and financial misrepresentation designed to hide its true financial position, which it thought was bleak. It said that Adler Group was controlled by a cabal headed by financier Cevdet Caner who held no official position within the company.

Viceroy described Adler Group’s modus operandi as acquiring or forcing mergers with better capitalised companies to then saddle them with debt. That management then channelled cash and assets to enrich its friends and associates via undisclosed and blatantly uncommercial related-party transactions, many of which were never intended to be settled in full. Viceroy noted that the related-party nature of these transactions was always hidden and it was not a matter of one or two small transactions. Three types of transactions that Viceroy uncovered during it's research were :

1. Looting Transactions - an asset is bought from an Adler Group company by a related party at a deflated price; or an asset is sold to an Adler Group company by a related party at an inflated price. Consus was Adler’s biggest looting transaction; it acquired it from a related party and major shareholder for €800m. The related party acquired this same asset for €49m less than a year prior.
2. Marking Transactions - where an asset is bought by an undisclosed related party at an inflated price, but the consideration is never settled in full. Adler’s book is then artificially marked up by unrecovered receivables. The biggest example was Gerresheim - A 75% stake in a project, owned an Adler subsidiary, was sold to a related party at an inflated price, of which only a third has been paid. This created fake paper profits which allowed Adler to borrow more money. The Gerresheim transaction was subsequently reversed, and Adler disclosed no major works have been completed. A mortgage was taken out against the underlying Gerresheim property by the new “owners” to the sum of €145m. A loan from Adler was also granted to the holding SPV for the sum of €75m to date. On reversal, there is insufficient cash to repay these loans.
3. Coup D’état Transactions - Adler, often with leverage and in concert with undisclosed related parties, buys a controlling stake in an asset-rich company. Then it flips the board and attempts to force a merger with the parent and proceeds to loot the asset-rich target via “looting transactions” and “marking transactions”. Adler Real Estate entered into an aggressive business combination with ADO Properties. Adler effectively took control of ADO with a relatively small stake financed by a bridging loan. ADO Properties (now controlled by “old Adler”) acquired Adler Real Estate and renamed itself “Adler Group”. Now in full control of a better capitalised entity.

Viceroy's investigation also noted that Adler would be substantially in breach of its bond covenants. Adler had insufficient liquidity to repay its bonds in a default scenario and did not have good assets to pledge or sell to raise money in an emergency. It believed that Adler concealed its true leverage by changing the way certain figures (e.g. LTV) are calculated and by recording semi-sham transactions that allowed it to realise paper gains and fabricated deductions against its debt.

Viceroy concluded that Adler’s business was built on systemic dishonesty and fraud to enrich friends and associates. That its balance sheet had been artificially inflated to a significant degree, its shares were not investible, and its bonds were almost certain to default with very large impairments. For these reasons Viceroy refused to assign a target price to Adler’s shares and believed they were un-investable.

Adler responded to the Viceroy report on the same day. It said that a key allegation was that the real estate asset values on ADLER's balance sheet were artificially inflated was evidently false. Adler pointed out that the real estate value set forth in its balance sheet had been determined by independent market leading real estate property appraisers and confirmed independently by financing banks. Adler added that numerous other allegations were false and it was currently preparing a detailed response to these allegations.

On 8 October 2021, Adler issued a press release with a further response to the report. It outlined asset valuations from leading appraisers at market standards to counter some of Viceroys allegations. Adler decided to appoint external independent advisers and auditors to conduct a comprehensive review of the allegations, especially regarding the third-party transactions. It said the outcome of the analysis would be made public once it was available.

Also on 8 October 2021, Bloomberg published an article "Tycoon Behind a Crisis-Era Property Crash Now Sits on a $9 Billion Debt Mountain". Part of the article revealed that in March 2021, an anonymous whistleblower had emailed major banks that have transacted with Adler. The email alleged that Caner was concealing his involvement in Adler and several related companies through “complicated opaque structures”. The allegation was that he secretly controlled Adler Group, having masterminded a series of acquisitions and mergers that had reshaped the German real estate market.

On 12 October 2021, Viceroy published a follow up, "The Whistleblower vs. The Lawyer". It contained a copy of the whistleblower email and a cease-and-desist letter from Cevdet Caner's lawyer. Viceroy was of the opinion that the letter did not even attempt to disprove its collected evidence of undisclosed related party transactions. That the letter instead relied on unsupported claims of impartiality and complete ignorance of its extensive referencing of sources. Viceroy confirmed it would not be complying with this cease-and-desist letter.

On 28 January 2022, the company announced a delay in release of its 2021 annual report. The company auditor, KPMG Luxembourg, had informed it that the delay was due to the on-going forensic special investigation on the Viceroy allegations, which should be completed prior to the issuance of an audit opinion.

On 10 February 2022, the German financial regulator. Bundesanstalt für Finanzdienstleistungsaufsicht (BaFin), confirmed it had launched an investigation about possible accounting irregularities at Adler Group.

On 10 March 2022, KPMG provided Alder Group with an update on its investigation. KPMG update noted:

• KPMG was not able to refute the allegations made regarding the related party transactions with the data provided to it,
• It refuted the allegations regarding the recoverability of ADLER's residential portfolio,
• The allegations regarding the development portfolio had only been partially refuted.

The investigation was on-going and the Adler said it expected to publish its annual report by the end of April.

On 21 April 2022, KPMG completed and issued its 127 page investigation report. The report did not provide a summary or conclusion. The points of note in the report were:

• KPMG found extensive evidence that Cevdet Caner was heavily involved in strategic decisions, the hiring of executives and their pay, as well as other operational matters. It also identified roughly €12.6m in consulting fees paid to Caner between 2018 and 2020.
• The investigation rebuffed the allegation that Adler’s rental portfolio was overvalued, it found that this did appear to be the case for the firm’s smaller property development portfolio. Based on a sample, KPMG’s forensics team estimated that the realistic market value was 17 per cent below the €2.4bn value on Adler’s accounts.
• KPMG noted that another real estate deal, which involved the brother-in-law of an investor who seemed to have pulled the strings behind the scenes at Adler, needed to be corrected on the balance sheet.
• KPMG questioned the €375m valuation of the Gerresheim deal in Dusseldorf, for which full documentation was not provided. It said that the allegation that the sales price for the project company was excessive could not be refuted by KPMG.
• KPMG said that it could neither verify nor refute many allegations as it had not obtained all necessary documents. Adler refused to grant access to one in five of the 3.9m documents deemed relevant by the investigators, citing “legal reasons”. The probe noted that some redactions were “significant” and it “could not rule out the possibility that further or different findings could result”.

On 29 April 2022, Viceroy released a review of the KPMG report. In its review it noted:

• KPMG Limitations - Adler withheld approx. 800k documents from KPMG; Adler ignored requests for explanations and supplement documents from KPMG; Bank documents were not made available, KPMG were rushed by management to complete; scope boundaries were set to only investigate the Viceroy's report. KPMG did not extend the investigation into media reports of malfeasance and corruption at Adler, nor the context of investigations of various regulatory investigations.
• Cevdet Caner - KPMG's investigation appeared to confirm that Adler's management and board took their orders directly from Cevdet Caner. Caner operated through Meridien Capital Management's structure to organize meetings with the board, dictate acquisitions, approve senior management remuneration, and timetable market-sensitive announcements.
• Financial Controls, Looting, & Disposals - KPMG highlighted that little or no due diligence was completed in respect to various acquisitions, including that of ADO and Consus. KPMG's investigations showed these acquisitions were driven by Cevdet Caner and his Cabal. These transactions were results of demonstrably inexistent internal controls.
• Development Portfolio - Viceroy provided a detailed status update on all of Adler's ongoing development projects, showing that most projects are shut off, and have failed to maintain basic administrative activities. Many have not lodged financial reports since 2019.
• Residential Portfolio - Viceroy believed that KPMG had avoided making any realistic assumptions and had assessed the portfolio independent of the rampant dirty dealing at Adler. It noted that KPMG's breakdown of Viceroy's findings – together with the apparent basis of their response – was simplified to a point where they were neither useful nor provide meaningful analysis.

Viceroy said it stood by its research and concluded - "We don't see how KPMG can obtain reasonable assurance that Adler's accounts are free of misstatement, and thus do not believe audits will be complete in Adler's brief deadline."

On 30 April 2022, Adler published it 2021 financials. However, KPMG issued a disclaimer of opinion. In a statement released by KPMG, it said that based on the investigation findings, KPMG was unable to complete its audits of the 2021 annual accounts. It added that its audit of the 2020 accounts could no longer be relied on.

On the same day, Alder announced that due to the disclaimer all directors who held a mandate in 2021 collectively offered their resignation with immediate effect. Four resignations were accepted by the chairman and the rest requested to remain until the upcoming AGM.

On 17 May 2022, the company announced that KPMG had informed Alder that KPMG was not available to audit the 2022 financial statements.

On 1 August 2022, BaFin released an interim finding of its probe into Alder. It found that, in Alders 2019 financial statements, Gerresheim was valued at €375m. This represented an overvaluation of between €170m and €233m. BaFin added that the reported values for the balance sheet items “Non-current assets held for sale” and “Income from fair value adjustments of investment properties” were therefore too high.

On 17 November 2022, BaFin issued another interim findings on its investigation into Alder's 2019 financials. It said that ADO Properties should not have been consolidated into Alder's financial statements. The effect of this was that various balance sheet items were overstated:

• Non-current assets held for sale were overstated by €4.4bn,
• Liabilities held for sale were overstated by €1.7bn
• Non-controlling interests were overstated by €1.7bn
• consolidated total assets were overstated by €3.9bn and
• total comprehensive income was overstated by €543m.

BaFin said its investigation into Adler's 2019 financials was still on-going and also the review of the 2020 and 2021 financials.

On 25 April 2023, Alder published its unaudited 2022 financial statements. The company had been unable to enagage a new auditor since KPMG's resignation in May 2022.

On 28 June 2023, the public prosecutor's office in Frankfurt and the Federal Criminal Police Office (BKA) raided a total of 21 properties – including Alder's & Caner's business premises, apartments and a law firm, in Berlin, Düsseldorf, Cologne and Erftstadt as well as in Austria, the Netherlands, Portugal, Monaco, Luxembourg and Great Britain. The raid was part of a sprawling investigation into suspected false accounting, market manipulation, and breach of trust.

Viceroy Research: Adler Group - Bond Villains, 6 Oct 2021
Adler Group: First Statement on the Report from Viceroy, 6 Oct 2021
Euronews: Real estate firm Adler rejects allegations made by Viceroy as shares tumble, 7 Oct 2021
Adler Group: Asset Valuations from leading Appraisers at Market Standards, 8 Oct 2021
Bloomberg: Tycoon Behind a Crisis-Era Property Crash Now Sits on a $9 Billion Debt Mountain, 8 Oct 2021
Viceroy Research: Adler Group - The Whistle blower vs The Lawyer, 12 Oct 2021
Reuters: Germany’s BaFin probes Adler Group’s financial reports, 10 Feb 2022
Adler Group: Interim status of comprehensive review by KPMG Forensic, 10 Mar 2022
Financial Times: KPMG not able to refute allegations against Adler Group, 11 Mar 2022
KPMG: Adler Group Investigation Report, 21 Apr 2022
Bloomberg: Adler Says Vindicated By Audit Showing Murky Fees, Opaque Values, 21 Apr 2022
Viceroy Research: Adler Group – Review of KPMG Investigation, 29 Apr 2022
KPMG: Official statement on Adler Group SA, 30 Apr 2022
Adler Group: Changes in the Board of Directors, 30 Apr 2022
Financial Times: KPMG refuses audit opinion on embattled real estate group Adler, 30 Apr 2022
Viceroy Research: Adler Group - Conference Questions, 3 May 2022
Financial Times: KPMG ditches troubled German real estate group Adler as audit client, 17 May 2022
BaFin: BaFin identifies accounting error in the valuation of Gerresheim site, 1 Aug 2022
Financial Times: German regulator says Adler overstated 2019 accounts by up to €233mn, 2 Aug 2022
BaFin: BaFin identifies further accounting errors, 17 Nov 2022
Financial Times: Adler inflated balance sheet by €3.9bn and earnings by €543mn, BaFin finds, 17 Nov 2022
The Australian Financial Review: Inside Adler’s fight for survival after its 97pc stock plunge, 12 Mar 2023
Financial Times: Police raid more than 20 offices and premises in Adler Real Estate probe, 28 Jun 2023
Bloomberg: How German Landlord Adler Ended Up the Target of a Seven-Country Raid, 29 Jun 2022
GMT Research: Alder Group – AGS FY 2020
Adler Group: Annual Report (Unaudited), YE Dec. 2022
Adler Group: Annual Report, YE Dec. 2021
Adler Group: Annual Report, YE Dec. 2020
Adler Group: Annual Report, YE Dec. 2019
EQS.News: Alder Group Filings