Adler / Aggregate - Positioning
All,
Please find our analysis of Adler / Aggregate here.
Fraud is not something you can easily detect when looking at the numbers. That’s generally the idea. But having scraped through Adler and Aggregate for the last couple of days, we have not found evidence of any value appreciations or similar that could not have occurred normally - without fraud.
Aggressive:
- The reverse take over of ADO to refinance cheaply the expensive developer debt at Consus is certainly aggressive. And some of the board resolutions do seem to favour some shareholders over others. But that issue has been out in the open for some time.
- Also, valuing some of the Consus developments at discounted completion is more aggressive than we’d expect to see, but those things are generally a negotiation with the auditor and subject to certain stages of development (percentage of completion) or pre-lease, this method is common.
Related Parties:
- It is true that large transactions have been made with related parties - to the point where Adler’s and Aggregate’s corporate governance may have failed to protect the interests of relevant parties. But that is not something we can ascertain from the documentation.
Value:
- Our work has focussed on what is there now, which entity it is in, how it’s financed, what it's worth and what cashflow it produces.
- We see the operations beneath Adler Real Estate as largely clean. There may have been some odd transactions, but the substance in place today seems stable and the valuation, although eye watering, reflects what has been happening to RE everywhere.
- The LTV at Group level is a different story. Here Group SA creditors are financing the ADO portfolio and the Consus assets and Book LTVs run high.
- Aggregate are a developer, so are dependent either on asset sales or on recognition of progress to borrow more money towards project completion. The Adler stake paid €15m in dividends, not much in the context, but it will be felt. Moreover a bond is put-able to Aggregate soon.
Positioning:
We have started by taking a 5% of NAV position in the Adler RE 26s at 94.5c/€ this morning with a view to a recovery there first. Me may be taking a more interesting position soon.
Wolfgang
E: wfelix@sarria.co.uk
T: +44 203 744 7003