Adler Rejects Hedge Fund Claims, Gives More Detail on Sale

(Bloomberg) -- Adler Group SA has rejected short-seller allegations it overstated the price of a key property sale, saying a deferred tax liability accounted for the gap between the price it disclosed and what the buyer said it paid.

A 135 million euro ($152 million) deferred tax liability will transfer to LEG Immobilien SE with the sale of the units that own about 15,000 apartments, a spokesman for Adler said in an email. The embattled German landlord sought to clarify the specifics of the deal after Argonaut Capital Partners complained to regulators about the discrepancy in LEG and Adler’s public statements earlier this month.

The LEG deal was closely watched both for the cash it promises to give to Adler to help pay down debt, and because Adler pointed to the properties fetching a price above their book value as a sign that its valuations were conservative.

Argonaut queried the announced price difference, as well as the transaction costs attached to the deal. The hedge fund, which is short Adler’s stock, filed a complaint with BaFin after it said Adler did not respond to a request for an explanation. 

Read more: Hedge Fund Accuses Adler of Overstating Proceeds From Sales

The transaction costs also include bank charges that Adler will incur as a result of early repayment of long-term loans that are secured against them, Adler’s spokesman said.

The transaction costs “are larger than usual since the secured debt is long-term debt which cannot be prepaid without the consent of the relevant financing bank,” he said. “The final make-whole and break costs are not yet determined, but Adler accounted for a buffer, both in its internal calculations as well as in its public announcements,” he added.

Adler said in the email that the terms of the final deal were above its book value, and that while the final price was about 4% lower than it initially anticipated in October, the net proceeds were higher. That’s because it sold all of its shares in companies owning the units instead of the originally planned 90%.

A representative for LEG said that the firm had taken over 135 million euros of deferred tax liabilities, which are deductible for LEG and that’s why their net price for the portfolio is 1.29 billion euros. The tax liabilities would only be triggered if LEG sells the properties, he added. 

Barry Norris, the chief executive officer of London-based Argonaut Capital Partners, said “it is disingenuous to add back a tax liability to the value of the properties in order to then claim that the deal was done above NAV, which was never previously disclosed anyway.”

©2021 Bloomberg L.P.