Police raid over 20 offices and premises in Adler real estate probe

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Police raided more than 20 offices and premises on Wednesday as part of a wider investigation into suspected false accounting, market manipulation and breach of trust at controversial German property group Adler Real Estate.

Simultaneous raids in Germany, Austria, the Netherlands, Monaco, Portugal, Luxembourg and the UK covered 21 offices, a law firm and other properties, including the property of Sevdet Kanner, an Austrian property baron living in Monaco.

In Germany alone, 175 prosecutors and officers from the country’s federal criminal police BKA participated, prosecutors said in a press release. Although Adler Real Estate or Canner were not named in the release, both confirmed the raids to the Financial Times.

The drastic move by law enforcement officials marks a major escalation in an accounting scandal at the Berlin-based and Frankfurt-listed real estate group.

Shares of the real estate company’s Luxembourg-based holding company, Adler Group, which have been virtually flat over the past two years, are trading at €0.43 on Wednesday. The holding company lost €2.9 billion in market capitalization during that period.

The Adler Group was exposed in 2021 after short-selling group Viceroy Research accused the company of widespread fraud and improper transactions involving Canner and Luxembourg-based investment firm Aggregate, one of the company’s major investors. Has been

German financial watchdog BaFin found last year that Adler Real Estate, which owns more than 26,000 housing units in Germany, inflated its balance sheet by €3.9bn and its earnings by €543mn in 2019 and filed a criminal complaint against the company Did.

Earlier this year, the London High Court approved a controversial restructuring plan of €3.2 billion worth of bonds that saved the Adler Group from impending bankruptcy.

He said in his press release that Frankfurt prosecutors are targeting several individuals aged 38 to 66 over suspected criminal acts between 2018 and 2020.

People familiar with the investigation told the FT that most of the suspects are former senior managers at Adler Real Estate. The Adler Group said in a press statement that the investigation was not directed against any board member of the Adler Group.

Canner’s Berlin-based lawyer Ben Erle confirmed that his client’s premises in Monaco and London were raided.

Canner told the FT that he was “delighted” by the formal investigation as he had finally “found out what the allegations are”, adding that he was “absolutely relieved and I am fully co-operative”.

Pointing to a prior court case in Austria over alleged fraud and money laundering in which he had been acquitted, he insisted that he had been “wrongly accused before and won all cases”.

Adler Group said: “The investigation is taking place in the background of a business transaction. , , in 2019, which will extend to 2020.

It said it was cooperating fully with law enforcement authorities, but declined to comment further. Aggregate did not immediately respond to a request for comment.

One of the transactions targeted by prosecutors is the 2019 sale of a property project in Düsseldorf known as the Gersheim deal, people with knowledge of the matter told the FT.

According to BaFin, it was booked at nearly double its fair valuation, adding up to €233mn to Adler Real Estate’s accounts. The counterpart in the transaction was one of Canner’s close relatives.

The watchdog said Adler Real Estate was dismissive of BaFin’s criticism of the Gersheim transaction and other issues. The company is taking legal steps against the regulator’s findings.

In addition to questionable accounting and market manipulation, prosecutors raise the issue of other asset sales as well as the Geresheim deal, which they fear inflated prices and inflated loan-to-value ratios.

A forensic audit commissioned by KPMG following Viceroy’s allegations also found that Canner was paid €12.6 million for unspecified “advisory services” in two M&A transactions, while Adler Real Estate received an undisclosed sum. Some bonds of Aggregate were also bought in the transaction.