(Bloomberg) -- Adler Group said it was in the process of looking at ways to lower its financing costs, as the German landlord grapples with steeper funding costs following two debt restructurings.
“It is absolutely clear that the high cost of debt is is not something that we are particularly happy with,” said chief financial officer Thorsten Arsan in a call with analysts. “So it goes without saying that it is our duty to explore ways to further optimize our capital structure and particularly to lower the interest costs.”
While Adler’s second debt restructuring has helped to bring down the company’s overall indebtedness, it is still facing a significantly increased interest burden due to the cost of financing provided by bondholders. Under the restructuring agreed this year, Adler increased the size of a new money facility, and creditors including Pacific Investment Management Co, Sculptor Capital Management and Arini Capital Management took on voting rights in the business.
The significant increase in interest has weighed on Adler’s funds from operations — a gauge of operating performance — which came in at a loss of €88 million ($92.7 million), according to a presentation on Thursday. This was largely due to the 12.5% payment-in-kind interest on a new money facility that came into play during its debt restructuring in 2023, it noted.
Other European real estate companies have been looking to take advantage of investor interest in the property market as the European Central Bank starts to cut interest rates. This week, Heimstaden Bostad AB became the first real estate firm to sell junior debt since late 2021, a riskier type of debt which is particularly attractive to landlords as they are treated partly as equity by rating companies.
As well as refinancing, Adler is also looking to undertake disposals to raise cash. The company agreed to sell its stake in Israeli-listed unit Brack Capital Properties to LEG Immobilien, creating €219 million in net cash proceeds. It also has agreed to dispose of Düsseldorf Upper Nord Quarter development project, a sale which offset a payable due to the buyer.
Arsan also said Adler was in the process of “actively marketing” a portfolio of properties in North-Rhine Westphalia. The company continues “to see significant interest for multiple investors. We remain confident to be able to announce a deal in due course,” he said.
The efforts are part of Adler’s aim to find a stabler footing after short seller Viceroy Research and a whistle blower accused it of fraud three years ago — allegations the firm has strongly rejected. They alleged that controversial tycoon Cevdet Caner, whose family invested in the landlord, was secretly pulling the strings behind the company without holding any official role.
The company also faced opposition to its restructuring in 2023, which saw holders of its longer-dated bonds successfully appeal the plan for the debt overhaul in UK courts. Adler settled all litigation in relation to the restructuring in October, it said.
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