Some of the Adler Group’s real estate projects are not progressing fast enough. In some cases, hardly any progress can be seen on satellite images. A problem for Adler.
Christoph Gröner, clean-shaven face, dark blue suit, immaculate appearance, boards a private jet. He is the founder of the CG Group, which specialized in large construction projects, many of them in major German cities. On the private jet, he says phrases like, “If you have 215 million euros, you throw the money out the window and it comes back in the door. You don’t get it broken. You buy cars. They get added value. You buy real estate, they get added value. You can’t destroy it through consumption, the money.”
However, his own business dealings were not quite as simple as Gröner made them out to be. In the report “Ungleichland,” he was presented as one of “Germany’s super-rich. When it was broadcast in 2018, however, Gröner no longer had a majority stake in his own company. Instead, it now belonged to the listed Consus AG, which later merged with the Adler Group real estate group.
Initially, it sounded as if Consus had landed a real coup with the CG Group. With the purchase of CG Group, Consus rose to become one of the most important project developers in the republic.
The purchased project portfolio has considerable potential: From 2018 to 2022 alone, the company expects cumulative sales of more than 3.5 billion euros, it said in a press release. Accumulated earnings before interest, taxes, depreciation and amortization should even amount to more than 830 million euros in the period.
One wonders if all the expectations were fulfilled.
Last year, Consus was taken over by the Adler Group, just like Adler Real Estate AG before it, which, unlike Consus, does not build residential buildings, but has spent years buying existing buildings and renting them out. In turn, the Adler Group became one of the most important real estate groups in this country and is now one of the few that builds and rents.
Recently, however, Consus has been struggling quite a bit. The company is sitting on numerous mega construction projects such as the 120-meter Steglitzer Kreisel residential tower in Berlin. Constructing such buildings swallows up vast sums of money, and unlike real estate purchases, banks are reluctant to lend. Consus was often short of cash and behind schedule with some construction projects.
The Steglitzer Kreisel high-rise, for example, is one of the tallest buildings in Berlin, with 30 floors. Until 2007, it housed the Steglitz-Zehlendorf district office. Since then, it has stood empty. Consus bought the site with the aim of converting the building into a residential building. 330 residential units were to be built on 17,620 square meters of land. Originally, construction work on the 120-meter-high building was to be completed this year, but there is now talk of completion in 2024. For some months now, hardly any construction progress has been visible. However, the Adler Group denied that work was at rest and stated that work was currently being carried out on the base. The progress there is difficult to perceive from the outside.
As WirtschaftsWoche reported at the end of October, an internal list shows that Consus subsidiary Consus RE GmbH had, however, accumulated overdue invoices of almost 80 million euros in the spring. The creditors included architects, craftsmen and construction companies.
According to the document, of almost 5,000 invoices, more than half had been due for more than a year, and some for more than two years. A spokesperson for the Adler Group told WirtschaftsWoche at the time that all of the outstanding receivables referred to were due to the CG Group acquired by Consus and agreements concluded with it. They were the subject of comprehensive reviews and discussions with the service providers, including legal disputes, he said. When asked, individual creditors said they were still waiting for their money and no longer wanted to work for Consus because of what they saw as poor payment practices. (Read more here.)
This year, according to a company presentation, the “Wilhelm Berlin” project near the luxury Adlon Hotel was also to be completed. It was to be “one of the most extraordinary and luxurious projects in Berlin,” according to the Consus homepage. The building complex was to be 85 percent residential. According to the company’s presentation, construction started in 2018, but the new building is apparently far from finished, as can be seen from the pictures. Recently, the completion of the project is also advised for the year 2023. According to a company spokesman for Adler, however, the dissatisfaction of creditors has nothing to do with the delay of some construction projects. The reasons for this are to be found at Corona, bottlenecks in the procurement of materials and “effects of building law”.
The hole of Dusseldorf
Last year should have seen a small liberation blow. In May, Consus announced that it had sold 25 construction projects. No details were given about the purchase price, but Andreas Steyer, then head of Consus, suggested that it was a good deal for his company. It was supposed to drastically reduce Consus’ net debt. The only question is whether Consus ever received any money from the deal. As recently as the end of August this year, the Adler Group – the group to which Consus now belongs – reported an outstanding receivable from the sale of almost 200 million euros.
Düsseldorf politicians now seem to be extremely annoyed. “Grand Central” is the name of a construction project that Consus wanted to realize in the state capital of North Rhine-Westphalia. It has since been nicknamed the “Grand Hole.” A thousand apartments are to be built on the site behind the main train station. The first tenants should have moved in long ago. Instead, homeless people are camping out on the wasteland.
In 2015, the Swedish Catella Group had purchased the property and had already received a building permit in 2018. Catella then passed on a large part of the project to CG Group. However, this apparently did not accelerate the start of construction. Catella now wants to build at least the 147 social housing units for which the company itself is still responsible. At the groundbreaking ceremony, Düsseldorf’s Lord Mayor Stephan Keller said he hoped the other owner would soon make a similar commitment.
In Hamburg’s Wilhelmsburg district, where the New Korallus Quarter is to be built, not much can really be seen yet either, at least from above. Consus wants to build 460 apartments, a daycare center, and retail space here. It is one of the largest residential construction projects south of Hamburg’s city center. In 2019, the Hamburg-Mitte district assembly had approved the development plan, thus laying the foundation stone for construction. According to a Consus presentation, construction was to begin last year and be completed in 2023.
The Adler Group may have other worries at the moment. In October, a speculator had posted a critical report about the company on the Internet after he himself had bet on a crash of Adler shares. The share price then also fell significantly after publication. The Adler Group reacted and announced that it would sell numerous rental properties and thus reduce its debt burden – certainly not a bad idea.
At the end of June, the Group had fairly high financial liabilities of 8.8 billion euros. It had borrowed around five billion euros from investors via bonds alone. The Adler Group’s loan-to-value ratio – i.e. the ratio of net financial liabilities to assets (known as loan-to-value, or LTV for short) – was around 55 percent at the end of June, according to the annual report, which is quite high for a real estate company.
The more rental properties the Adler Group now sells from its portfolio, the more important Consus’ construction projects become for the Group, and the more important it is that they make progress and yield money. Three years ago, for example, the CG Group, which also belongs to the Adler Group through the Consus takeover, took over the Gewa Tower in Stuttgart and renamed it the Schwabenlandtower. Almost 200 rental apartments were to be built in the 107-meter-high building, and a hotel was to move into the base. In 2019, the company had stated that the construction project would be completed in 2020. So far, apart from a peregrine falcon – and even that only for a limited period – no one has moved in.