The curious case of struggling German property group Adler

The rapid rise and fall of German property group Adler a fine case study in how investors turn a blind eye to red flags in every boom – and the perils of doing so.

Protest against high rents in Berlin
Attempts to raise rents in Germany have led to protests
(Image credit: © Christophe Gateau/dpa/Alamy Live News)

To Sherlock Holmes she was always “the woman”. Irene Adler, the antagonist in Sir Arthur Conan Doyle’s short story A Scandal in Bohemia, was one of the few characters to outwit Holmes. Adler Group, on the other hand, is a German property company that is caught up in its own, rather less Bohemian scandal. Adler’s shares are down 83% in the past year, its auditors have bailed out, and its future is uncertain. Its rapid rise and fall is a fine case study in how investors turn a blind eye to red flags in every boom and the perils of doing so.

The background to Adler’s situation is complicated, to the point where it would tax even Holmes. In brief, however, over the past decade an obscure real-estate firm called Adler Real Estate became a major player in residential property, owning about 70,000 flats across Germany at its peak. This growth was funded through debt rather than issuing equity, and as the real-estate market boomed, Adler Real Estate’s shares rose from around €0.50 to a peak just above €15.5 by 2018.

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Bruce Packard
Contributor

Bruce is a self-invested, low-frequency, buy-and-hold investor focused on quality. A former equity analyst, specialising in UK banks, Bruce now writes for MoneyWeek and Sharepad. He also does his own investing, and enjoy beach volleyball in my spare time. Bruce co-hosts the Investors' Roundtable Podcast with Roland Head, Mark Simpson and Maynard Paton.