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Adler and Aggregate’s Azeri triangle comes full circle


One month ago, FT Alphaville took readers on a trip down a rabbit hole of transactions involving €1.4bn Frankfurt-listed real estate company Adler and its mysterious shareholder Aggregate Holdings.

It is hard to summarise the twists and turns of our efforts to unravel a web of securities lending transactions. But let’s just say it’s not every day that several subjects of an article feel the need to clarify that their dealings were “completely in line with the laws” and “nothing illegal”.

A big date in the calendar for Adler-watchers is now fast approaching. On Friday, it’s due to release the findings of a special investigation by KPMG’s forensic accounting team. As a reminder, the company is under investigation by Germany’s financial watchdog BaFin over potential accounting irregularities.

Adler has already hinted that sections of the KPMG report may make unpleasant reading for shareholders. In March, it disclosed that in the “first draft” of the investigation, the Big Four accounting firm was “not able to refute” allegations relating to “alleged related party transactions” made in last year’s bombshell short report from Viceroy Research. Adler’s chair said this was “due to currently available data” that needed to be further investigated.

The short selling outfit particularly homed in on the role of Cevdet Caner, a 48-year-old Austrian property magnate who presided over one of Germany’s biggest real estate bankruptcies. Caner denied the allegations against him in an entertaining interview with the Financial Times in October, dismissing them as “bullshit”. Likewise, Adler denied the allegations against it.

Despite concerns regarding its related party dealings, when Adler first released its summary of the preliminary findings of KPMG’s report, shareholders appeared to take comfort from the fact that valuations on its rental properties were “rock solid”. On its smaller but riskier portfolio of development projects, however, the company conceded that the Big Four audit firm’s initial findings “indicated valuation differences”.

And that’s where Aggregate — the investment vehicle of Caner’s longtime friend Günther Walcher — comes back into the equation.

Aggregate became Adler’s largest shareholder in 2020 by contributing German property development group Consus into a convoluted three-way merger. While the transaction drew the ire of minority investors, Walcher’s Aggregate booked a tidy €95mn gain on the transaction.

Given that KPMG’s concerns appear to chiefly lie with Adler’s related party dealings and its development portfolio, the fact this collection of assets began life as part of a group controlled by an associate of Cevdet Caner seemed worth digging into further.

To truly understand something, you have to go back to its beginning. And when FT Alphaville looked at the origin of Adler’s development portfolio, it took us back to a former Soviet republic that featured prominently in our last deep dive: Azerbaijan.

The Azeri money that got the Pebble rolling

In “Pledging allegiance: Adler, Aggregate and the Azeris”, FT Alphaville flagged Aggregate’s dealings with several Azeri businessmen, who were at pains to stress that they had no connection to the family of home country president Ilham Aliyev.

Truth be told, with allegations of kleptocracy levelled at Azerbaijan’s so-called First Family for years, that wasn’t much of a surprise.

Aggregate also rejected any links to the Azeri First Family in response to a Bloomberg article earlier this year. The piece laid out how Adler’s shareholder had bought properties from Azeri investors that The Organized Crime and Corruption Reporting Project has claimed acted as proxies for the Aliyev family.

Aggregate said it had worked “with reputable law firms who conducted appropriate compliance due diligence and ‘know your client’ checks” and was unaware of the allegations regarding its counterparties until Bloomberg’s queries.

Digging back even further in Aggregate’s corporate history, FT Alphaville discovered yet another link with Azerbaijan.

Back in 2016, when Aggregate was in its infancy, its shareholder Günther Walcher instigated a transaction that gave it real heft for the first time.

Walcher, who made his fortune founding a company that produces electronic barriers for ski lifts, contributed an entity called Pebble Investments into the group in December 2016. The transaction boosted Aggregate’s value by €475mn overnight, due to Pebble’s 50 per cent stake in German real estate developer CG Gruppe, becoming the crown jewel in the investment group’s property holdings.

Pebble was incorporated in mid-2015, and that same year it received a €20.7mn loan from a British Virgin Islands company Velare Finance Corp. By the time Walcher folded Pebble into Aggregate at the end of 2016, the loan had been repaid.

What is Velare? Well, corporate filings lodged in Isle of Man show that an Azeri businessman Adnan Gurbanov acted as a signatory for the company the same year.

According to OCCRP, Gurbanov is one of a handful of individuals that have acted for offshore firms that bought and sold London property on behalf of the Aliyev family. The non-profit journalism outfit reported that he took over some of these roles from his more prominent brother Gafar Gurbanov, who is a director of the investment firm Triangle that played a starring role in our last story on Aggregate.

Gafar Gurbanov and another Triangle executive also for years acted as directors of a luxury hotel Aggregate purchased in London’s Holborn district, having been appointed by the previous owner. Aggregate previously said it was “not aware at the time of the allegations regarding these directors”.

In response to FT Alphaville’s questions about the loan from Velare to Pebble, Aggregate said it was “a financing arrangement” and an “arms-length transaction and fully-repaid.” Adnan and Gafar Gurbanov did not respond to requests for comment.

Pebble is not just some obscure asset that featured in a long-forgotten transaction from over half-a-decade ago, however. In 2017, Aggregate sold the investment company to Consus Real Estate in exchange for shares that made it the developer’s largest shareholder.

Consus Real Estate 2017 annual report

Then, in 2020, Aggregate sold Consus to Adler — which described it as “a strategic stake in a high quality development company” — and became the largest shareholder in the newly enlarged group in the process.

December 2019 presentation on Adler’s merger with ADO and Consus

Whenever FT Alphaville digs into the early history of intriguing transactions involving Adler and Aggregate, it often seems that there are repeated roads leading back to Azerbaijan. It will be fascinating to discover where KPMG ended up while digging into Adler’s books.

Related Links:
Pledging allegiance: Adler, Aggregate and the Azeris — FT Alphaville



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