(Bloomberg) -- A key Adler Group SA subsidiary that German regulators say had erroneous 2019 accounts is the target of efforts by shareholders and bondholders to appoint a special investigator. 

Adler investors led by Schutzgemeinschaft der Kapitalanleger, a German lobby group for shareholders, plan to propose a special audit of Adler Real Estate at the unit’s annual meeting this month, according to Marc Liebscher, a member of SdK’s board. A group of the unit’s bondholders, including hedge funds such as GLG Partners, told the company in a letter last week they are separately pushing for a special investigator, according to a copy seen by Bloomberg News.

Those efforts began even before Germany’s BaFin on Monday accused the embattled landlord of booking a property sale at a price that was roughly double a fair valuation, causing Adler Real Estate’s 2019 financial statements to be wrong. Adler said it would appeal the ruling. 

The investors are placing further pressure on management as concerns mount about the financial position of the landlord. Sweeping asset sales and a forensic probe into allegations of fraud failed to stop a slide in Adler’s shares and bonds to record lows. Bloomberg reported in May that prosecutors in Frankfurt opened a probe into Adler after BaFin filed a complaint.

Adler Real Estate has faced investor scrutiny over a loan it gave its parent and a deal earlier this year to buy a portfolio of apartments from Adler Group for cash. The creditor group that is pursuing a special audit has already called on Adler Real Estate’s management to quit over the deals that the investors say puts key collateral out of their reach and could make it harder for them to get their money back in the event of an insolvency.

Shareholder Action

SdK’s motion to appoint a special investigator could be announced as soon as August 16 ahead of presenting the item at the AGM, Liebscher said. The motion could then be filed directly to the courts, he added. 

An Adler spokesperson declined to comment.

The probe led by SdK, which was involved in the Wirecard litigation, aims to look into Adler Real Estate’s financial statements as well as the role of Cevdet Caner, the Austrian tycoon who runs one of Adler’s biggest backers and whose wife is Adler’s second-biggest shareholder. While Caner has denied any high-level involvement in running the firm, a KPMG report - commissioned by Adler to refute short-seller allegations that Caner was the firm’s undercover boss - showed him setting meetings and weighing in on pay.

Created through a controversial three-way merger two years ago, Adler Group has more than 7 billion euros ($7.2 billion) in outstanding debt, issued in part by subsidiaries such as Adler Real Estate that were standalone companies before. Its market capitalization has fallen from 2.6 billion euros in August last year, to around 412 million euros, a fraction of the book value the firm’s ascribed to its property holdings.

Creditor Group

Earlier this year, Adler Group sold a portfolio of 1,400 Berlin flats to Adler Real Estate for 326 million euros. In December, the parent company borrowed 265 million euros from Adler Real Estate and didn’t disclose the loan until late March -- when it said the loan agreement had been signed that day -- prompting investors to ask whether the money may have been used without proper approval.

In the letter last week, the creditor group urged Adler Real Estate’s board to demand repayment or collateral for loans granted to parent Adler. The bondholders wrote that Adler has so far refused to meaningfully engage with them. 

Read More: Adler Bondholders Escalate Fight After Internal Cash Transfer

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