The Federal Financial Supervisory Authority (Bafin) examines a property valuation by Gateway Real Estate. picture alliance / Daniel Kubirski | Daniel Kubirski
The Federal Financial Supervisory Authority, or Bafin for short, has published an audit order for Gateway Real Estate AG. Specifically, it is about a half-yearly financial report from last year.
According to Bafin, there is “concrete evidence of violations of accounting regulations”. This is about a property valued at 141.5 million euros, which is said to be massively overvalued.
A new appraisal has shown that the property in Augsburg is worth around 42 million euros less. This corresponds to a devaluation of 30 percent.
Now we’re taking a closer look: the financial regulator Bafin is targeting the real estate group Gateway Real Estate. The auditors focus on the valuation of a property in Augsburg. The listed project developer is said to have overvalued the property by 42 million euros.
The area in the big city was on the residential developer’s books until June 30 last year with a value of 141.5 million euros. The property accounted for a huge portion of the total value of Gateway Real Estate’s portfolio. According to the half-yearly financial report, all “investment properties held by the group” had a value of 271.2 million euros.
Loss of value of 42 million euros
After Publication of this report This was followed by the revaluation of the property in Augsburg – and with it the devaluation. The Berlin-based company had to reduce the value of the property by 42 million euros, or 30 percent.
When asked by Business Insider, Gateway Real Estate tried to explain how a property could be incorrectly valued by 42 million euros. “The real estate is valued annually at the end of the year based on reports from external experts based on current data using internationally recognized valuation methods,” explains spokesman Sven Annutsch. At the end of the first half of 2023, the appraisal value for the property in Augsburg was continued because there was no evidence of devaluation at that time.
Information about Gateway Real Estate
Gateway Real Estate is a listed company Real estate stock corporation with a focus on the residential real estate market Deutschland. In the past, the group operated under the name “Hamburgische Immobilien” and “Energie Invest AG”.
The company is in Year 2006 been founded. The company’s shares have been on the regulated market, Prime Standard, since April 12, 2019 Frankfurt Stock Exchange written down. The company’s main shareholders are the Ketterer family (78.65 percent). Norbert Ketterer is the chairman of the supervisory board of the group, Stefan Witjes is the board. 7.86 percent of the shares are in free float.
That is the focus of the group
The company describes itself as Developer of real estate in top locations. “We develop sustainable and modern solutions throughout Germany Wooden living quarters“, the company writes on its website. His focus is on German “top cities”, is it[calledThisincludesCologneBerlinDresdenLeipzigandStuttgartaswellasselectedhigh-growthregions
core business of the listed company Based in Berlin is the construction of rental apartments for institutional investors and for our own portfolio. Accordingly, the segments “Existing properties” and “Residential property development“expanded. The AG was also in the area until 2020 Commercial project developments employed.
Despite its national work area, the group elects relatively few employees. In the most recent annual report, i.e. as of December 31, 2022, the Executive Board as a whole was included 25 employees busy.
At the request of the financing partner, the group commissioned a new appraisal. The fact that this result differs so much from the first assessment is because “the external assessor had to use a different assessment methodology because the previously used methodology led to implausible results,” said the spokesman. The new procedure resulted in a value that was 42 million lower. The value fell by 30 percent compared to the previous IAS40 balance sheet. This was also surprising for society.
What is International Accounting Standard 40?
The so-called “International Accounting Standard 40” (IAS 40) is a regulation that relates to the accounting of Investment property relates. This standard is part of the International Financial Reporting Standards, which have been adopted by many countries around the world. They should consistency and transparency in the Financial reporting to promote.
IAS 40 specifies the Accounting and valuation methods that must be applied to real estate. This applies to real estate owned by a company investment to be held instead of being your own business purposes how to use it for production or delivery. Such properties could, for example, be rented buildings or vacant land awaiting Increases in value being held.
The standard requires two important factors: the Initial and subsequent assessment. This means: A property held as a financial investment initially becomes Acquisition or production costs accounted for. Companies can then choose between a model continued acquisition cost and the Market value model choose. In the latter case, changes in fair value are recorded in the income statement.
The spokesman emphasizes that Gateway Real Estate immediately announced this devaluation itself. And in fact: The real estate group announced the devaluation on September 30th – in one sentence in a 14-page interim statement.
The real estate group’s share price collapsed completely after the property was devalued. Finance.net
The financial regulator has now announced that it is taking a closer look at this case. On April 16th the Bafin an examination of the abbreviated financial statements as of June 30, 2023 and the associated interim management report from Gateway Real Estate.
According to the financial regulator, “there are indications of violations of accounting regulations,” it says in one Notice the Bafin. She also had “indications that the property may be significantly overvalued.” Bafin is checking whether this meets the requirements for a valuation at fair value – i.e. at the market price on a specific date.
Bafin has evidence of massive overvaluation
“Companies must recognize declines in value as a result of the changed fair value in profit or loss in the period in which they occurred,” explains the Federal Institute. A request from Business Insider to the financial regulator has so far remained unanswered. There is currently no further information on the background to the audit. It remains unclear what “concrete evidence” of violations is involved.
According to media reports that Gateway Real Estate confirmed to Business Insider, the overvalued property is a project development property in Augsburg. Some of it is used commercially or industrially. This is said to be the 12,000 square meter site on which the Osram company once produced. The group acquired the area in 2019.
The company is convinced that it has prepared the half-yearly financial report correctly.
Sven Annutsch
(Spokesperson for the public company Gateway Real Estate)
According to Gateway Real Estate’s plans, the focus for the area in the future will be primarily on the housing industry. Spokesman Sven Annutsch confirms this. According to this, the company has been working on this project “for more than three years together with the city of Augsburg”. From an operational perspective, the group continues to see project development on a positive path.
Sven Annutsch emphasizes that Gateway Real Estate is convinced that the half-yearly financial report was prepared in accordance with the regulations. At this point in time there was “no reason to make a value adjustment,” said the spokesman. The group is cooperating fully with Bafin to clarify the matter. It is assumed that “the investigation can be brought to an amicable conclusion in a constructive and professional dialogue,” he said.
Group with pre-tax loss of 185 million euros
The group recently published preliminary business figures for the past year. He therefore made a pre-tax loss of 185 million euros. A loss of 52 million euros was forecast, writes the real estate newspaper. According to the company, there are two reasons for this discrepancy. On the one hand, value adjustments were made to financial receivables amounting to a good 100 million euros. On the other hand, a depreciation of 29.7 million euros was made on real estate projects.
Gateway Real Estate originally planned to publish its audited consolidated financial statements for 2023 on April 30. However, the company postponed this planned date at short notice. It is unclear whether there is a connection to the Bafin exam. The listed company’s official justification was that it wanted to wait for the outcome of ongoing negotiations on two project transactions and the announced extension of project financing.