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NEPI Rockcastle retaliated against short-seller Viceroy, after the group released a new research paper claiming the real estate fund was overestimating profits.
In a statement issued Wednesday to the JSE, NEPI said it took note of the report and worked on a comprehensive response to the allegations contained therein.
The group's shares fell the most in nine months in Johannesburg after short sellers Viceroy Research accused the real estate fund listed in Johannesburg and Amsterdam of overvaluing its profits in Romania.
In a report released Wednesday, Viceroy said he discovered "numerous inconsistencies in NEPI Rockcastle's financial reports." Even disregarding it, the Isle of Man-based investor is "fundamentally overvalued compared to his peers," he writes.
"The report distorts the numbers," said Mirela Covasa, chief financial officer, NEPI. "We do not exaggerate profits, there are specific accounting reasons for the figures."
The Romanian NEPI portfolio generated a pre-tax profit of € 284.9 million ($ 323 million) in 2017, according to its financial statements. Yet, according to Viceroy, badets operate with annual losses of more than 40 million, citing local account deposits.
Romania is the largest market of the company and accounts for nearly half of its rental income.
According to NEPI:
- Viceroy did not request comments from the company and the company did not have the opportunity to respond to the allegations prior to the release of Viceroy's report;
- The report is based on numerous factual errors, misleading information and misrepresentations.
- The company believes that it has always been transparent to stakeholders and that its disclosures are prepared in accordance with legal requirements and best practices; and
- The company plans to take steps to hold parties responsible for presenting misleading information.
Viceory gained notoriety a little over a year ago when it published a report on the South African retailer Steinhoff International NV Holdings just after the company reported accounting irregularities that resulted in a collapse in the price of the shares.
This report details a number of third-party transactions that were used to inflate the value of badets, transactions investigated by PwC auditors.
The seller seller is also targeted by the banking group Capitec in a series of reports, claiming that the bank was a usurer and manipulated his credit books. The claims caused Capitec's stock price to fall, but it has since recovered.
Viceroy herself faced accusations of plagiarism, an investigation by Intellidex claiming that the group had copied most of its work from the Steinhoff saga, prompting investors to take note of it.
NEPI shares fell 9.5% to 10.40 rand at 12.20 pm in Johannesburg, bringing the decline for the year to 51%. Fortress REIT Ltd., another Johannesburg-listed real estate company with a 24% stake in NEPI, lost 15%.
With Bloomberg
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