NEPI Rockcastle Shares Slump on Viceroy Report Over Profits

(Bloomberg) -- NEPI Rockcastle Plc shares slumped the most in almost 10 months in Johannesburg after short sellers Viceroy Research accused the Johannesburg and Amsterdam-listed real estate fund of overstating its profits from Romania.

Viceroy said in a report published Wednesday that it had uncovered “numerous inconsistencies within NEPI Rockcastle’s financial reporting.” Even without taking those into account, the Isle of Man-based investor is “fundamentally overpriced when compared with peers,” it wrote.

“The report is based on numerous factual errors, misleading information and false claims,” NEPI said in statement. “The company is considering taking measures to hold any parties accountable for presenting misleading information.”

NEPI’s Romanian portfolio generated pre-tax profit of 284.9 million euros ($323 million) in 2017, according to its financial statements. Yet the assets really operate at annual losses of more than 40 million euros, according to Viceroy, citing local account filings. Romania is the company’s largest market and makes up almost half of its rental income.

Viceory rose to prominence just over a year ago when it published a report on South African retailer Steinhoff International Holdings NV just after the company reported accounting irregularities that triggered a share-price collapse. That report detailed a number of third-party transactions that were used to inflate asset values, deals that are under investigation by auditors at PwC.

NEPI shares declined 13 percent to 99.94 rand as of 3:36 p.m. in Johannesburg, extending the drop for the year to 53 percent. Fortress REIT Ltd., another Johannesburg-listed property firm that owns a 24 percent stake in NEPI, fell 4.9 percent.

NEPI’s 400 million euros notes maturing in February 2021 are down eleven cents to 90 cents on the euro, the lowest level since their issuance in November 2015, according to data compiled by Bloomberg.

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