Serdika Center in the Bulgarian capital of Sofia: One of six Central and Eastern European malls acquired by Nepi Rockcastle. Picture: FOTO FABRY, ECE, SERDIKA CENTER, SOFIA
Serdika Center in the Bulgarian capital of Sofia: One of six Central and Eastern European malls acquired by Nepi Rockcastle. Picture: FOTO FABRY, ECE, SERDIKA CENTER, SOFIA

Nepi Rockcastle shares slumped the most in nine months in Johannesburg after short-sellers Viceroy Research accused the Johannesburg- and Amsterdam-listed real-estate fund of overstating its profits from Romania.

The share was down 16% to R96.92 at 2pm on Wednesday. Fortress, another Johannesburg-listed property firm that owns a 24% stake in Nepi, fell as much as 15%.

Viceroy said in a report published on 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 misrepresenting the figures,” Nepi CFO Mirela Covasa said by phone. “We are not overstating profits, there are specific accounting reasons for the numbers.”

Nepi’s Romanian portfolio generated pretax profit of €284.9m in 2017, according to its financial statements. Yet the assets really operate at annual losses of more than €40m, according to Viceroy, citing local account filings. Romania is the company’s largest market and makes up almost half of its rental income.

Viceroy rose to prominence just more than a year ago when it published a report on South African retailer Steinhoff International Holdings 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.

Bloomberg