(Bloomberg) — Real estate investor Aggregate Holdings SA is seeking to allay concerns of alleged unlawful dealings raised by a short seller by offering some financial firms a detailed look at a paid report that finds no evidence to support the claims.
Aggregate had commissioned law firm Hogan Lovells to draft a report as it sought to counter Viceroy Research’s accusations of wrongdoing in certain real estate deals with Adler Group SA and about the role of Austrian tycoon Cevdet Caner. The firm, which announced the broad findings from the report last week without revealing its actual contents, is giving some banks and investors the opportunity to see a more detailed version if they sign a non-disclosure agreement, according to a letter seen by Bloomberg.
Aggregate is seeking to mend relationships with key backers as it faces payments to bondholders. The firm and its owner Guenther Walcher have come under fire in recent months as Viceroy’s Fraser Perring targeted Adler, one of its largest investments. Perring accused Caner –an adviser to Aggregate whose family owns stakes in Adler– of leading an opaque “cabal of kleptocrats” who have stripped the firm of value. Adler and Caner have rejected the allegations.
‘Commercial Rationale’
Viceroy’s main allegations related to the overarching, decision-making role of Caner and how he and his ‘inner circle’ used Aggregate and others to loot outside shareholders through transactions.
Hogan Lovells said it found “no evidence to support the key allegations” about Caner and the deals, which have a “commercial rationale,” according to the report seen by Bloomberg. The law firm deferred some of the questions raised by Perring’s report to Adler and other companies involved in the deals.
Here are the main transactions criticized by Viceroy and reviewed by Hogan Lovells:
- Aggregate’s CG Group sale to Consus Real Estate, a company Aggregate controlled until it was merged with Adler Real Estate in 2020
- Aggregate bought a stake in the company at 49 million euros ($56 million) in 2016 and brought it to Consus at 872 million euros a year later for Consus’ shares, creating an artificial profit, Viceroy alleged
- Hogan Lovells said that while the “increase is very substantial, CG Group was in a distressed situation but with excellent and undervalued commercial and residential development projects”
- An investment of Adler’s unit Brack Capital into Consus
- In 2018 Brack acquired 4.1% of an unrelated listed German real estate developer for 35 million euros and identified the developer only later as Consus. Aggregate “profited greatly from this purchase,” Viceroy alleged
- Hogan Lovells said Viceroy doesn’t explain in what way Aggregate profited or how the transaction was inappropriate, hence couldn’t be investigated further
- Aggregate’s signing of options with ADO Properties
- Viceroy said Aggregate was granted a put option to sell its stake in Consus in 2019, an “asset no-one wanted,” to ADO Properties, looting ADO’s shareholders. The transaction was criticized by some investors and a member of the German parliament, Fabio de Masi. ADO eventually merged with Consus and Adler Real Estate, becoming Adler Group, in 2020
- Hogan Lovells said the majority of allegations are directed at Adler, Consus and ADO, “to which Aggregate did not have preferential or special access. To the extent that the allegations refer to Aggregate, it is believed that this was the right exit from the investment in Consus”
- Consus Real Estate asset disposals
- Viceroy says Consus Real Estate sold development projects to Partners Immobilien Capital Management, owned by what it calls a character with criminal ties, and Groener Group, controlled by Consus’ former CEO, in transactions that looted Consus’ outside shareholders
- Hogan Lovells says there “does not appear to be any involvement by Aggregate” in the Consus disposals and that Aggregate and its owner Walcher didn’t “consider this to be anything other than proper arm’s length sale process”
- The tie-up drew a backlash at the time from lenders who said the deal breached terms
Brief Rally
Aggregate bonds briefly rallied last Wednesday after it said Hogan Lovells investigation had ended, but pared gains by the end of the week. Its 2025 notes are indicated at about 59 cents on the euro, according to data compiled by Bloomberg.
In the letter to banks and investors, Aggregate also pointed to a November court ruling that ordered Viceroy to no longer use four passages in the report that discuss Walcher’s relationship with Caner.
Read More: Adler Short-Seller Told to Cut ‘Untruthful’ Details From Report
The Hogan Lovells’ report also brings forward a range of allegations against Viceroy Research. The report alleges that their work “varies widely in quality” with some elements “relying on little more than anecdotes, smear campaigns.” It also says Viceroy’s targets are “subject to significant short selling before its research is released, primarily by Viceroy itself or related parties.”
Adler denies the charges made from Viceroy but is yet to respond officially to the allegations. The firm said last month that its results would be delayed to give auditor KPMG more time to deliver a forensic report that examines the allegations. Adler is under investigation by German financial watchdog BaFin over potential balance sheet irregularities.
In response to Hogan Lovells’ findings Perring said, “Viceroy are unable to comment on the unpublished report. We stand by our report that is extensively referenced and consider the lack of company response to be significant. Hogan Lovells’ report and mandate should be published in full.”
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