CPI房地产集团美国（CPIPGR）：CPI PG 4月8日年度业绩电话会议的MW问题（英）

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MuddyWatersQuestionsforCPIPG’sApril8,2024AnnualResultsConferenceCall

DearMr.Greenbaum:

Wenoteyoumostvaluethequalities“transparency,opennessandsolidbusinesslogic.”1InthislightwesubmitthefollowingquestionswithregardstoCPIPG’s2023annualresults.

1.In2H2023,CPIPG’slendingtoRadovanVitek’scompanySenalesInvestincreasedtoapproximately€416millionfromjust€169.6millionatYE2022.2Twodaysbeforetheyearend,€273millionof

Vitek’sdebtwasoffsetinanon-cashtransactionbymeansofatransferof20luxuryvillasinDubai,17ofwhichwere“variousstatesofdevelopment.”The€273millionappearstobeincludeprincipalandinterest.CPIfinancedthislendingtoVitekthroughborrowingsofitsown-

a.WhencashflowistightandliquidityforpayingdownCPIPG’sexpensivebridgeloanisinyourownwordsa“priorityaboveallelse”,3whydidmanagementincreaselendingtoVitek?

b.Whycancel€273millionofthedebtreceivableinexchangeforluxuryproperties“invariousstagesofdevelopment”wheni)neitherthistypeofpropertynorthismarketarecoreto

CPIPGandii)valuationsofincompletepropertiesseeminglyareevenmoreeasily

manipulatedthanforcompleteproperties–particularlygivenVitekandCPIPG’shistoryofhighlyquestionablevaluations?

c.DidCPIPGallowVitektoPIKhisinterestobligation?CPIPGpurportedlychargedVitek5%interest;however,CPIPG’scashflowstatementshowsonly€3.0millionofinterestreceived,asmallfractionofthe€39millionininterestincomereportedtheincomestatement.4,5

1CPIPG2023managementreport,p.4

2CPIPG2023managementreport,p.118,149

3CPIPG2023managementreport,p.4CEO’sletterand

/cpipg-obtains-e635m-

bridge-loan-to-bolster-liquidity-protect-ratings/,

“Thatseemedtousareasonableconcessiontomakefortheextra

yearandahalfofliquidity,”saysGreenbaum.“Ofcourse,thecostofdebtisasignificantfactorforus,andweare

consciousofourinterestcoverageratio.But,rightnow,prioritizingliquidityaboveallelsemeantwewerewillingtotakeonalonger-dated,moreexpensivebridge.”

42023MR,p.136

52023MR,p.64,73

2

Below:CPIPG2023CashFlowsshowonly€3mininterestreceived

2.CPIPGreportedpurchasingtheGalopotagroupofcompaniesonNov24,2023,whichareinvolvedinoperatingtheChuchleArenaracetrackinPrague,thebreedingofthoroughbreds,aswellasoperatingracingbets.Althoughmanagementnotesthatthiswasarelatedpartytransaction,CPIPGexcludes

thefactthattheGalopotagroup’s€24.5millioninfinancialdebtsareowedtoVitek.

a.YoustatethatthekeyfocusisonreducingleverageandmaintainingCPIPG’sinterestcoverageratio–whythendidCPIPGtakeovermoremoneylosingassetsfromVitek?

b.IftheintentistopayVitekforhis€24.5millionloantotheGalopotagroupcompanies,whyrecordthisasanother€1transaction?

3

TheGalopotagroupcompanies’financialsshowthatasofYE2022theyhadinaggregate-€5min

equityandongoingoperatinglossesof~-€4m.LikethePietronitransaction(whichwecoveredinourthirdreport),thistransactionwasonceagainnominallycompletedfor€1.Theimplicitrisksinthis

relatedpartytransactionsurpassjustpotentialassetandliabilityinflation,butincluderegulatoryrisksassociatedwithgamblingandseeminglymoneylaunderingaswell.6

Below:theGalopotagroupacquisitiondisclosure

HadVitekconvertedhisdebttoequity,thetransactionwouldlikelyhavebeenrecordedwith

considerationduetoVitekof€24.5million,basedonthedealstructuredisclosed.Itseemsthatreportingthisasanother€1transactionandomittingthatthepurportedlenderisindeedVitekisintendedtoobscurematerialfactsfromlendersandbondholders.The“solidbusinesslogic”

associatedwithtransactionappearstobefromVitek’sperspective,notCPIPG’s.

Below:Marcanoa.s.(Galopotagroup’skeyholdco)FY22financialsshowthedebtsowedtoVitekpersonally7

6

/australia-news/2023/oct/19/horse-racing-money-laundering-claims-australia

7

https://or.justice.cz/ias/ui/vypis-sl-firma?subjektId=339908

4

3.CPIPGsoldVTeamPrahas.r.o.toVitek’sChuchleArenaPrahas.r.o.onJanuary1,2023and

reacquireditviatheGalopotaacquisition.Accordingtoitswebsite,VTeamPrahaisashowjumpingteamforVitek’sdaughtersAnneMarieandKristinawithastableofapproximatelytenhorses.8Its

financialsshowthatitisamoneylosingoperationrunbyVitek’swifeMarieandfinancedwithmillionsofEuroinloansprovidedbyCPIFIM,whichoftenonlyaccruedPIKinterest.

a.DoesCPIPGseeabrightfutureintheequestrianindustry?Ifnot,howdoesfinancing

activitiesmanyassociatewithdouchebaggerycomportwiththegroup’srealestateinvestmentstrategies?

b.TheJanuary1,2023saletoVitekwasexcludedfromtherelatedpartytransactiondisclosuresinthemanagementreports.Whywasthisomitted?

Below:VTeamPrague’sprofilepageshowstheteamiscomposedofVitek’sdaughters

8

https://vteam.cz/profil

5

Below:VTeamPrague’s2020financialstatementsshow€5.8m(CZK147m)inborrowingsfromCPIFIM

Below:VTeamPrague’s2020financialstatementsshowCPIreceivingonlynon-cashPIKinterest

6

Translation9(emphasisadded):Intheframeworkofshort-termobligations-controlledorcontrolledperson,significantinfluenceAsofDecember31,2020,theCompanyreportsobligationsforthecompanyCPIFIMSAduetounpaidinterestontheloanintheamountof2,146,000.CZK(2019-CZK1,890thousand)andforthecompanyCPIFIMSAduetorealcashpoolinginCZKandEUR,totaling17,764thousandCZK(2019-bythousandCZK).Theprincipalamountfromcashpoolingis17,724thousandCZK,interestintheamountof40thousandCZK.Loansarepayablemonthly,alwaysinthefollowingmonth.Furthermore,thecompanyreportsaliabilitytoCPIServices,a.s.intheamountof18,000thousandCZK(2019–OCzk).

4.In2023,thenetequityvalueofGSGBerlinreportedbyCPIPGdroppedfrom€3.718billionatYE22tojust€311millionatYE23–meanwhilereportedprofitsdoubledfrom€163to€338million.

a.WhydidtheequityvalueofGSGBerlindeclinebyover90%YoY?

b.Howdoyoureconcilethechanges–includingboththedecreaseinequityandincreaseinprofits?

Below:In2023,CPIPGreportsGSGBerlinnetequitydroppedto€0.311b(-91.6%),butresultsfortheyeardoubledto€338m10

9TranslationbyGoogletranslate

10CPIPG2023managementreports,pdfpg.184

7

Below:In2022,CPIPGreportsGSGBerlin’s(fkaGewerbesiedlungs-GmbH)netequity:€3.718b,resultsfortheyear:€162m11

5.CPIPG’sNetLTVmeasuresdebtsagainstitsquick-to-increaseandslow-to-impairportfoliopropertyfairvalues(PPvalues),includingthosemadetoundevelopedlandorlandwithdevelopmentpermitsonly(i.e.Bubny,MQM,theyet-to-bestartedbuildingsatPolygonandanyamongthe17thenew

luxuryDubaivillasindevelopment,etc.).Basedonmanagement’sDecember2023response,FVgainsarebeingbookedevenjustonprogresswithplanningpermissionandthe“prospectfor

obtainingbuildingpermits.”12

a.Ismanagementpreparedtoonlypublishfairvaluesforpropertiesunderdevelopmentforpropertieswithactualconstructionstarts–andifso,justforthediscretebuildingsthat

started,notthewholeofthedevelopmentinwhichtheyreside?

CPIPG’sfairvaluepoliciesindicatethatonceaplotoflandoranoldbuildingisdesi