Real Estate

Vivion’s numbers don’t add up. Literally.


Vivion is a Luxembourg-based real estate company with a €3.7bn portfolio of investment properties across Germany and the UK.

It is also the latest target of feared short seller Muddy Waters.

The US hedge fund and its pugnacious founder Carson Block are best known for publishing short reports dissecting the finances of public companies, so FT Alphaville was intrigued to see the firm shorting the bonds of a closely held private business instead.

The report on Vivion is long and probes many aspects of its business, from related party transactions involving controlling shareholder Amir Dayan to the occupancy rates of its core properties. Vivion on Thursday issued a brief riposte stating that Muddy Waters’ report “contains numerous factual inaccuracies” and that it “intends to respond to the report shortly”.

In the meantime, however, FT Alphaville has discovered one thing that does appear to contain a clear inaccuracy: Vivion’s own balance sheet.

The first section of Muddy Waters’ report questions the validity of a series of shareholder loans, flagging a series of apparent discrepancies with the balances reported at the holding companies above Vivion.

FT Alphaville decided to take a look at how Vivion reported the shareholder loans in its balance sheet. Here’s a table of Vivion’s non-current liabilities taken from its interim financial statements for the first half of 2022 (the numbers are in thousands of euros, with the left-hand column representing 30 June 2022 and the right-hand column 31 December 2021):

Have you spotted the mistake?

Vivion’s calculation of non-current liabilities for June 30 is incorrect. Instead of the €3,961,851,000 listed, the line items actually sum to €3,691,851,000. This suggests that Vivion got its 6 and 9 muddled up.

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The mistake does not appear to flow through the rest of the balance sheet, as the sum of Vivion’s total liabilities and equity incorporates the correct €3,691,851,000 figure. But it appears to be a major mistake to the tune of €270mn in a crucial part of the company’s financial statements. It also suggests the numbers were inputted manually given the seeming fat-finger mistake on swapping the 6 and the 9.

The usual question in these sort of situations is: why did the auditor not catch this?

The simple answer is that the financial statements are unaudited. 

The more nuanced answer, however, is that they were “reviewed” by the Luxembourg branch of KPMG. The audit firm concluded that nothing came to its attention that indicated that the accounts were “ not prepared, in all material respects, in accordance with IAS 34, “Interim Financial Reporting”, as adopted by the European Union.”

While not an audit, KPMG said it still entails some degree of checking the books:

A review of condensed consolidated interim financial information consists of making inquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. 

FT Alphaville asked KPMG Luxembourg about the error and it responded:

We will inform the company about the apparent transposition error in their interim financial statements. We have no further comment in view of our client confidentiality obligations.

We asked Vivion for some context around the error and the company provided us with the following statement:

The table in question had two digits transposed in the subtotal for non-current liabilities. This was simply a clerical error which was correct in the subsequent publication of our EMTN reporting, dated 11 November 2022. Both documents were signed off by our auditors.

Is this a mundane typo or an error that is indicative of wider issues with Vivion’s financial reporting? We imagine that the company’s supporters and sceptics might reach opposite conclusions.

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