Creditor Seizes Control of Cohan Properties Amid Financial Scandal
A creditor has seized control of American real estate firm Cohan Properties after its CEO misused millions in company funds. The takeover follows failed bond issues and regulatory scrutiny.
The turmoil surrounding the American real estate company Cohan Properties continues to unfold. Just two months after it was revealed that controlling shareholder Mike Cohan misused company funds for personal purposes, one of his creditors has decided to take over the firm, which raised approximately 412 million shekels from investors in Tel Aviv earlier this year through a bond issuance.
The Takeover by Dekma
Behind the takeover is Netanel Lorenzi, the controlling shareholder of Dekma, whose shares were previously traded on the local stock exchange. Dekma, which held a lien on all of the company's shares, announced its decision to enforce the lien, effectively becoming the sole shareholder with a 100% equity stake. According to the company's announcement, this move may constitute grounds for putting the bonds up for immediate repayment.
In the background, Dekma and Lorenzi share a history with the local capital market that includes run-ins with regulators and investors, culminating in a fine of 525,000 shekels imposed by the Israel Securities Authority. This penalty stemmed from risky investments made by Lorenzi using company funds contrary to his authority, which generated losses amounting to millions of shekels.
Lorenzi executed short sales of stocks and exchange-traded funds tracking stock indices totaling over 11 million dollars. However, the gamble failed dramatically. The shares targeted by Lorenzi's short positions—including the ETF managed by prominent investor Cathie Wood heading the ARK fund, as well as electric vehicle manufacturer Tesla—actually rose in value, dragging Dekma into multimillion-dollar losses.
The Troubles of the American Firm
The transfer of control is another grim chapter in the brief history of Cohan Properties, which operates in the U.S. commercial real estate sector. This past March, the company raised about 412 million shekels from Tel Aviv investors via bond issuance, receiving an A2 rating from rating agency Midroog, which was subsequently downgraded to A3 following the events. However, a few months later, it transpired that CEO and controlling shareholder Mike Cohan had unlawfully withdrawn funds from the commercial property company's coffers to repay another loan for his private businesses.
"Events of this kind will never happen again," Cohan quickly promised investors while apologizing.
Yet it soon became clear that statements and actions diverged. At the beginning of last month, the company announced that during August, Cohan withdrew an additional sum of approximately 1.1 million dollars from the firm. This occurred after the affair had already been exposed and despite Cohan's own claims that his actions were not malicious but stemmed from a lack of awareness.
Management Shakeup and Background
Following these incidents, the company's board of directors reached an understanding with Cohan whereby he would vacate the CEO seat, to be filled by Chief Financial Officer Ran Ben Daniel. Although Cohan was initially appointed as company president, the title was revoked after it emerged that the scale of the withdrawals and liens he executed was higher than initially reported. Furthermore, his signing rights were revoked and transferred to the CEO.
Cohan Properties, which holds 17 income-producing properties spread across 13 U.S. states valued at 420 million shekels, entered the stock exchange as part of a renewed wave of bond issuances by BVI companies in Tel Aviv. These are companies incorporated for fundraising purposes in the British Virgin Islands, to which owners—typically Jewish-American businessmen—transfer a portion of their real estate assets to raise debt in Tel Aviv.
