Cohen Properties CEO removed from post after withdrawing 24 million shekels
An in-depth audit at Cohen Properties revealed that controlling shareholder Mike Cohen withdrew more funds than previously reported. Cohen is stepping down as CEO but will remain on the board. Despite the need to restate past financial reports, the company is taking active steps to stabilize its liquidity and recover the funds.
The Cohen Properties affair is reaching a turning point. In a new comprehensive report, the company revealed that an in-depth audit of the conduct of the controlling shareholder, Mike Cohen, uncovered a more severe situation than initially appeared: the amounts withdrawn from the company are larger, the debt was revised upward, and additional withdrawals were discovered that were not included in previous audits. Consequently, the board reached a dramatic decision: Cohen will end his role as CEO.
To recap, Cohen, a BVI company operating in US income-producing real estate, raised about 412 million shekels from the Israeli public in March. Following a request for clarification from the Securities Authority, it was discovered that the controlling shareholder used offering funds for private purposes to pay off debts on his own assets, leading to a 22% drop in bond value and a class action lawsuit exceeding 90 million shekels.
In the July 29 report, the company estimated the controlling shareholder's debt as of June 30 at approximately 7.8 million dollars. The additional audit corrected this figure to about 8.1 million dollars. A more prominent discrepancy was found in July withdrawal volumes: while previously reported at 4.87 million dollars, the updated audit found the real amount to be about 7.36 million dollars. Most of this gap stems from a withdrawal from the Chicago property account (South Dearborn), which had not been included in the previous audit. Furthermore, even after July 29, the controlling shareholder continued to withdraw an additional 1.1 million dollars.
On the positive side, Cohen is returning funds in significant volume. From July 1 to the report date, he returned about 12.58 million dollars. After offsets and deductions, the open debt stands at about 4.01 million dollars (excluding interest). Cohen has committed to transferring another 2 million dollars, and a balance of 2.1 million dollars from a Morgantown Mall transaction is expected to be credited and offset. The audit committee has imposed a 15% interest rate on the withdrawn funds.
Regarding corporate governance, the board reached an understanding that, effective August 31, Cohen will end his tenure as CEO. He will be appointed president and remain a director to contribute to business management, while CFO Ran Ben Daniel will serve as acting CEO until a permanent appointment is made. Additionally, due to banking cooperation issues regarding signature rights, the company has opened new accounts at a different bank, implementing a dual-signature requirement for the controlling shareholder and the CFO.
There is also positive news: an updated valuation for five Manhattan office properties revealed a value 54.8 million dollars higher than the original purchase cost, which will significantly strengthen the balance sheet. To further improve liquidity, the company is selling the Killeen Mall for 45 million dollars and refinancing Manhattan assets.
The company has postponed its second-quarter report and concluded that previous financial reports, including the annual report and prospectus, must be corrected as they did not accurately reflect the situation. Unlike other cases such as Simad, Cohen Properties is actively functioning, selling assets, and raising financing, suggesting a struggle for stabilization rather than collapse.
