Hall of Shame

Real Estate

Rural Funds Group (RFF AU)

Year: 2019

Rural Funds Group (RFF), an Australian trust, is a real estate investment trust (REIT) which owns a diversified portfolio of high quality Australian agricultural assets that are leased to experienced agricultural operators (tenants).

August 6, 2019 - Short seller Bonitas Research issued a report, "Short Rural Funds".  In the report Bonitas alleged that RFF had inflated profit by at least A$28m (since FY17) through the inclusion of fabricated rental income. Bonitas believes that RFF had artificially inflated its reported financial performance to raise cash from the capital markets to help finance its attractive dividend pay-out ratio to shareholders; and to siphon funds into businesses privately held by management. Bonitas also alleged that RFF had overstated net assets by 100% and that fake profits were hidden by dubious fair value changes to RFF’s biological and property assets. 

August 7, 2019 - Rural Funds Management said it rejected the allegations but given their seriousness it had hired Ernst & Young to conduct an independent investigation of Bonitas' claims, which should take about three weeks.

August 8, 2019 - Bonitas issues a rebuttal to Rural Funds clarification announcement. and asked "if E&Y is paid by RFF to perform a voluntary review reported directly to, and paid for, by RFF, then how is RFF’s proposed review supposed to actually produce any independent findings?"

August 27, 2019 - Rural Funds announced that the independent investigation conducted by E&Y concludes that the assertions contained within the Document are not substantiated. Further, E&Y have corroborated the response provided by RFF on 7 August 2019.

September 5, 2019 - Bonitas comments on the E&Y report -   "The E&Y Report is not an audit, not a clean bill of health, and did not refute our Report’s allegations"

February 12,  2020, an Australian court ruled that Bonitas’ report was “false” and “misleading”. Note that Bonitas did not participate in the case.

Bonitas Research:  Short Rural Funds  - Aug. 6, 2019
Australian Associated Press: Rural Funds Group rejects allegations  Aug. 8, 2019
Bonitas Research: Rebuttal to Rural Funds Clarification  - Aug. 8, 2019
Rural Funds: Results of independent investigation conducted by E&Y - Aug 27, 2019
Bonitas Research: Comments on the E&Y report - Sep. 5, 2019
Bonitas Research:  Letter to Rural Funds  - Oct. 1, 2019

Business News Australia: Rural Funds triumphs over short seller Bonitas in Supreme Court   - Feb. 12, 2020
Sydney Morning Hearld:  Court blasts short-seller for false Rural Funds Group allegations   - Feb. 12, 2020

Rural Funds Group : Annual report 2019
Rural Funds Group : Annual report 2018