The audit results overview of the Spanish branch operations

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The main purpose of this update is to provide you with a full overview of the current situation with each project, together with relevant documents. All the actions we have taken in 2023 had a single goal, to protect the investment projects and the invested capital. That is also the main priority for the new Spanish team, to resolve the issues that the previous management and construction company created, and to move towards the repayment with each project.

Starting the Spanish branch operations

In 2021 with Kirsan entering Reinvest24 as a shareholder, Reinvest24 expanded to the Spanish market forming an SPV. Maxim Enachi was appointed as an Administrator of the SPV to implement the projects on the local market. Spanish SPV successfully acquired 4 projects on the Spanish market in the Valencia area and was in the process of acquiring another two.

The need to step in and make changes

In 2023, after annual reports for previous years were still not presented and multiple projects were experiencing delays with their implementation and completion, we initiated an independent review of the projects to get a second opinion, with the goal of speeding up processes. The first information that came back forced us to initiate the replacement of the management in the Spanish branch and make a full review of the previous operations.

Auditing and reviewing previous operations

The dismissed director Maxim Enachi didn’t provide any of the documentation for the company accounting or project implementation, that the Administrator of the company should naturally have and provide after being dismissed. This made the reviewing process difficult and lengthy, as we had to recover the documents one by one from different entities. We are still currently working on fixing accounting and construction mistakes and irregularities.

Results and current situation

In the second part of 2023, we achieved full control over the Spanish SPV and the real estate properties the company owns and we have completed the lengthy reviewing process. In this process, we identified many questionable actions by the previous management and Kirsan Building SL, which made us initiate legal actions to apply protective measures. Unfortunately, the Spanish court has been extremely slow to process our request.

Montesano

The Montesano land plot was acquired by Spanish SPV RE24 ESP SL in 2021. In the loan agreement concluded and signed by Maxim Enachi as the director of Spanish SPV (borrower), it was agreed that this land plot is the collateral for investor’s loan and Maxim Enachi takes personal responsibility for it.

The land plot is quite large and was supposed to be divided into 5 independent plots with houses built on each one of them. The documents for the division were allegedly presented to the local authorities by SPV management, but authorities experienced long delays in processing this division. The initial estimation for the project implementation provided by Maxim was 12 months. Maxim chose Kirsan Building as the main subcontractor for performing the work on this plot. From the beginning of the project following works have been performed:

• Cleaning from old trees and leveling of the land plot – 30,000 EUR to Kirsan Building
• Agency fees 6,352 EUR
• Taxes 35,000 EUR
• Architectural planning related to land division 6,455 EUR
• Architectural project 2,686 EUR
• Operational expenses

Current situation

In May 2023 during the audit, auditors noticed the pending registration of some kind of agreement for this property. Maxim Enachi never provided explanations for this despite multiple requests. At the end of June, during the RE24 ESP SL shareholders meeting, Maxim Enachi stated that everything is progressing with the Montesano project, while he actually performed a sale of this plot to Kirsan Building SL already in January and correction to this agreement was made in April.

In July we were able to get the mentioned in nota simple agreement from the notary. The agreement stated that the land plot was sold in January to Kirsan Building SL to settle the debt (without explanation), while in the balance sheet of RE24 ESP SL at the end of 2022, there was no debt in front of Kirsan Building SL. While we were monitoring the Spanish SPV bank account transactions, there were no payments done regarding this transaction. The notary and other fees were paid in some other way. It is also important to note that the sale transaction was made by Maxim Enachi to satisfy 350’000 EUR Kirsan Building SL’s alleged claim, while the property value was estimated to be 750’000 EUR.

The claim to the Spanish court was immediately filed (beginning of August) to apply protective measures to this sale transaction (and land plot) until the case was reviewed by the court. We’ve been expecting a fast reaction from the court for such an important matter. Regretfully, despite several visits and reminders by lawyers, the court set the hearing of our application for protective measures to 13 December 2023 only. In December the hearing was postponed to January 29th and later to March 28th, 2024 due to the request of Kirsan Building SL and Maxim Enachi’s lawyer (representing both) explaining by the inability to be present and the date conflict with another hearing.

In November it also became evident that despite all presented requests Kirsan Building SL sold the Montesano land plot to PUCHANETTI SL.

At the moment we are still expecting the court’s reaction to the presented claim and some judgment.

Xirivella

Xirivella acquisition preliminary agreement was signed at the beginning of 2021. The initial estimation provided by Maxim for the project completion was 9 to 12 months. The property was sold by the bank, and the ownership of apartments went over to Spanish SPV, but storage room ownership belongs to the previous owner, the company, which is in bankruptcy. Spanish SVP has mortgages on those storages. The bankruptcy administrator of the owner company is the same person, who represents Kirsan Building SL and Maxim Enachi in court.

Once the new construction company was able to enter the building (the keys and the security codes were not passed over by the ex-Administrador or construction), the works done and the works required to finish the construction were assessed. The amount of work required to be performed to finalize the construction was estimated to be in the ballpark of 150’000 EUR, but later we also got information that some additional debts exist e.g. for the works performed by the Architect team, electric company, and others. Some works needed to be redone due to poor quality. Also, the premises were used by Kirsan Building SL to accommodate their employees (construction workers), which required almost total renovation and replacement of furniture and technics of 2 apartments. The cost of the cleaning of the premises alone was 6,000 EUR. Also, additional works on cleaning some elements from construction dust have yet to be performed – e.g. conditioner pipes, that should but were not isolated during the dusty construction process. There is still an issue with storage rooms to be resolved.

Current situation

The Xirivella apartment building in Valencia is currently owned by Spanish SPV. At the moment the new team is finalising the construction of the premises and demonstrating the apartments to the potential buyers. As of right now, 1 out of 10 apartments is reserved and this property is closest to completion of all the projects managed and implemented by the Spanish SPV.

Gandia

The project was started in 2022 and the fee to book the property was paid to the land owner. The rest of the settlement of this deal was supposed to happen as an exchange for Xirivella apartments. This is the agreement concluded by M.Enachi with the seller. There were also payments made to the local government for construction licenses.

After M.Enachi was removed from the management the Gandia project was reassessed (as all others) and the conclusion was that in the current situation, the financing of the construction would be problematic and potentially lead to a ‘stuck’ project, and also the liquidity of the proposed buildings will be quite low and require a lengthy period for selling those townhouses with an estimated price. As a result, the decision was not to continue with this project, and as the exchange deal was not finalized, the project will receive some damage from the made payments, but the refinancing which was made to buy out Xirivella apartments to perform the exchange will be reversed and the funds paid out. This will provide a faster return to investors and also finishing the construction of Xirivella will happen a lot faster than performing the new construction and selling of those properties in Gandia.

Current situation

The project will not be finalized. The repayments will be performed from the sale of the apartments supposed to be part of the exchange deal.

Casablanca

The project was initiated in late 2021 and the plan was to buy 16 terraced houses with 11 garages and a swimming pool with a total cost of just under 2m EUR. The initial funding for this project was collected, but the seller’s AML service didn’t agree to let the selling transaction through in the way it was agreed with SPV, explaining that they would need to perform an AML procedure not only for SPV, but for every investor of the project. After the reversal of the initial transaction, the funds were sent again via the company belonging to Sergiu Coman (a minor shareholder in Reinvest24). After several months of delay the seller’s AML service still refused to make the transaction. The partial return of funds was performed, but the technical possibility of partial return of funds to investors does not exist or can be performed only by writing off missing principal. After the management of the Spanish SPV was replaced, a new plan for the payout of the missing amount is being created.

La Canada

The project is a development of 4 villas in the residential area of Valencia suburb started in mid-2022. After the land plot with frame construction on it was acquired, the works on those were started. All construction works were ordered from Kirsan Building SL by M. Enachi and justified by the lowest offer received. About 60% of the proposed budget was paid out to the construction company. During the audit of the project, there were numerous issues identified in the quality of the construction performed. We captured the current state of the building and the works performed via notary service after taking over the property, you can find it from here.

The architectural project was updated to be more attractive for the buyers and the new team made plans for finishing the construction and fixing the existing issues in construction.

In late autumn we found out that there is a notarized debt acknowledgment done by M.Enachi in favor of Kirsan Building SL in the amount of 396’489.02 EUR accompanied by burdening all 4 villas with this debt.

Current situation

The La Canada 4 villas located in the suburb of Valencia, the crossing of Calle 229 and Calle 232 are owned by SPV RE24 ESP SL. We are starting a legal action to appeal the debt-related claims set on these properties in favor of Kirsan Building SL. The completion of the project requires additional financing to complete the construction works, which would be the best option for selling the villas at a fair price. We have started the presale of the villas, which could also help to partially finance the works. The second option is selling the project as it is, but this would lead to substantial capital loss for investors.

L’Eliana

The L’Eliana land plot acquisition was finalized in early spring 2023. Due to other projects in Spain not being finished on time, no actions were made for this project to start any construction unless some previous projects were finalized and exited. Late autumn we found out that there is a notarized debt acknowledgment done by M. Enachi in favor of Kirsan Building SL in the amount of 783’499.34 EUR accompanied by burdening a land plot with this debt.

Current situation

The L’Eliana land plot with the address L’ELIANA en OTROS SECTOR SUZR-1 is owned by Spanish SPV RE24 ESP SL. We are starting a legal action to appeal the debt-related claims set on these properties in favor of Kirsan Building SL. The new Spanish team is offering the project to local real estate developers and we are also looking into possibilities for refinancing. Selling a project of this size fast in the current market will require to decrease in the selling price, which will likely result in capital loss for investors.

Conclusions

Despite the usual controlling measures applied as monitoring the Spanish SPV bank account, the company financials, the documentation, progress, and video reports provided by the management, it was not possible to identify the notarial transactions made by Maxim Enachi in real-time. The notary and other fees were not paid from the company account and a settlement was made against a claim. At the end of 2022, there was no debt in front of Kirsan Building SL on the company balance sheet and also the accounting documents that we were able to recover from the previous accountant did not have anything that supports the alleged claims.

The agreements made for selling the Montesano plot, the same as encumbering the La Canada and L’Eliana projects didn’t have any explanation of the origin of the debt. Based on the offers for construction works presented by Kirsan Building SL (the reason why Kirsan Building was chosen as a construction subcontractor), the works that were approved and accepted, invoices that were paid to the subcontractor by Maxim Enachi, do not align with the notarised audit results on the construction works on Xirivella and La Canada properties. Therefore any debt that Kirsan Building SL claimed to have is questionable, but Maxim Enachi confirmed the debts at notary in substantial amounts without notifying the shareholder.

The audit revealed numerous facts and actions carried out by the former management and Kirsan Building SL. It is evident that these actions raise serious questions regarding their legality, suggesting a deliberate attempt to benefit personally at the expense of Reinvest24 and its investors. Our legal team is currently in the process of compiling this case and deliberating on the necessary legal course of action to address and resolve this situation.

Reinvest24 assumes no responsibility or liability for any errors or omissions in the content of this article. The information contained in this article is provided on an "as is" basis with no guarantees of completeness, accuracy, usefulness or timeliness.