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Yitzhak Tshuva, the controlling shareholder in the Delek Group, plans to refinance his Canadian real estate portfolio to raise $150-200 million for other investment projects abroad. General Motors is among the potential investors negotiating with Tshuva for financing this reorganization.

During the late 1990s, Tshuva acquired hundreds of apartments and commercial properties in Canada, mostly in Toronto, via his privately held Elad company. The value of this real estate portfolio grew significantly during the past several years as property values have risen in major Canadian cities. The portfolio is now thought to be worth over $500 million. Some 40 percent of these properties is commercial, the rest is residential.

The refinance plan entails new mortgages that reflect the higher property values and rents, as well as the lower interest rates that now prevail in North America.

Tshuva has focused on efforts to raise money or sell properties in Canada during recent months, while leaving the everyday management of the Delek Group and his venture capital holdings in Israel to company executives.

During the first half of 2002, Tshuva looked into the possibility of raising capital for his Canadian real estate company by selling bonds to institutional investors on the local capital market via a local underwriter. But he was disappointed when the company was given a low assessment and he dropped the idea of issuing bonds in Israel.

Tshuva turned next to leading investors and financiers in the United States and Canada to explore the possibilities for raising money or selling off some of his properties. One of the options presented to him was to float his real estate portfolio via a real estate investment trust (REIT).

This type of fund, which has become popular during the past decade in North America, distributes the rental income from its real estate holdings to the fund's shareholders. Among other offers, British banking group HSBC proposed in July that Tshuva conduct this type of share issue on one of the Canadian bourses, based on a value of about $600 million.

While negotiating with HSBC, Tshuva was also talking with several other large financial groups, including Citibank and Deutsche Bank. In the end, he decided to work with a General Motors group.

Like other giant U.S. corporations, the automobile manufacturer has subsidiaries that manage its financial assets and invest its workers' pension and health funds. These companies mainly invest in liquid assets like stocks and bonds, but also in real estate portfolios. The Internet site of one of General Motors' investment companies indicates that about 7 percent of the assets it manages are invested in real estate.

Tshuva, who also has real estate holdings in the U.S. and England, believes that property values are still going up in Canadian cities, despite the price increases of recent years, because demand still exceeds supply. In addition, housing prices are still relatively low in proportion to construction costs.

Tshuva plans to use the money raised by refinancing his Canadian real estate holdings to expand his overseas businesses, but not to invest in his Israeli companies. Some of Tshuva's Israeli companies are strapped for cash: Green, which coordinates Tshuva's venture capital activities in Israel, owes the banks hundreds of millions of shekels. Tshuva provided personal guarantees for over NIS 200 million of this debt.

The Delek Group, Tshuva's principal holding in Israel, is also about to embark on major infrastructure investments in the areas of natural gas and water desalination, requiring substantial lines of credits.

The market value of the Delek Group (in which Tshuva holds an 86-percent stake) is about $620 million, considerably less than the value of his real estate holdings abroad.