Israeli Property Firm Gazit Globe Unit May Buy Key Urbancorp Project

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An Urbancorp project in Toronto.
An Urbancorp project in Toronto. Credit: Google Street View

First Capital Realty, a Canadian unit of the Israeli property firm Gazit Globe, is expected to enter into negotiations to buy Urbancorp’s share in a major project they are building together, an Urbancorp source told TheMarker Tuesday.

Kingsclub, three towers with 506 rental apartments and street-level commercial space in Toronto’s Liberty Village, is one of the largest bidders for Urbancorp, the Canadian developer whose bonds trade on the Tel Aviv Stock Exchange.

Urbancorp sent shockwaves through the TASE after it filed for bankruptcy last week, less than five months after it sold 180 million shekels ($47.9 million) of bonds to Israeli investors. Among the mutual fund managers with the biggest exposure are Yelin Lapidot, with 28 million shekels and Psagot with 25 million shekels.

Urbancorp’s problems mounted Tuesday after two more subsidiaries filed for bankruptcy. Bridlepath and Woodbine are not connected to the company that issued bonds in Tel Aviv. The bankruptcy filing brought the total number of Urbancorp’s 17 companies in bankruptcy court to eight.

Tarion, which provides warranty protection for buyers of new homes, opened a help line for Urbancorp customers. It said Urbancorp was required to complete projects in development but was barred from starting new ones. Tarion revoked Urbancorp’s registration on 17 projects a month ago, most of which are being appealed by the company.

Kingsclub is valued on Urbancorp’s books at CA$330 million ($261.5 million). The residential part of the project is owned (one-third each) by Urbancorp, FCR and the real estate investment trust CapREIT. The commercial portion is split equally between Urbancorp and FCR.

Sources said Urbancorp is a financial partner in Kingsclub and is not involved is managing the project.

When construction is completed in 2018, Kingsclub will be Urbancorp’s main income-producing property. After deducting bank debt, the sale of its share of the project will generate tens of millions of Canadian dollars in cash for Urbancorp, which it badly needs to repay Israeli bondholders.

Tel Aviv District Court Judge Eitan Orenstin on Monday appointed attorney Guy Gissin as an officer of Urbancorp, to prevent a situation where controlling shareholder Alan Saskin was the only remaining manager.

Ornestein cited bondholder concerns that Saskin might not use Urbancorp’s assets to ensure bondholders are repaid. Kingsclub would be an obvious asset to dispose of because Gazit Globe is an obvious buyer and Urbancorp has little experience in commercial real estate.

Urbancorp has five Toronto projects in development. The most important is Downsview, which is 51%-owned by Urbancorp with Mattamy Homes as a partner and has 946 units.

The Toronto Star reported Monday that Mattamy is in talks with Urbancorp to buy some of its properties. “We will be sending a letter to Downsview Park customers to explain the situation and reassure them that the notice of Urbancorp’s proposal under the Bankruptcy and Insolvency Act in no way affects the purchase, construction or delivery of their home at Downsview Park, which is being built by Mattamy Homes,” spokesperson Brent Carey said in a statement.

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