Three U.S. Property Firms Join Wave of Tel Aviv Bond Issues

Eran Azran
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Stephen Ross, chairman of Related Cos. LP and owner of the Miami Dolphins, speaks during an interview in New York, Sept. 2, 2014.Credit: Bloomberg
Eran Azran

The wave of bond offerings by U.S. property in Tel Aviv is expected to crest in April and May, with totaling debt sold reaching some 10 billion shekels ($2.6 billion), up from 2.5 billion shekels at the end of 2014.

That list was officially added to three new names on Tuesday, with The Related Companies and GFI Capital Resources Group both issuing draft prospectuses. Meanwhile, TheMarker has learned that a third company, JDS Development, is in the process of preparing a prospectus to raise between 150 million and 200 million shekels.

U.S. developers are turning to an unlikely place like Israel to sell debt because interest rates are low and capital is readily available. The Israeli market is accessible to ordinary companies – those not structured as real estate investment trusts, or REITs – that want to raise relatively small amounts of debt from the public.

Nevertheless, the Israel Securities Authority said two weeks ago it was exploring concerns about the U.S. debt offerings and whether the trend required regulatory intervention.

Related, which is controlled by Stephen Ross and best known for developing the Time Warner Center, is developing the $15 billion megaproject Hudson Yards, a 28-acre neighborhood on Manhattan’s West Side.

The company said it would issue bonds in Tel Aviv through a Virgin Islands unit called Related Commercial, which controls seven residential and commercial properties in New York, one under development. The completed properties are 95% to 100% occupied and valued at about $800 million, it said.

Related didn’t say how much it would be raising, but reports last November estimated it would be around 450 million shekels.

GFI, which is considerably smaller than Related, will also issue debt through a Virgin Islands subsidiary that hold 19 residential, office and commercial properties it valued in the prospectus at $220 million.

The company, which was founded by its CEO Allen Gross, didn’t say how much it sought to raise but a November report said it would be about $100 million.

Unlike most of the other U.S. property companies raising debt in Tel Aviv, JDS is a real estate developer, not just a landlord with an income stream from rents.

The company, which is controlled by a 32-year-old American Jew named Michael Stern, has about 7 million square meters of property under development in New York City and Miami, and specializes in high-end residential real estate. Leader Underwriting is expected to manage the offering.

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