The Real Deal New York

Joel Gluck’s Spencer Equity raises $59M in Tel Aviv bond deal

Brookland Capital also secures $18M in first phase of debt offering

December 03, 2015 03:45PM
By Rey Mashayekhi

Tel Aviv Stock Exchange

From left: Gal Amit, Rafael Lipa and the Tel Aviv Stock Exchange

Joel Gluck’s Spencer Equity Group closed its second Israeli bond issuance this week, raising a total of $59 million through a debt offering on the Tel Aviv Stock Exchange.

The Brooklyn-based real estate firm secured the issuance at a 4.9 percent interest rate, receiving around $50 million through an institutional tender to Israeli banks, pension funds and financial institutions and raising the rest through a public offering to a wider array of investors.

It’s the second time Gluck has tapped the Israeli bond market, having secured more than $100 million through its first issuance in November of last year. Bond offerings on the Tel Aviv Stock Exchange, which enable private real estate firms to access corporate-grade debt at low interest rates, have increasingly grown in popularity among U.S. developers.

Spencer Equity and its advisors, Gal Amit and Rafael Lipa of Victory Consulting, increased the size of this latest issuance – backed by a portfolio comprised of 20 assets, including 16 multifamily buildings – after receiving outsized demand for the issuance from institutional investors.

The company initially targeted a total bond issuance of $50 million, but the offering was bumped up to a maximum amount of $62 million after investor demand for the bonds exceeded $130 million during the institutional tender, sources said.

Interest in the deal was buoyed by enthusiasm for Gluck’s stable, income-producing rental properties — with 77 percent of units in the portfolio rented out to tenants subsidized by the U.S. Department of Housing and Urban Development and 99 percent of the units subject to affordable housing programs.

The 4.9 percent interest rate on the deal, one of the lowest achieved by a U.S. real estate firm in Israel, was enabled by strong ratings from Israeli credit rating agencies S&P Maalot and Midroog.

Bedford-Stuyvesant-based developer Brookland Capital is also tapping the Israeli bond market once more, as The Real Deal reported last month, and secured around $18 million through the institutional tender phase this week.

Brookland, one of Brooklyn’s most active developers and led by Boaz Gilad and Assaf Fitoussi, is hoping to raise around $30 million total once the public tender is sealed next week and the offering is closed.

The firm, also advised by Victory Consulting, secured nearly $35 million in its previous debt issuance last year, with this latest deal meant to fund roughly 32 Brooklyn projects the company has in its pipeline.

Florham Park, N.J.-based retail landlord the Klein Group closed its first debt offering in Tel Aviv, valued at around $55 million, last week while Michael Shah’s Delshah Capital is seeking to raise around $80 million through its own issuance in the coming weeks.

Retail magnate Jeff Sutton’s Wharton Properties hopes to access the Israeli bond market in the coming months after a $500 million deal, which would have been the largest ever debt offering by a U.S. firm in Tel Aviv, fell through in September.