The Real Deal New York

Delshah closes on $102M Israeli bond deal

East Village-based developer issues two series, including one backed by 55 Gansevoort

January 12, 2016 04:45PM
By Rey Mashayekhi

Michael Shah Israel Bonds

The Tel Aviv Stock Exchange (inset: Michael Shah)

Michael Shah’s Delshah Capital closed its Israeli debt offering this week by raising more than $102 million through the issuance of bonds that will be traded on the Tel Aviv Stock Exchange.

Delshah sealed 400 million shekel, or just under $102 million, after closing the deal’s public tender in Israel on Monday, with the company noting that the issuance “was oversubscribed by more than 50 percent.”

The East Village-based landlord raised roughly $82 million through the deal’s first phase last week – an institutional tender open to Israeli banks, pension funds and institutional investors.

The bond deal was backed by a portfolio of 13 New York City assets valued at more than $500 million, the company said, including more than 1,100 federally-subsidized Section 8 housing units in Staten Island and a number of residential and commercial properties in Manhattan.

Delshah plans to use proceeds from the offering “partially for investments into the existing portfolio and to fund Delshah’s pipeline of value-add New York real estate investments,” the company said in a statement. It is expected to use around $38 million of the funds to repay senior debt on four of its Manhattan properties.

Shah said his firm is “thrilled” with the bond offering, which makes Delshah the latest New York real estate firm to tap Israel’s corporate bond as a source of capital secured at low interest rates.

The two series of bonds issued by Delshah include one unsecured series, through which the company raised more than $40 million at an interest rate of 6.8 percent. The bond is set to mature in September 2021.

The second series of bonds is secured in part by a pledge of a stake in the company’s five-story commercial property at 55 Gansevoort Street in the Meatpacking District – which current lessee Restoration Hardware plans to convert into a 14-key boutique hotel.

55 Gansevoort Street

55 Gansevoort Street in the Meatpacking District

Delshah raised nearly $61 million through the issuance of the second, secured bond series – set to mature in September 2023 — at an interest rate of 4.6 percent, giving the total debt offering a blended interest rate of nearly 5.5 percent.

InFin, an Israeli financial consultancy led by Yehonatan Cohen and Yossi Levi, advised Delshah on the bond deal. The bonds were distributed by underwriter Clal Finance Underwriting.

Cohen, whose firm was the lead advisor on Related Companies’ $210 million debt issuance on the Tel Aviv Stock Exchange last year, said Israeli investors were attracted to Delshah’s “consolidated 100 percent ownership of all of the subsidiaries” included in its portfolio.

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