The Real Deal New York

Israeli bond boom continues

US developers have borrowed $2B since 2008

February 16, 2016 11:03AM


Stephen Ross’ Related Cos. financed part of Hudson Yards through the Israeli bond market

U.S. developers, seeking easy access to equity to finance projects, continue to turn to the Israeli bond market and its lower interest rates. At least 14 companies, primarily New York-based real estate firms, have borrowed over $2 billion since 2008.

Real estate investment trust Strawberry Fields, which owns Alzheimer care facilities in the Midwest, is the latest to turn to Israeli market for financing — borrowing 265 million shekels, or around $67.8 million.

Strawberry Fields follows in the footsteps of Extell Development, which raised 1.65 billion shekels in Israel — or more than $422 million — for its luxury condominium tower One57, and Related Cos., which raised 847 million shekels last year for its Hudson Yards megadevelopment.

U.S. developers can pay five or six percent interest on debt in Israel that would cost twice as much as home, according to Bloomberg . In addition, the bonds get better grades because the U.S. government’s credit rating is higher than Israel’s. Developers pool all of their buildings together in a new holding company and borrow against the collective equity — a contrast to the U.S. debt rule of never paying for one building with the assets of another.

A number of Israeli financial consultancies now specialize is helping U.S. real estate firms tap the bond market in Tel Aviv. Related, for example, was advised on its deal by Yehonatan Cohen and Yossi Levi of InFin, who left their previous roles at Israeli financial giant Clal to focus on bringing foreign companies to Israel.

Gal Amit and Rafael Lipa of Victory Consulting, meanwhile, have helped raise more than $1.3 billion for New York real estate companies through the Israeli bond market. Victory structured its first U.S. deal in 2007 and has now done 20 such transactions with eight different companies. They’re now courting developers in L.A. and other American cities.

No U.S. developer has defaulted on its Israeli bonds, though it remains to be seen how the market copes when the current commercial real estate boom ends. [Bloomberg]Dusica Sue Malesevic