KBS Strategic Opportunity REIT closed its Israeli bond offering Monday after issuing nearly $33 million in debt through a public tender, bringing the first bond issuance by a U.S.-based REIT in Israel to roughly $249 million, sources said.
KBS secured 127.7 million shekels, or more than $32.6 million, through the second phase of its bond offering – a public tender open to a wide array of Israeli investors.
The public tender follows last week’s institutional tender, open only to qualified Israeli investment funds and financial institutions, that saw the REIT raise more than 842 million shekels, or nearly $216 million.
The public, non-traded REIT’s total issuance now stands at nearly $249 million, secured at an interest rate of 4.25 percent, according to sources with knowledge of the matter. This makes KBS the latest American real estate firm to capitalize on affordable Israeli debt deals available through public bond offerings on the Tel Aviv Stock Exchange, as well as the first U.S. REIT to do so.
While KBS – managed by Newport Beach, Calif.-based real estate investment firm KBS Capital Advisors – could have raised up to 1 billion shekels, or $256 million, sources close to the company described the issuance as a “huge success.”
The REIT is understood to have initially targeted a total raise of 600 million shekels, or just over $153 million, but saw the institutional phase of its offering receive more than $300 million in demand from institutional investors, as The Real Deal reported last week.
In addition to being one of the larger bond offerings by a U.S. company in Israel – the record is currently held by the Moinian Group, which closed on a $361 million issuance last May – the deal is also notable for the 4.25 percent interest rate on the debt issued by KBS.
For comparison, Moinian’s 4.2 percent interest rate on its $361 million offering was one of the lowest ever secured by a U.S. company in Israel, with only Joel Wiener’s Pinnacle Group raising debt at a lower cost.
KBS, whose assets include a 32-story, 928,000-square-foot office building at 110 William Street in the Financial District, is expected to use the proceeds from the deal to continue exercising its strategy of buying commercial assets and stabilizing them through increased leasing and occupancy.
The REIT was advised on its offering by Gal Amit and Rafael Lipa of Victory Consulting Group. Israeli financial services firms Poalim IBI and Leumi Partners were the underwriters on the issuance.