The Real Deal Miami

Israeli bond boom continues

US developers have borrowed $2B since 2008

February 16, 2016 04:30PM

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Hudson-Yards-Stephen-Ross

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

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

REIT 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 of five-year debt last year for their megadevelopment Hudson Yards.U.S. developers can pay five or six percent interest on debt in Israel that would cost twice as much as home, Bloomberg reported. 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.

Gal Amit and Rafael Lipa of Victory Consulting helped raise more than roughly $1.3 billion through the Israeli bond market for New York projects last year. The Tel Aviv-based financial advisers structured their first deal in 2007 and have now done 20 such deals with eight companies. They’re now courting developers in L.A. and other American cities.

No developer has defaulted on the bonds, though the challenge will come when the commercial real estate boom ends. [Bloomberg]Dusica Sue Malesevic

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