New York- and Florida-based residential developer Copperline Partners raised $85 million through a bond offering on the Tel Aviv Stock Exchange on Monday, in a boost for U.S. real estate firms looking to the Israeli bond market as a source of capital.
Copperline received the $85 million through an institutional tender to Israeli banks, pension funds and financial institutions, according to sources with knowledge of the deal.
The firm could raise as much as $110 million through a public tender to a wider range of Israeli investors Tuesday — with Copperline and its advisers, Israeli financial consultants InFin, expecting to raise at least another $10 million to push the total bond issuance to $95 million.
The offering, backed by a portfolio of 23 assets holding an aggregate value of $675 million, received an A rating from Israeli ratings agency S&P Maalot. The deal is expected to close at an interest rate of around 6 percent, with the bonds set to mature in 2020. Clal Finance Underwriting is the distributor in the offering.
The portfolio features around 3,000 residential units and two hotels generating an annual net operating income of roughly $32 million, and it does not include any development sites or pending projects, according to sources.
Copperline, a private firm owned by the Schlesinger family, owns at least 38 residential and hotel properties across New York, Connecticut and Florida, according to the its website. The company is expected to use the proceeds from the issuance to refinance debt, renovate properties and buy out partners at some of those buildings.
Representatives for Copperline could not be reached for comment.
The firm was advised on the bond offering by Yossi Levi and Yehonatan Cohen of InFin – who, in their roles at Israeli financial giant Clal Finance, advised the Related Cos. on its $210 million debt issuance on the Tel Aviv Stock Exchange earlier this year.
Israel’s bond market has grown in popularity over the past few years among U.S.-based real estate firms, who have looked to the market as platform allowing private companies to access low-cost capital through public issuances of corporate-grade debt.
But the collapse last month of a proposed $500 million offering by retail magnate Jeff Sutton’s Wharton Properties – then poised to be the largest such debt issuance by a U.S. real estate firm to date – had raised questions regarding the market’s viability for U.S. companies.
Yossi Levi of InFin said the Copperline issuance’s success was a sign that the Israeli bond market continues to be a feasible platform for U.S. firms offering stable, “cash-producing properties” – adding that the Wharton deal confused many in the market with its “very complex structure.”
“I believe it’s all a matter of structuring the offering right,” Levi told The Real Deal, noting that the Israeli market “is becoming more selective” in the debt offerings brought to market.