Israeli investors continue to be drawn to the New York City real estate firms that have looked to Tel Aviv as a means of raising affordable corporate debt, with Joel Wiener’s Pinnacle Group raising $65 million in the first phase of its latest Israel bond deal Thursday.
Pinnacle Group, which trades in Israel under the name Zarasai Group, secured the $65 million, or 250 million shekels, in an institutional tender to Israeli investment firms, insurers, pension funds, mutual funds and qualified investors, according to sources with knowledge of the deal.
The Penn Plaza-based landlord raised that figure at an interest rate of 4.35 percent, with the bonds holding 6.3 years duration – the longest series ever issued by a U.S. company in Israel, sources said. The offering was also characterized by strong demand from investors to the tune of $182 million, or 700 million shekels.
The low interest rate is reflective of positive ratings delivered by the major Israeli ratings agencies on Wiener’s portfolio, which contains nearly 8,700 rental units – 97 percent of which are rent-stabilized — across Manhattan, Brooklyn, Queens and the Bronx. Pinnacle’s total assets are valued at $1.7 billion, with total equity standing at $715 million, according to an investor presentation.
The company will hold a second public tender in the coming days that will be open to a wider pool of general Israeli investors. The tender could take the Zarasai Group’s total issuance to a maximum amount of $78 million, or 300 million shekels. Pinnacle is expected to use the proceeds raised to fund new building purchases and service existing debt maturities.
This latest offering is Wiener’s third since 2012, with the landlord having raised around $280 million in funds on the Israeli bond market through its two previous series of bonds issued.
Multifamily real estate assets – particularly those in the robust New York residential market — are generally viewed favorably by the Israeli market as stable, income-producing and less risky than other asset classes like condominiums and development sites.
While multifamily-focused landlords like Yoel Goldman’s All Year Management and Joel Gluck’s Spencer Equity Group have continued to raise money in Israel at low interest rates, condo developers like Gary Barnett have seen their bonds perform to an underwhelming degree as of late amid increased investor concern regarding the state of the luxury condo market.
Victory Consulting Group, led by Israeli financial advisers Gal Amit and Rafael Lipa, advised Pinnacle on the deal. Israeli financial services firm Poalim IBI was the underwriter on the bond issuance.