The Real Deal New York

Jeff Sutton looks to raise $100M in Israeli bonds

Issuance will be backed by 18 properties including 747 Madison
By Chava Gourarie | November 30, 2016 01:50PM

747 Madison Avenue, 29 West 34th Street and Jeff Sutton

From left: 747 Madison Avenue, 29 West 34th Street and Jeff Sutton

Jeff Sutton’s Wharton Properties is seeking to raise $100 million on the Tel Aviv Stock Exchange, according to a prospectus filed Wednesday.

This is Sutton’s TRData LogoTINY second attempt to raise money in Israel, after a failed effort at raising $500 million last year.  Sutton pulled out after investors balked at the conditions he was offering.

In the current version, Sutton is seeking a more modest $100 million. The funds will go toward further investment in the retail sector such as acquisitions of new properties or the financing of existing properties, according to the documents.

The entity issuing the bonds is backed by 18 of Wharton’s properties, primarily in Manhattan and Brooklyn, out of the company’s roughly 150 total retail properties in the New York area. The portfolio, valued at $710 million, includes several prime retail locations like 747 Madison Avenue, home to Givenchy and Alexander McQueen, Three 34th Street properties in Midtown, and seven Fulton Mall properties in Downtown Brooklyn.

The 10,200-square-foot Madison Avenue property is the highest profile, with a net operating income of $4.4 million for the first half of 2016 — $3.8 million of which is rent income. The property’s two tenants, both fashion-centric retail, have 15-year leases ending in 2028 and 2029 respectively and the average price per square foot is $948. The income from the second highest-profile property, 29 West 34th Street, home to Aldo and Geox, was just under half of 747 Madison, at $2.1 million for the first six months of 2016.

In contrast, the lowest-earning of the properties, the 4,000-square-foot building at 480-482 Fulton Street, home to Sneaker Point in Fulton Mall, had an NOI of $71,000 for the first half of 2016, and was valued at $18 million.

None of Wharton’s Fifth Avenue properties are included in the portfolio, as opposed to last year’s offering, which included 717 and 509 Fifth Avenue.

Wharton, a Manhattan retail giant, is one of several American companies raising bonds in Israel for the first time. Elad Group, a Midtown-based firm, filed a prospectus seeking to raise up to $60 million Wednesday, and the Dallas-based Southern Properties Capital, headed by Daniel Moos, filed earlier this month to raise up to $93 million. Namdar Realty Group, a Great Neck-based company focused on shopping centers, raised $118 million in an institutional tender Tuesday, out of a $140 million bond issue, after raising their ask from $112 due to high demand.

Sutton, who according to Forbes is worth $3.6 billion, is being advised by the financial consultants Rafael Lipa and Gal Amit. The issue is set to take place in early 2017, according to sources.