David Marx wants to buy a Queens dev site from his own company – if bondholders let him

Israeli bondholders are scheduled to vote on the sale this week
By Kevin Sun | May 13, 2019 06:27PM

David Marx of MDG Real Estate and the site at 71-05 Parsons Boulevard in Queens (Credit: Google Images and iStock)

David Marx of MDG Real Estate and the site at 71-05 Parsons Boulevard in Queens (Credit: Google Images and iStock)

UPDATED, April 14, 01:25PM: A few months after putting one three-acre Queens development site on the market, David Marx’s MDG Real Estate is looking to sell another large site — to Marx himself.

In what Tel Aviv Stock Exchange filings describe as an “exceptional” or “unusual” deal, Marx is offering roughly $54 million to take two adjacent vacant plots, located between Parsons Boulevard and Park Avenue in Flushing, off the hands of his British Virgin Islands-registered holding company, MDG Real Estate Global Limited. But first, MDG’s Israeli bondholders need to approve the deal.

“It’s a negotiation. It’s in the best interests of the company, and I believe it will ultimately go through,” Marx said, noting that the company’s bond prices have risen since the announcement on May 7.

MDG’s Series B bonds rose by 1.46 percent, from 93.61 to 94.98 cents on the dollar following the announcement, while its Series C bonds rose 6.38 percent, from 77.50 to 82.91.

After an informational meeting on Monday, holders of the company’s Series B and C bonds were originally scheduled to vote on the deal this Thursday. But according to disclosures filed on Tuesday, the vote has now been postponed by a week, to May 23. Ballots may be submitted electronically and the results may take some time to finalize.

The two development sites, with a total area of roughly 2.4 acres, are bookended by two other MDG properties. One of them, a 184-bed assisted living center at 71-61 159th Street, was part of the collateral for the company’s $61 million Series B bond offering in early 2017. The other is an eight-story 137-unit rental building at 159-10 71st Avenue. MDG picked up all four lots between 1999 and 2002.

According to company disclosures, MDG discovered early last year that the two vacant sites could potentially support more than twice as much square footage as originally believed. But after spending several months trying to formalize those additional rights, the firm ultimately decided that it didn’t have “the economic capacity to develop real estate of this order of magnitude.”

“In any case the owner and the board of directors have no desire to develop said real estate at this time,” the disclosure added. MDG says that it attempted to market the sites for several months, with the help of “two reputable American brokerages,” but received no “concrete offers at a fair price.”

Marx has no further plans for the sites at present. “What’s happened is that bondholders have shied away from development, and they like to see steady cashflow,” he said. “So we’ll be able to take this cash and convert it into cashflow, and that is our goal as a company.”

American firms as a whole have had a few difficult months on Israeli bond markets, with firms like All Year Management and Brookland Capital facing lawsuits on top of collapsing bond prices. In January, MDG saw both of its bond series downgraded from A3 to Baa, with negative outlook, by ratings firm Midroog.

Nonetheless, the recent debut of Dallas-based Westdale Asset Management, a first since the tumult began, may be a sign that the market is recovering. All Year was also able to raise $20 million in a private offering last week, despite its legal troubles.

Update: This story has been updated to include the postponement and correct the sequence of events.