Joel Gluck’s Israeli bond issuance falls through as Williamsburg rental project faces financing crunch

The return of American firms to the Israeli bond market has run into a hiccup.

Joel Gluck’s Spencer Equity, the second of three New York-based developers to announce plans earlier this month for new bond offerings in Tel Aviv, has reversed course amid investor concerns surrounding the Williamsburg property that would secure the bonds.

Spencer Equity tried to put a positive spin on the news.

“The company is honored to announce that in light of the existence of better alternatives for the financing of the property, the company has decided not to carry out the bond issuance,” the company stated in a disclosure to the Tel Aviv Stock Exchange published Wednesday afternoon.

Spencer could not be reached for comment. Israeli publication Globes first reported the news.

The issuance of what would have been Spencer’s fourth series of Israeli bonds failed in the institutional bidding phase, sources told The Real Deal. Gluck’s firm was targeting a 240 million shekel (or $68.5 million) raise, which would have been used to refinance the partially stalled rental project at 163 North 6th Street and replace a $46 million mortgage from Signature Bank.

Signature Bank provided a three-year, $53 million loan on the property in 2016, which was then extended and reduced to its current value in January. A source told TRD that the loan is nearly in default. Signature Bank did not respond to a request for comment.

As previously reported by TRD, the second phase of Spencer’s church-to-rentals conversion project known as Spire Lofts has been stalled for years because of excess floor area that has kept the building from obtaining a certificate of occupancy, leading to an $8 million loss in 2018 alone. This appears to have been the main reason for the failure of the bond issuance.

The most recently disclosed appraisal report for the property notes that it is in fact overbuilt by 7,588 square feet — 50 percent more than the 5,000 square feet previously reported.

Spencer Equity owns a 66.9 percent stake in Spire Lofts, and Yoel Goldman’s All Year Management owns the remainder. On Tuesday, just a day before the issuance was scrapped, All Year disclosed that it had agreed to guarantee its share of payments associated with the new bonds.

Meanwhile, Silverstein Properties returned to Tel Aviv with a bang last week, with a nearly three-times oversubscribed institutional bidding round. Trading in the firm’s new Series B bonds began Tuesday.