Treetop withdraws $30 million issuance on Tel Aviv Stock Exchange

After receiving not-so-sweet terms, firm will restructure strategy, return in 12-18 months

Adam Mermelstein and the Tel Aviv Stock Exchange
Adam Mermelstein and the Tel Aviv Stock Exchange

Treetop Development, one of a handful of American real estate firms that have turned to the Tel Aviv Stock Exchange as a source of capital, has withdrawn its bid to raise approximately $30 million on the exchange after Israeli investors came back with unfavorable terms.

The New Jersey-based landlord – which owns some 6,000 apartments in Northern Manhattan, New Jersey and across the Midwest and Southeast – withdrew its 120-million-shekel bond issuance Tuesday and decided not to move to the public offer stage, Treetop principal Adam Mermelstein told The Real Deal.

“Upon doing our bond issuance there were covenants in the deed of trust we found too restrictive, [in addition to] an interest rate higher than what we expected,” Mermelstein said.

Treetop went to Tel Aviv in November seeking to raise capital on the stock exchange, joining a growing wave of New York real estate firms including Extell Development, the Related Companies, Brookland Capital and GFI Capital that have sought funding from Israeli investors.

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Mermelstein said the company had commitments to receive about three quarters of the $30 million through institutional investors, but decided to reassess its strategy when those bids came back with an interest rate of 8.9 percent and restrictions on how Treetop could leverage its properties.

Developers are drawn to Tel Aviv partially for the low interest rates they can receive in the range of 5 to 7 percent, compared to the 15 to 20 percent they would pay on mezzanine loans. Brookland, for example, pays 6.4 percent on its bonds, while Extell pays an unusually low 4.9 percent.

“We did raise the money we were looking to raise, and there seemed to be a tremendous amount of interest, which we were pleased with,” Mermelstein said.

Treetop is looking is looking to restructure its issuance and head back to Tel Aviv in the next 12 to 18 months with underwriter the Clal Group, he added.