Delshah raises $82M on Israeli bond market

Michael Shah becomes first non-Jewish developer to tap Tel Aviv Stock Exchange for funds

55 Gansevoort Street in the Meatpacking District (inset: Michael Shah)
55 Gansevoort Street in the Meatpacking District (inset: Michael Shah)

Michael Shah’s Delshah Capital secured nearly $82 million through the first phase of the firm’s bond issuance on the Tel Aviv Stock Exchange this week.

Shah becomes the first non-Jewish developer to tap Israel’s corporate bond market, which has become an increasingly popular source of capital for New York-based real estate firms, according to sources with knowledge of the issuance.

Delshah raised around 320 million shekel, or roughly $81.5 million, through the institutional tender phase of the debt offering, which was open to Israeli banks, pension funds and financial institutions.

A portfolio of 13 properties with a combined appraised value of $495 million backed the deal. The properties include more than 1,100 federally subsidized, affordable housing units in Staten Island, as well as four commercial and six mixed-use rental properties in Manhattan.

The company’s issuance noted that around $38 million of the proceeds will be used to repay senior debt on four of Delshah’s Manhattan properties, with the balance going toward acquisitions and potentially buying out joint venture partners.

The deal was “incredibly well-received,” Shah told The Real Deal, adding that the proceeds of the issuance leaves Delshah “well-poised for future acquisitions.”

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Israeli credit ratings agency Midroog noted that Delshah’s portfolio features assets in areas “characterized by stability and financial strength” that are “enjoying growth in recent years,” such as Soho and the Meatpacking District.

The East Village-based firm issued two series of bonds – one series of unsecured bonds issued at an interest rate of 6.9 percent, and a second series of secured bonds closed at an interest rate of 4.6 percent.

The unsecured series will mature in September 2021, while the secured series bonds will mature in September 2023, sources said.

Israeli financial giant Clal Finance Underwriting is the distributor on the bond offering, with Delshah advised by Israeli financial consultants InFin, led by Yehonatan Cohen and Yossi Levi.

The offering was characterized by robust demand from Israeli institutional investors, sources said, to the tune of about $127 million.

Delshah’s issuance is now set for a public tender next week open to a wider array of investors, with the potential to raise another $18 million once the issuance is sealed.