Pacific Oak taps Israeli bond market again

California firm leveraging undeveloped suburban Dallas land as collateral

Pacific Oak's Keith Hall and the underdeveloped land in Richardson used as collateral
Pacific Oak's Keith Hall and the underdeveloped land in Richardson used as collateral (Pacific Oak, Google Maps)

Pacific Oak Group will dip into the Israeli bond market again in search of capital, using undeveloped land in Richardson as part of its collateral. 

The multi-faceted California investment firm with $4 billion in real estate assets is looking to raise $195 million in new bond issuances in Israel, according to the firm’s May market report filed with the SEC.

This is becoming an annual occurrence for the firm which has raised nearly $350 million with Israeli investors since 2020, including $95 million last year, according to previous SEC filings. The firm has been a public non-traded REIT since 2020. It issued its first bonds in the Israeli market in 2016 when it raised $250 million in 4.25 percent bonds.

The Israeli market has been popular with real estate developers as a way to obtain a cheaper source of capital. By issuing bonds in Israel, firms discovered they were able to raise debt for properties without a mortgage and obtain favorable and lower interest rates.

Though some firms, like Starwood Capital Group, bit off more than they could chew. In 2020, Starwood defaulted on at least $250 million worth of Israeli bonds and is now dealing with a class action lawsuit supported by the the Israel Securities Authority.

Pacific Oak also ran into trouble last year when the firm defaulted on a loan for 110 William Street, an office in the Financial District of Lower Manhattan. The firm is currently negotiating with the lender to restructure and refinance the loans, according to its market report.

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For this year’s bonds, Pacific Oak is using undeveloped land assets in the Dallas suburb of Richardson, as well as in Las Vegas as collateral. The Richardson land is nearly 25 acres, adjacent to the two-building office park Palisades Central, owned by KBS. The land only covers part of the loan collateral and is valued at $20.1 million, according to Pacific Oak. The Las Vegas owned parcels cover the rest of the $195 million debt.

Pacific Oak has been shifting its market focus in recent years away from office and into multifamily. Since 2015, the firm has decreased its office holdings from 72 percent of its overall portfolio to 32 percent. Meanwhile, it has increased its multifamily holdings from 5 percent to nearly 30 percent. The firm has also increased its investment into land and corporate securities.

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