Lehman Brothers Holdings Inc. (NYSE: LEH) has been one of the key investors in the global real estate market. Israeli companies were happy to collaborate with a supposedly solid financial institution like Lehman Brothers and crowed about investments and joint ventures with it.
Lehman Brothers is directly linked to four Israeli real estate companies. It owns 5.84% of Adama Holding Ltd. (TASE:ADMA.B1), which develops income-producing projects in Romania. In August 2005, it acquired 25% of Big Shopping Centers (2004) Ltd. (TASE:BIG) subsidiary Big India Malls Pvt. Ltd. for $15 million. In February 2008, it signed a memorandum of understanding (MOU) with BSR Engineering and Development Ltd. (TASE:BSRE) and its Indian partner to buy land in Bangalore for NIS 360 million. After several postponements, this deal was cancelled last week.
The fourth Israeli real estate company with which Lehman Brothers has had a longstanding relationship is Nanette Real Estate Group NV (AIM:NAT; TASE:NANT.B1), controlled by Olimpia Real Estate Holdings Ltd. (TASE: OLMP) with a 29.9% stake, and Meshulam Levinstein Contracting and Engineering Ltd. (TASE:LEVI), with 20%. Nanette, once proud of its Lehman Brothers' collaboration will probably now have to find a new partner for its development projects in Eastern Europe.
Last week, both Nanette and Big Shopping Centers issued notices that they collaborate with Lehman Brothers Real Estate Partners (LBREP), which is a series of distinct and segregated private equity funds, funded by multiple partners and not part of the Chapter 11 proceedings of Lehman Brothers Holdings.
Nanette added that all of the LBREP's funding obligations to the joint venture companies have been met for the entirety of 2008, and that no additional substantial investments were required in current projects beyond what has already been invested.
Big Shopping Centers stated that its investment agreements with the Lehman Brothers funds stipulate sanctions if the partners violate them, including compelling Lehman Brothers to sell its stake in Big India Malls. Big Shopping Centers said, "Except for possible delays regarding decision-making in the short term, no request for [for shareholders' relief] will have a material effect on the company's activity in India."
One other real estate company is indirectly linked to Lehman Brothers - Ravad Ltd. (TASE: RAVD), controlled by Igal Ahouvi. Ravad leases office space in Tel Aviv's Platinum Tower to Lehman Brothers Israel Ltd. Ravad owns 30% of the 22-storey building, and Lehman Brothers rents 860 square meters, plus a 90-square meter balcony. The fate of the premises is not known, but if Lehman Brothers pulls out of its lease, signed in 2001, Ravad might be able to lease the space at a much higher rent.
Published by Globes [online], Israel business news - www.globes-online.com - on September 21, 2008
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