IBI Investment House Ltd. analyst Shay Lipman has reacted favorably to the notice to the Tel Aviv Stock Exchange (TASE) by two Nochi Dankner-controlled IDB Holding Corp. Ltd. (TASE:IDBH) units bought a major Manhattan property, calling the building "an asset in one of the best places in the world," and "a very impressive deal."
Property and Building Ltd. (TASE: PTBL) and Koor Industries Ltd. (TASE:KOR) have bought the HSBC New York headquarters on Fifth Avenue from HSBC Holdings plc (LSE:HSBA; HKSE: 005; NYSE, Paris: HBC) for $330 million in cash in a sell and lease-back deal. The two companies made the purchase through a joint subsidiary owned in equal shares. Each company will put up $165 million in equity for the purchase.
The 80,000-square meter HSBC Bank Building comprises two structures, one 12 stories and the other 29 stories, at 425 Fifth Avenue and 1 West 39th Street. HSBC will lease back 51,000 square meters of the buildings under a ten-year lease, with a ten-year option to extend. It will pay $45 million in rent in the first year, while the IDB units will pay $18.5 million in annual expenses on the property.
Lipman gives Property and Building a "Buy" recommendation with a target price of NIS 280, 16% above today's opening price. He says, "Many parties were interested in the property, but I believe that they were unable to secure financing for a deal." He notes that Koor and Property and Building fully financed the purchase from shareholders' equity, without the need for external financing. Property and Building has NIS 2 billion in liquid assets. Koor is also cash-rich, and is the means through which Dankner has been buying and selling shares in Credit Suisse Group AG (NYSE: CS; SWX: CSGN; XETRA: CSGZ) and French-based retailer Carrefour SA (Euronext: CA).
Lipman nonetheless warns that the leases a third of the tenants in the HSBC Tower expire within a year. "If the tenants do not exercise their options to extend their leases, it will not be easy for the companies to lease the space, since New York has a surfeit of available office space."
IDB's share rose 1.6% by early afternoon to NIS 92.50, Koor's share fell 2.3% to NIS 112.80, and Property and Building's share rose 1% to NIS 244.
Published by Globes [online], Israel business news - www.globes-online.com - on October 4, 2009
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