Elco's US REIT raises $219m

Landmark Apartment Trust of America issued preferred stock to funds affiliated with Blackstone and iStar Financial, ahead of an IPO.

Elco Holdings Ltd. (TASE: ELCO), controlled by chairman Georg Salkind, has taken another step to float its multifamily business in the US. Landmark Apartment Trust of America Inc. (LATA), a REIT in which Elco owns a 32.5% stake, raised $219 million in a private placement of preferred stock to funds affiliated with Blackstone Group LP (NYSE: BX) and iStar Financial Inc. (NYSE: SFI). The investment could rise to $285 million if certain conditions are met.

LATA will use the proceeds to buy more housing blocks and renovate them, and help repay $60 million in liabilities on previous issues of preferred stock.

In a statement to the TASE on Tuesday, Elco said that if LATA holds a public offering in the future, it will repay Blackstone and iStar's investments, plus predetermined interest. The preferred stock will be repaid three years from the issue date, with an option for a two-year postponement at LATA's discretion and under certain conditions.

Elco added that LATA is in the final stages of signing agreements to buy housing blocks with 6,200 apartments for $448 million. The properties have a net operating income (NOI) of $33 million a year, which will boost the REIT's NOT to $100 million.

Elco VP business development Avi Israeli said, "With these deals, LATA is implementing its business strategy to create a critical mass of multifamily blocs in the US. When the deals are closed, it will manage 30,000 housing units and be a major force in the industry.

"Multifamily housing in the US has been attracting a great deal of interest from investment institutions and funds in the US and around the world. The investments by Blackstone and iStar indicate a vote of confidence in LATA's activity, and we believe greatly strengthen the potential for creating value."

Elco saw the opportunity in the US multifamily housing market in 2008, and set up Elco Landmark Residential Inc. In 2012, together with partners, it founded LATA by merging Landmark Residential with US REIT ATA Inc. as the first step toward an IPO. Elco made a capital gain of over $30 million on the deal. Under the merger, Landmark Residential transferred 4,600 apartments to the merged REIT in exchange for a 26% stake in it.

LATA will reportedly hold an IPO at a company value of at least $500 million. Leader Capital Markets gives Elco a "Buy" recommendation, mainly on the strength of Landmark's business and in expectations of LATA's IPO.

Elco's other subsidiaries include Electra Ltd. (TASE: ELTR), Electra Real Estate Ltd. (TASE:ELCRE), and Electra Consumer Products Ltd. (TASE:ECP). In June, Salkind sold 5% of Electra for NIS 72 million, following a 30% rise in share price over the previous 12 months.

Published by Globes [online], Israel business news - www.globes-online.com - on July 3, 2013

© Copyright of Globes Publisher Itonut (1983) Ltd. 2013

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