One week before the huge Tel Aviv Stock Exchange (TASE) bond issue by US real estate company Wharton Properties (BVI), the company's owner, billionaire Jeff Sutton, is fortifying his position on 5th Avenue in New York City through an Israel-related deal - the purchase of a building housing Israel Discount Bank of New York headquarters for an estimated $250 million.
Sutton is joining forces for the acquisition with Aurora Capital, controlled by Bobby Cayre; they jointly signed a 99-year lease for the building, located on 5th Avenue, corner of 42nd St (at 511 5th Avenue). The seller is a group of family trusteeships.
The 17-storey, 15,000-sq.m. building acquired by Sutton and Aurora currently houses all of Discount Bank of New York's headquarters, which has been using the building since the 1960s. Almost 1,900 sq.m. of the building consists of commercial space, while the basement floor currently contains a branch of Discount Bank New York.
Sutton and Aurora are also partners in a building at 509 5th Avenue, leased to the Skechers fashion chain. Some of this building is included in the bond issue in Israel. Sutton and Aurora are expected to make renovations in the property they have purchased, and it appears that they intend to bring in a new tenant, probably a prestigious brand name, on the basement floor in place of Discount Bank New York.
Second try in Tel Aviv
Sutton, an American-Jewish developer, has been dealing in real estate for 25 years. He has acquired over 120 properties in New York City alone, with a total value of $10 billion. His Wharton Properties group is considered a leading US company in retail real estate, especially luxury stores. Wharton Properties dominates 5th Avenue in Manhattan, the gold coast of commercial real estate, where it leases properties to the most prestigious fashion chains, including Dulce and Gabbana, Armani, and Prada.
Wharton Properties is expected to raise up to NIS 2 billion (NIS 500 million) on Wednesday in a TASE bond issue. For the purpose of this issue, Wharton Properties transferred 17 income-producing New York properties to a new company, Wharton Properties Ltd., incorporated in the British Virgin Islands, for collateral for the bonds, which have a high AA rating from S&P Maalot.
This is Sutton's second attempt to issue bonds in Israel. In early May this year, Wharton Properties submitted a prospectus in which the prospective bond proceeds were earmarked for the acquisition of mezzanine loans at 9% interest from US banks as secondary financing for the purchase of properties. Due to the complex structure of the issue, which apparently deterred some investors, the issue structure was changed.
The properties transferred to the issuing company (held jointly with Sutton, the owner) feature central location and 97% average occupancy. They are leased to high-quality tenants for long periods, with most of the leases containing mechanisms for automatic annual rent increases.
The issuing company plans to use the proceeds from the issue to provide or purchase mezzanine loans or preferred capital in assets or properties privately owned by Sutton. Underwriting company Poalim IBI Underwriting and Investments (TASE: PIU) is leading the issue, together with consultants Gal Amit and Rafi Lipa.
Published by Globes [online], Israel business news - www.globes-online.com - on September 10, 2015
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