The Guy Fund hedge fund, managed by founder Oded Gal, has suffered heavy losses on its investment in bonds issued by collapsing real estate company Brookland Upreal. Guy Partners' return in the past two months was -24%: -10% in November and -15% in December, according to figures from the company obtained by "Globes." The fund finished 2018 with a -27% return. Since it was founded in 2013, Guy Partners' return has been 34% (an annual average of 5.2%).
"Globes" recently reported that Guy Fund's assets were assessed at several hundred million shekels. The fund is the largest investor in Brookland's bonds, having purchased the latter's Series B bonds with a par value of NIS 40 million, nearly one third of the series and 27% of the total of Brookland's Series A and Series B bonds. The bonds have not yet been repaid.
Oded Gal founded the Guy Partners group of hedge funds in 2013, a year after resigning as CEO of Poalim IBI Underwriting and Investments' (TASE: PIU) mutual fund company. Guy Partners currently manages three different hedge funds: Guy Fund, which specializes in the Israeli bond market; Guy Equity, which specializes in the Israeli stock market; and Guy Global, which specializes in the global dollar bond market. Guy Fund is a local player that takes large positions, including in the bonds of foreign real estate companies.
Brookland, managed by founder and CEO Boaz Gilad, is a small residential real estate development company operating in Brooklyn, New York. In 2014-2015, the company issued two series of bonds to the Israeli public. Brookland's Series A and Series B bonds totaling NIS 150 million in par value are still listed on the Tel Aviv Stock Exchange (TASE). Two months ago, the company reported that due to serious delays in the pace of constructing apartments and delivering them to the buyers, it would have difficulty in repaying the principal to the bondholders in 2019.
In the weeks following the report, Brookland's bonds fell to a price reflecting a poor return for investors, while the company itself rapidly neared collapse. Last week, Gilad announced his resignation as CEO, attributing it "to the demand by the bondholders for the appointment of a manager within a few hours to represent them, without being given an opportunity to understand how we could work together and whether a joint plan of action could be devised, following negotiations with investors and creditors without consulting or informing him, thereby in his opinion causing heavy losses, and to extremely aggressive behavior that precludes any chance of a recovery by the company, which does not enable the CEO to do his job in the company properly."
Gilad's resignation was followed by the resignations of Brookland CFO Noa Poran and director Alon Rasky.
Published by Globes, Israel business news - en.globes.co.il - on January 14, 2019
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