Real estate company Property & Building is considering the acquisition of a controlling interest in the Lipstick Building in New York. The company reported on Thursday that it had initiated steps towards a deal in which it will acquire all of the ordinary share capital of a corporation held by a third party that holds most of the rights in the land on which the Lipstick Tower is located.
The 34-storey Lipstick Building is located in Manhattan on Third Avenue between 53rd Street and 54th Street. The price in the deal is $51 million, while the corporation to be acquired also has $420 million in debt, which it took on when buying the property. This debt will have to be repaid when a deal is signed or shortly afterwards.
Property & Building said that there were additional costs in the deal whose total was unknown. The company is also considering the acquisition of the leasing rights in the tower built on the land in the deal. These rights are currently owned by a company under the joint control of an unrelated third party and Property & Building controlling shareholder Eduardo Elsztain. The terms for this possible deal, however, have not yet been discussed.
According to Property & Building, it has only begun preliminary examination of a deal, and negotiations have not yet begun. The company also emphasized that at this stage, there is no certainty that it will continue its consideration of whether a deal is worthwhile, or that any agreements about any rights in the land and/or the tower will be reached. In any case, any such agreement, if and when contracted, will be brought before the legally authorized company organs for approval.
Elsztain is the controlling shareholder in holding company Discount Investment Corporation, which holds 68.83% of Property & Building. A few days ago, Discount Investment Corporation published a NIS 653.7 million offer to purchase for all of the public's holdings in Property & Building. According to Property and Building, it published the preliminary announcement about the tower because of the offer to purchase for its shares, which is still pending.
In 2007, shortly before the global credit crisis, the Lipstick Building was acquired by a group of investors consisting of Manofim Finance (now Arena Group), controlled by Jacky Ben-Zaken, and Tao Tsuot, controlled by Ilan Ben-Dov, for $650 million. The buyers paid almost the entire price with credit. Within a few years, however, they got into difficulties as a result of the crisis and had to sell the property at a heavy loss.
Published by Globes, Israel business news - en.globes.co.il - on June 10, 2019
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