After a few weeks of quiet, bond issues by US real estate companies are again appearing with the completion of the debt raising round for investment institutions by Silverstein Properties, controlled by US real estate developer Larry Silverstein.
The issue, led by Leader Underwriters, was oversubscribed, with demand being more than double the amount that Silverstein was seeking to raise. The company ensured an issue of NIS 635 million ($176 million) at 3.4% interest, which as far as is known is the lowest interest rate to date at which a US company has raised money on the TASE. S&P Maalot has rated the bonds AA.
Larry Silverstein, 86, has been active for decades in US real estate. Among other things, his group is building office towers in the World Trade Center (the former Twin Towers) in Manhattan. The Israeli capital market is familiar with the group; large Israeli investment institutions, including Menora Mivtachim, Migdal, Alteshuler Shaham, Psagot, and Amitim, have participated in Silverstein's acquisition and financing deals for properties in New York and Washington. This probably helped Silverstein Properties raise the money more easily and at a relatively low interest rate. It is believed that the largest players in the market also took part in the issue.
Silverstein Properties incorporated eight properties with over 800,000 square meters of commercial and rental housing space in high-demand areas of Manhattan for the issue. Seven of the portfolio properties are income-producing properties in Manhattan (58% offices and the rest residences) with 95% occupancy rates. The company also has land for development in midtown Manhattan.
Silverstein Properties' revenue totaled $210 million in 2017, its net operating income (NOI) was $118 million, and its adjusted funds from operations (FFO) totaled $99 million. The company balance sheet total at the end of 2017 was $3.6 billion, and its shareholders' equity net of minority rights was $1.5 billion.
Market cooled off in recent weeks
Given the increase in volatility in the markets and the timing of the Passover and Israel Independence Day holidays, activity in the local bond issues market, especially by foreign real estate companies, cooled off slightly in recent weeks. According to TASE data, real estate companies raised NIS 1 billion in April, with the largest single bond issue by a foreign company being that of Strawberry Fields REIT, which raised NIS 240 million.
US companies continued their dominance of the local debt market in the first quarter of 2018, with issues totaling NIS 3 billion, nearly 30% of the NIS 11.5 billion raised by real estate companies in the quarter. Total corporate bond issues on the TASE in the first quarter exceeded NIS 23 billion.
Published by Globes [online], Israel business news - www.globes-online.com - on May 3, 2018
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