The corporate debt market in Israel has become confirmed in the past couple of years as a preferred way for small and mid-size North American real estate companies to raise cheap finance. More and more such companies from the US and Canada are choosing to recycle loans through bond offerings in Israel, and this segment has been gathering momentum from year to year.
Today, another US real estate company filed a prospectus with the Israel Securities Authority and the Tel Aviv Stock Exchange, to raise $110 million (NIS 400 million) in an issue of tradable 6-7 year bonds.
The company in question is Windsor Capital Group, which was founded in 1989 and specializes in maintenance and management of business hotels. The company will start a road show for the offering early next month.
Windsor Capital Group, controlled by Patrick Nesbitt, is based in Santa Monica, California. It operates a chain of ten hotels, seven in California and the rest in Las Vegas, Georgia, and North Carolina. Eight of the hotels operate under the Embassy Suites brand owned by the Hilton chain, one is under the Marriott brand, and remaining hotel is under the Renaissance band (a sub-brand of Marriott).
Ownership of the ten hotels will be transferred to the special purpose vehicle for the bond offering. The hotel management company will remain independent and will pay rent to the bond company. A 15-year leasing agreement will be signed between the two companies, with an option to extend for a further ten years. The rent will be $35 million annually, rising by 2% from the end of the first year of the lease agreement. The bond company will also be paid rebates for insurance premiums and taxes. Regular repair and renovation costs will be financed from a special fund that will be transferred to the bond company and into which the bond company will pay part of the monthly rents it receives under the financing agreements.
The financial statements appended to the prospectus show that the value of the investment real estate the bond company owns was $608 million at the end of 2016. Against this are loans amounting to $325 million which the company now seeks to recycle, among other things through the bond issue. The company's shareholders' equity was $285 million, representing 46% of the balance sheet footing.
Published by Globes [online], Israel business news - www.globes-online.com - on May 22, 2017
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