The New York media reports that Africa-Israel Investments Ltd. (TASE:AFIL; Pink Sheets:AFIVY) has halved asking prices for 32 condominium in the Apthorp, a historic building on West End Avenue in Manhattan.
Africa-Israel was forced to make the reduction, because the New York State Attorney General’s Office ordered it to sell 25 condos, 15% of the condos in the Apthorp, by September 15. If the company misses the deadline, the condo conversion plans will be voided and the Apthorp will revert back to rental.
Africa-Israel is renovating the building at an investment of $30 million. The renovations are due to be completed by March 2010. The present asking price for a one-bedroom condo is $1.8 million, half the asking price of a year ago.
Clal Finance analyst Yuval Ben-Zeev told "Globes", "The Apthorp project is not going as planned. It should be remembered that Africa-Israel's most problematic projects are in Miami, such as the Marquis project. In New York, property values have fallen, but solutions can be found."
Ben-Zeev added, "Without a real estate market recovery, there is no value remaining for shareholders. The company is making progress on repaying debts, bond by bond, year by year, in the hope of a market recovery. At the moment, it has enough money to continue through mid or late 2010."
Over the next two years, Africa-Israel will have to pay back NIS 3 billion to bondholders, and pay an additional NIS 2 billion over the subsequent two years. Since this is the company's main focus, Ben-Zeev advises to invest in Africa-Israel bonds, rather than in its shares. He estimates that the company has NIS 1.2 billion in cash.
The moment of truth will fall in late 2010 or early 2011, when Africa-Israel will have to redeem short-term bonds. If it meets the payments, prices for its long-term bonds will rise. If the company cannot make the payments, and seeks a settlement with its bondholders, the blow to the long-term bonds will be smaller.
Ben-Zeev says, "This is a struggle for survival. The bonds are traded at such high yields that there is no reason to buy Africa-Israel's share. It is a high-risk investment anyway, but there's a chance for a very high return."
Published by Globes [online], Israel business news - www.globes-online.com - on July 8, 2009
© Copyright of Globes Publisher Itonut (1983) Ltd. 2009