US offerings on TASE bring fat fees

Rafi Lipa and Gal Amit Photo: Tamar Matsafi
Rafi Lipa and Gal Amit Photo: Tamar Matsafi

The main beneficiaries are underwriters Poalim IBI and a list of consultants.

The new wave of Tel Aviv Stock Exchange (TASE) bond issues by US real estate companies highlights the source of the great motivation on the part of the underwriters and consultants involved in these offerings - especially large fees. The two most recent issues in the wave, for which All Year Holdings and Southern Properties Capital were responsible, are also generating impressive amounts of money for the parties accompanying them. Underwriting and consultant fees in the issues totaled NIS 45 million - 5% of the aggregate NIS 900 million raised in the offerings.

The shelf proposal report published today by All Year shows that assuming that the full NIS 618 million listed in the issue is raised, the underwriters, headed by Poalim IBI Underwriting and Investments Ltd. (TASE:PIU), issue consultants Gal Amit and Rafi Lipa, and other professional parties involved in the issue will rake in NIS 27.5 million, 4.5% of the maximum gross amount in the issue.

In total, assuming the full amount is raised, All Year is expected to pay NIS 14 million in fees for distribution, advance commitment, and coordination, together with other expenses, including over NIS 13 million in consultation fees for Victory Consulting Group, controlled by Amit and Lipa. A recent revision published by All Year shows that the company raised NIS 537 million in the institutional stage, 87% of the maximum amount, with more to come in the public stage of the offering.

Most of the business conducted by All Year, controlled by Yoel Goldman, consists of the purchase, upgrading, construction, and leasing of apartment buildings in Brooklyn, New York. The company also builds and upgrades income producing residential real estate.

Proceeds from All Year's bonds, rated A2 with a stable outlook by Midroog, are designated for replacing $96 million in loans for the William Vale project and for $61 million in preferred capital. The project, which includes a hotel, offices, commercial space, a parking lot, and restaurants, is located in Williamsburg, Brooklyn. A presentation for the bond issue stated that the project was worth $252 million, and that its construction would be completed in the second half of 2016.

The money from the bonds will be secured with a senior lien for the bondholders on Goldman's 50% holdings in the project. All Year currently has two bond series on the local stock exchange totaling NIS 845 million currently trading at 5-5.5% yields.

High interest helped Southern Properties

The underwriters, consultants, and professionals accompanying the nearly NIS 280 million bond issue by Southern Properties, also led by Poalim IBI, also received large fees totaling NIS 16.5 million, 6% of the gross proceeds from the issue.

Southern Properties paid over NIS 6 million of this amount as distribution, underwriting, handling, and advanced commitment fees, and over NIS 10 million in other expenses, which also included consultation fees for JB Radhan, controlled by Eyal Jedwab and Yuval Barak. Jedwab and Barak previously worked at the Giza Singer Even consultant firm, and served as economic advisers to Moti Ben-Moshe in the acquisition of the IDB group.

Southern Properties, a subsidiary of US public company Transcontinental Realty Investors (TCI), encountered great difficulties in its TASE bond issue, due to criticism of its parent company's previous actions, combined with a downgrade of its rating from A to BBB plus even before the issue was carried out. Nevertheless, the high 7.3% interest rate offered by the company in the public stage of the issue attracted many investors.

Southern Properties operates in the southern US, mainly in Dallas (59%) and other cities in Texas (26%). The company owns 17 multi-family housing sites with 3,919 housing units and seven office buildings with space totaling 1.58 million sq.ft. (147,000 sq.m.). For the sake of comparison, the fees paid by IDB Development Corporation Ltd. (TASE:IDBD), which recently completed a bond issue of nearly NIS 1.1 billion, amounted to nearly NIS 12 million, just over 1% of the amount raised, including NIS 7.5 million in management, consultation, coordination, and distribution fees for the underwriters, headed by Epsilon Investment House Ltd., and NIS 4.5 million more, consisting mainly of advance commitment fees and other costs.

Published by Globes [online], Israel Business News - www.globes-online.com - on February 22, 2017

© Copyright of Globes Publisher Itonut (1983) Ltd. 2017

Rafi Lipa and Gal Amit Photo: Tamar Matsafi
Rafi Lipa and Gal Amit Photo: Tamar Matsafi
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