Tshuva's El-Ad National to issue bonds on TASE

Yitzhak Tshuva  picture: Bloomberg

The US real estate company is seeking to raise NIS 220 million in unlinked bonds bearing 4.4% interest.

Delek Group Ltd. (TASE: DLEKG) controlling shareholder Yitzhak Tshuva is hopping on the bandwagon of American Jewish real estate developers who have raised money in recent years on the Tel Aviv Stock Exchange (TASE) for some of their activity in North America. He is following in their footsteps by seeking to take advantage of the comfortable interest rates to raise debt on the local stock exchange. Tshuva wants to raise NIS 220 million for El-Ad National through a bond issue, after incorporating the company in the British Virgin Islands, exactly as the US developers did.

The shelf prospectus and supplementary prospectus published this morning by El-Ad National indicates that Tshuva is offering unlinked bonds at 4.4% annual interests. The bonds are repayable in six annual payments at the end of November in 2018-2023. Tshuva is earmarking the proceeds from the offering for financing the company's current activity. El-Ad National owns its main properties together with real estate tycoon Yakir Gabay, who has extensive real estate business in Germany. The offering is not secured by an underwriting undertaking.

The prospectus reveals that El-Ad National's offering follows a Gabay investment early this year, mostly in the issued properties, when he signed an agreement with Tshuva. Gabay will pay Tshuva $142 million for 50% of the rights in the properties, reflecting a value of $885 million for the properties themselves.

The proceeds for this purchase, which Gabay conducted through the Yellowstone company, were calculated according to half of the value of the partnership's properties, minus bank debt and owners' loans. According to the prospectus, part of the proceeds from the purchase was paid in cash and cash equivalents, "and the greater part will be paid in a payment deferred for 42 months, payable in three payments (bearing interest through a seller's loan granted to Yellowstone at 5.65% annual interest)."

El-Ad National is part of Tshuva's El-Ad Group, which handles Tshuva's income-producing and development real estate business in the US and Canada. The El-Ad Group's most well-known project was the Plaza Hotel in New York, sold in 2012. Most of the project, which the group acquired in 2004, was converted into luxury apartments.

Focus on Florida

El-Ad National is active in income-producing residential real estate in the US, and the prospectus indicates that half of its portfolio of 8,900 housing units in 31 multi-family dwellings is located in eight states: Florida, Texas, Illinois, Indiana, Georgia, Michigan, and North and South Carolina. The group also has 1,200 rental condo units in three projects.

Most of this business is concentrated in Florida, where El-Ad National has its headquarters and 60% of its properties. The company says it plans "to locate investment opportunities in residential income producing properties, with an emphasis on the purchase of residential sites, including properties that will generate a stable cash flow and make it possible to enlarge the properties portfolio." The company also states that the properties portfolio will be financed through the group's equity and its investment partners, and through loans - usually separate financing for each property.

In an interim pro forma report attached to the prospectus, the company presents its $191 million in current liabilities, $185 million of which consists of bank loans, primarily "loans taken to financing long-term investments, repayment of which will commence in the coming year." The company adds that it has three one-year extension options for repayment of $144 million of this amount, and that the company's management "expects the company to refinance or extend the loans scheduled for repayment during the next 12 months before the repayment date."

El-Ad National also states, "The company expects to produce cash flow from its current activity that will enable it to cover its working capital deficit and finance other business." The long-term loans due for repayment in the coming year have created a substantial $185 deficit in the company's working capital.

El-Ad National's revenue totaled $18 million in the first nine months of the year, 7% more than in the corresponding period last year. Thanks to an $11 million positive revaluation of its properties, the company's net profit soared 74% to $24 million during this period. It finished 2015 with a $38 million net profit, when it reported a $16 million positive revaluation and $23.5 million in revenue.

El-Ad National chairman and deputy CEO is El-Ad Group CFO, treasurer, and head of mergers and acquisitions Baruch Itzhak. Also on the company board of directors are El-Ad Canada CEO Rafael Lazer; Boaz Schnitzer, a consultant for Tshuva's companies and the Delek Group; Orly Daniell, Tshuva's daughter and chairperson of El-Ad Holdings; and Yoel Shargian, another executive at El-Ad.

Published by Globes [online], Israel business news - www.globes-online.com - on November 30, 2016

© Copyright of Globes Publisher Itonut (1983) Ltd. 2016

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Yitzhak Tshuva  picture: Bloomberg
Yitzhak Tshuva picture: Bloomberg
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