Encore Properties raises NIS 475m on TASE

Encore Properties Photo: Company

The bond offering of the US real estate company was oversubscribed.

While prices of bond series issued by foreign real estate companies dropped more than 2% in Tel Aviv Stock Exchange (TASE) trading, the institutional stage of the bond issue by Encore Properties went against the trend, with the company guaranteeing sales of NIS 475 million, after its bond series were oversubscribed.

Guaranteed sales of Series A, Encore Properties' main bond series, which is secured with liens on its assets, totaled NIS 405 million at 5.4% annual interest, lower than the 6% maximum interest rate for the series. Guaranteed sales of Series B, which was issued without liens, totaled nearly NIS 70 million at 7.2% annual interest. In the public stage, scheduled for the coming days, Encore Properties plans to raise tens of millions of shekels more.

As far as is known, important investment institutions took place in the bond issue, including insurance companies and provident and mutual funds. Most of the amount raised is earmarked for repaying senior debt on properties and purchasing the shares of Encore Properties' partners in its properties.

The review that pushed down the bond prices of US companies on the TASE

Infin led the bond issue. Infin is managed by CEO Yehonatan Cohen, which he founded in early 2016 after less than two years as CEO of Clal Finance Underwriting, following the latter's merger with Discount Underwriting and Investment.

The TASE trend in foreign real estate bonds has been negative since "Globes" published a negative review of their situation by Tzachi Levi, a corporate bond consultant for Psagot Investment House Ltd.. Levi wrote, "The foreign real estate companies have a lot of equity, but it mostly resulted from revaluations by these companies of the properties that they own… Almost none of these companies is capable of repaying the bonds it issued - not from its current activity, and certainly not by selling properties. There is only one way for them to do it - refinancing the debt on the Israeli capital market. If this is not possible, the debt will not be repaid." More than 20 foreign real estate companies active in the US have raised an aggregate total of NIS 16 billion on the TASE.

Another company from the Virgin Islands

S&P Maalot rated Encore Properties' bonds BBB. Among other things, they noted that the company's business risk profile "is supported mainly by geographic dispersal of the properties, a good knowledge of the areas in which it conducts income-producing real estate business, and the operation of hotels under the Hilton and Marriott franchises."

Encore Properties has 23 properties. 45% of them are multi-family housing, 31% are rental apartments and offices, and there are also hotel and commercial properties. Like its US colleagues, the company is incorporated in the Virgin Islands.

Encore Properties belongs to the Encore Enterprises group, which has over 1,000 employees. According to the company's prospectus, it has completed over 110 deals worth over $2.4 billion since it was founded in 1999. The company is controlled by chairman and founder Dr. Bharat Sangani, his wife Smita, and president and CEO Patrick Barber.

In addition to the bonds activity by US companies, the local corporate bond market continues to prosper. Bond issues in recent days include a huge issue by income producing real estate company Melisron Ltd. (TASE: MLSR), which has secured a NIS 940 extension of two bond series, and a NIS 460 million issue by BIG Shopping Centers. Other recent bond issuers include retail chain Hamashbir Lazarchan, which raised NIS 45 million in the institutional stage with bonds secured by a senior lien on shares in Hamashbir Department Stores.

Demand for most issues has been strong for a long time already, supported by a search by investors for returns, given the low interest rates prevailing in the market.

This search also supports a revival of the offerings market in the local capital market, in which NIS 4.6 billion has been raised in offerings and allocations since the beginning of the year, despite the high price levels at which some of the companies making capital offerings are being traded.

Published by Globes [online], Israel Business News - www.globes-online.com - on June 15, 2017

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

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Encore Properties Photo: Company
Encore Properties Photo: Company
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