US real estate companies continue to cast eyes on the HSBC office building in New York owned by IDB group company Property and Building Ltd. (TASE: PTBL). Sources inform "Globes" that, last week, George Comfort & Sons offered to buy the building for $950 million (NIS 3.7 billion), and even said it would agree to deposit $10 million to demonstrate the seriousness of the offer. The IDB group, however, sees the office building as an important asset, and for the time being prefers to continue in ownership. The IDB group is controlled by Eduardo Elsztain.
The HSBC tower is at 452 5th Avenue in Manhattan. It comprises two adjacent buildings, one 12 floors and the other 29 floors, with a total built area of 80,000 square meters. The asset is entirely leased to high quality tenants, such as HSBC and law firm Baker & McKenzie.
In April 2010, the IDB group bought the building from HSBC through group units Koor and Property and Building, in equal shares, for $330 million. Eighteen months later, Property and Building bought Koor's 50% share at a valuation of $480 million. Since then, along with the general recovery in real estate prices in New York, the tower's valuation has continued to climb and generate on-paper capital gains for Property and Building. In the company's financial statements for the third quarter of 2015, the building was valued at $820 million, more than double the weighted valuation at which it was bought.
In its third quarter report, released the day the offer was received from George Comfort & Sons, Property and Building stated that it had from time to time received approaches from parties interested in purchasing the office tower, and that it had examined the offers, but had meanwhile rejected all of them. The report further states that Property and Building intends to examine the possibility of selling up to 49% of its rights in the asset, so that it will continue to retain control.
Property and Building has shareholders' equity of NIS 1.7 billion. Selling the HSBC building at the offered price would boost its shareholders' capital by some NIS 500 million and give it tremendous liquidity. This would enable it both to reduce its net debt, which currently stands at NIS 3.3 billion, and to pay a substantial dividend to its shareholders, headed by parent company Discount Investment, which is crying out for cash to service its debt.
Published by Globes [online], Israel business news - www.globes-online.com - on November