The acquisition of the HSBC Holding plc (LSE: HSBA; HKSE: 005; NYSE, Paris: HBC) New York headquarters by Property and Building Ltd. (TASE: PTBL) is turning out to be one of the best real estate deals conducted in New York by Israelis, and unquestionably more successful that the real estate deals by Property and Building's parent company IDB Holding Corp. Ltd. (TASE:IDBH) through IDB USA Inc.
Early last week, Property and Building announced that it received a $750 million offer for HSBC New York headquarters, reflecting a 127% jump in value, since the company bought the property three years ago. Property and Building said at the time, "The company has not made any decision about selling the building, and there is no certainty at this time whether it will be sold."
Sources inform ''Globes'' that another offer for the building has been made by South Korea's Hyundai. If the building is sold at this price to the first bidder, a New York businessman, or to Hyundai, Property and Building can expect to make a $150 million profit and a net cash flow of $350 million.
Property and Building and its sister company Koor Industries Ltd. (TASE:KOR) bought HSBC's New York headquarters for $330 million in equal shares in 2009. In November 2011, Property and Building bought out Koor for $138 million, giving the property a value of $480 million.
The property's value has since risen. In its financial report for the third quarter, Property and Building booked its value at $602 million. In June, the company refinanced the property with a $400 million ten-year non-recourse loan from JPMorgan Chase Inc. (NYSE: JPM), and repaid the $240 million loan from Bank Hapoalim (TASE: POLI).
HSBC sold its New York headquarters on Fifth Avenue between 39th and 40th Streets in a sale and lease-back deal. The three-building complex has 80,000 square meters.
The source says that Property and Building has also received a $155 million offer for the Barney's Building in Chicago, which the company bought for $121 million, including transaction costs, in early 2011. The 8,800-square meter building is wholly leased to the Barney's fashion chain and to Citibank for $9.8 million a year (up from $8.5 million when the property was bought.
The sale of the two buildings would compensate Property and Building for the hundreds of millions of dollars it wrote-off for its investments in Las Vegas, including the joint investment with Yitzhak Tshuva's Elad Properties in the Plaza casino and hotel project. Property and Building posted a net profit of NIS 3 million in January-September 2012, compared with a net loss of NIS 311 million in the corresponding period of 2011. A sale would also not affect the company's strong foundations in Israel, where it owns properties with one million square meters of space, as well as 250,000 square meters in other countries.
Property and Building's spokesman said in response, "Beyond the company’s notices to the TASE, we have nothing to add."
Published by Globes [online], Israel business news - www.globes-online.com - on December 27, 2012
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