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Bloomberg
Brooklyn developer The Leser Group Ltd. is selling 125 million shekels ($32.5 million) of bonds in Israel,
reopening a market that was shut to North American real estate companies after Canadian developer Urbancorp Inc.’s April default rattled investors.
The new issue, a retap of Leser’s 6.9 percent bonds due in May 2026, will yield 6.6 percent, according to Poalim I.B.I – Management & Underwriting Ltd., the lead manager on the deal. It originally sought to raise 75 million shekels but decided to increase the offering after getting double that demand from institutional investors, Poalim said. The yield on the existing debt rose for a third day, increasing 2 basis points to 6.6 percent at 10:08 a.m. in Tel Aviv.
Israeli bond investors’ appetite for foreign real estate debt dried up after Urbancorp filed for bankruptcy protection and luxury developer Extell Development Co. said financing for one of its projects would take longer than expected, sending borrowing costs on foreign real estate bonds soaring. U.S. firms have raised at least $2.8 billion in Israel since 2008, lured by cheaper financing costs and higher credit ratings than they could earn at home.
WAITING ON EXTELL
Leser was able to return to the market because it’s already known to Israeli investors, said Yaniv Saylan, a real estate analyst at Tel Aviv-based Israel Brokerage & Investments. New companies without buildings that are already generating income will have a harder time getting cheaper borrowing costs in Israel than at home, he said.
Chairman Abraham Leser “is very well known, he comes every quarter,†Saylan said by phone. “I don’t see the case of any developer coming to Israel and the institutional investor will open the door.†Israeli investors are still waiting to hear whether Extell has obtained construction financing needed to complete its One Manhattan Square project.