US real estate company Extell, which conducted one of the largest bond issues in the wave of debt offerings in Israel, today announced the positive news investors were waiting for when it announced that it had received $163 million in financing from US company RXR Realty. This amount is the second part of a $463 million loan that RXR Realty granted Extell. The loan is earmarked to pay for the 80-storey One Manhattan Square tower, one of the company's main projects, designed to contain more than 800 condo apartments and 200 affordable apartments.
Extell added today that the loan it received, previous financing it obtained, and senior financing taken for construction of the project are enough to pay for the entire $1 billion cost of one year of construction on the project. Extell's two bond series, which total NIS 1.65 billion, responded positively with rises of about 2% at their peak, although the bond yields are still high at around 10%.
IBI Investment House real estate analyst Yaniv Saylan today wrote, "Anyone who doubted that construction of this project would take place now realizes that this is not the case now. A scenario in which the company fails to obtain financing for the project is very unlikely, especially when the project will already be in the advanced construction stages, with advances from customers. We believe that a 10% yield is appropriate for the current risk in the company's activity." Owned by developer Gary Barnett, Extell engages mostly in developing and building luxury housing projects in New York. The recent sharp downturn in the luxury housing market, however, has made it difficult for the company to sell the remaining apartments that it still owns and complete the financing package needed to build the new apartment towers. This state of affairs generated great anxiety among investors, who several months ago sent the company's bonds to junk bond yield levels of up to 16%.
In recent months, thanks to Extell's success in making progress towards acquiring the financing for building this project and other important one (Central Park Tower), and to meetings by Barnett with bondholders and analysts, the bonds have recovered.
Published by Globes [online], Israel Business News - www.globes-online.com - on January 29, 2017
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