In Israel, holding of any number of projects is carried out through a public real estate company which holds all the projects. For instance, before the issuance takes place in Israel, U.S. real estate entrepreneurs set up a real estate holding company, that is registered in a particular place based on legal and taxation considerations. The newly established company incorporates a large number of assets that are partially financed by equity capital (30%-40%) and partially by bank leverage (60%-70%). After its establishment, the new holding company carries out a debentures issuance in Israel. The repayment of the debentures is based on the excess cash flow deriving from the assets, after making the ongoing payments to the financing banks. In practice, the funding deriving from the debentures constituted another leveraging layer for the group of companies. Moreover, since the repayment of the debt is based on a cash flow deriving from several assets, the financial risk associated with the investment decreases (read more).

2. Simplicity and Promptness of the Capital Raising Process
Debentures issuances by real estate companies are executed on the basis of a prospectus – a document, comprised of, inter alia, the following chapters: details of the securities offered to the public, company’s capital and the holders thereof (usually relates to the holding company, as described above with respect to the real estate issuance method), the intended use of the proceeds deriving from the issuance, a description of the company’s fields of activity (e.g., entrepreneurial real estate, yielding real estate, etc.), company management, description of the company’s shareholders and officers.
The prospectus is accompanied by financial statements of the company and, in some instances, the valuation of its assets.
Also, debentures issuances by real estate companies are usually conducted by way of a uniform offer via tender on the interest rate. The preparation of the issuance’s documents as mentioned above and the examination thereof by the Israeli Securities Authority (ISA) and TASE are carried out in a very short timeframe: 2-3 months. The timeframe between the publication of the initial prospectus draft and the publication of the final prospectus is approximately one month. In other words, the timeframe between commencing the process of capital raising and the actual completion thereof is very short and the conduct vis-a-vis the relevant entities (e.g., ISA and TASE) is done by way of a fast and effective dialogue.

3. Low Interest Rate and Market Accessibility 
U.S. real estate companies’ entrepreneurs take advantage of the possibility to raise cheap debt in Israel’s stock exchange, which is much cheaper than the alternative of raising debt in the U.S. market, where the  interest rate that they are required to pay is much higher (read more).
 In 2014, capital raisings by U.S. real estate companies bore an annual interest of 4.65%-6.9% and were for a maturity period of between two to eight years (in some cases, the payment schedule included a grace period). Most of the debentures issued in 2014 are rated in A-groups and are not secured by any collateral or pledges.
The structure and characteristics of the Israeli capital market allow U.S. real estate companies to also raise smaller amounts through issuance of debentures, for the development of small-scale projects, which is more problematic in the U.S. market. The excess of available investment funds, in contrast to the shortage of investment targets in Israel, such as the case in various insurance companies, further contributes to the wave of issances on the Israeli market by U.S. companies. 

In conclusion, the benefits of raising debt in the field of real estate in Israel (such as simplicity and promptness of the capital raising process, market accessibility and low interest rates) and the success of the recent issuances, make TASE an interesting trading arm for companies operating in the field of real estate in the U.S. who are interested in raising debts.

Click here to read the summary of the debentures issuances made by U.S. companies at TASE throughout 2014 and to this date in 2015, as well as the issuances by U.S. real estate companies, which are intended to be carried out over the next couple of months.