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David Marx’s MDG Real Estate Global wants to use a bond issue to build two Manhattan hotels.
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The stream of American-Jewish real estate developers looking for cheap financing in the Israeli capital market through intermediaries Rafi Lipa and Gal Amit, with the help of underwriters Poalim IBI Underwriting and Investments Ltd. (TASE:PIU), today produced another draft prospectus for a bond issue – the fourth in the past few weeks. This time, the company is real estate developer David Marx’s MDG Real Estate Global.
Marx, described as very experienced in the development, improvement, and management of properties all over New York, currently owns eight income-producing properties in New York City, and one more in the nearby town of Medford. The properties contain six buildings with rental apartments, geriatric housing, and protected housing in Queens; an office building and a geriatric housing building in Brooklyn; and a building used for geriatric housing in Medford. Marx also owns another building zoned for protected housing, which he says is in the final stages of construction.
Like the other American-Jewish developers knocking on the Israel capital market’s doors, MDG was established to absorb Marx’s properties as a tax shelter in the British Virgin Islands. Marx has also asked Israeli rating companies S&P Maalot and Midroog for a rating for his $70 million (NIS 260 million) bond issue, without liens or collateral.
An appraiser’s opinion attached to the draft prospectus estimates the value of Marx’s income-producing properties at $324 million, currently generating $18.9 million in net operating income (NOI) annually.
As is usual in issues by American real estate developers, part of the proceeds from the issue is designated for recycling existing debt, while the MDG will use the remainder as equity for new development projects, headed by Marx’s current flagship project: construction of two hotels in West Manhattan – one on 37th St. and 11th Ave., and one on 34th St. and 10th Ave.
The company estimates the cost of the land and construction for the two hotels at $400 million, and believes that they will generate more than $150 million in aggregate value. At least one of the project shows the risk incurred in bonds issued by American real estate developers. Building a hotel on 11th Ave. is an old dream for Marx. He bought the land in 2007 for $45 million with a non-recourse loan from the Lehman Brothers investment bank. A year later, the great US credit crunch occurred, and Marx failed in his attempts to raise the financing necessary to build the hotel.
Published by Globes [online], Israel business news – www.globes-online.com
