Delshah raises $52M in Tel Aviv for $250M Morningside Heights project

Firm plans to convert five-building complex into 205 upscale rentals

Israeli road show veteran Micheal Shah raised $52 million in a bond issuance on the Tel Aviv Stock Exchange to finance a $250 million redevelopment project in Morningside Heights. The total falls short of Shah’s $63 million offer, and carries a fixed interest rate of 6.15 percent, the maximum allowed under the terms of the offer.

Shah planned to finance the project — which would convert a five-building complex at 30 Morningside Drive to high-end rentals — with a combination of a roughly $130 million construction loan, $70 million in bonds raised in Tel Aviv, and $50 million from capital sources, including EB-5 money, according to a bondholder presentation.

His company, Delshah Capital, purchased the complex for $102 million in 2014, also with funds raised in Tel Aviv. He plans to convert it to 205 high-end rentals.

Unlike previous bonds, Shah’s offer gives the bondholders membership interest in the entity that owns 30 Morningside, putting them in the second position in the capital stack. Up to $30 million in excess EB-5 money would serve as a cushion for paying back the bond money, Shah said. Delshah thus far has raised $12.5 million in Eb-5 funds, out of a possible $50 million, Shah said.

The real estate firm previously had about $120 million in the Israeli bond market and Shah’s first substantial payment, of close to $22 million, is due in 2021. Delshah has 14 properties in its portfolio at a value of $623 million, according to the rating company Midroog. The rating company put the Delshah’s loan-to-value ratio at 40 percent and loan-to-capital ratio at 50 percent, which will rise to up to 61 percent once the financing for the Morningside Heights project is included.

The company recently closed on a $28 million loan from Cantor Commercial Real Estate to refinance two properties in New York, at 69 Gansevoort and 58-60 Ninth Avenue. The five-year loan carries a 4.25 percent interest rate.

In May of 2016 The Real Deal published a detailed feature that shows how U.S. real estate players raise money on the Tel Aviv Stock Exchange.