Pacific Oak Group will once again foray into the Israeli bond market to find funding, using undeveloped land in Richardson as part of its collateral.
The diversified California investment firm with $4 billion in real estate assets is seeking to issue $195 million in new bonds in Israel, according to the company’s May market report to the Securities and Exchange Commission.
In what is becoming an annual event for the company, the company has raised nearly $350 million from Israeli investors since 2020, including $95 million last year, according to previous SEC filings. The company has been a public non-traded REIT since 2020. It issued its first bond in the Israeli market in 2016, when it raised $250 million on a 4.25% bond.
The Israeli market has long been popular with real estate developers as a way to access cheaper sources of capital. By issuing bonds in Israel, companies find that they can raise debt on properties without collateral and receive favorable and lower interest rates.
Although some companies, such as Starwood Capital Group, eat more than they can chew. In 2020, Starwood defaulted on at least $250 million in Israeli bonds and is currently dealing with a class action lawsuit backed by the Israel Securities Authority.
Pacific Oak also ran into trouble last year when it defaulted on a loan for its 110 William Street office in the Financial District in lower Manhattan. According to its market report, the company is currently in talks with lenders to restructure and refinance the loan.
For this year’s bond, Pacific Oak used undeveloped land assets in the Dallas suburb of Richardson as well as Las Vegas as collateral. The Richardson land covers nearly 25 acres adjacent to Palisades Central, a two-building office park owned by KBS. The land, which covers only part of the loan collateral, is worth $20.1 million, according to Pacific Oak. The Las Vegas-owned land covers the rest of the $195 million in debt.
In recent years, Pacific Oak has been shifting its market focus from offices to multifamily housing. Since 2015, the firm has reduced its office holdings from 72% of its overall portfolio to 32%. At the same time, it has increased its multifamily holding from 5% to nearly 30%. The company has also increased its investments in land and company securities.
