Cohan Properties Shifts Ownership to Creditor as Tel Aviv Bond Turmoil Grows
Foreign real estate firms issuing bonds in Tel Aviv face major turbulence as Cohan Properties shifts ownership to creditor Netanel Lorenzi amid fund misuse, while Aya New York moves to refinance.
The turmoil surrounding foreign real estate companies that issued bonds on the Tel Aviv Stock Exchange (BVI companies) continues. Just two months after it was revealed that the controlling shareholder of Cohan Properties misused company funds for personal purposes, ownership of the company unexpectedly passed last week to one of its creditors, businessman Netanel Lorenzi.
Cohan Properties raised approximately 412 million shekels from investors in Tel Aviv at the beginning of the year through a bond issuance. About two months ago, it was first reported that the company's owner, Jewish billionaire Mike Cohan, improperly withdrew millions of dollars from the commercial property company's coffers to repay other loans in his private business. This occurred across several distinct incidents, despite assurances that similar events would never happen again. Since the initial report, Cohan has continued to update the market regarding additional debts incurred by the owner alongside partial repayments he made.
To repay the funds he unlawfully took, Cohan turned to Lorenzi, an Israeli living in Britain who engages in short-term lending through Decama Finance. As far as is known, a little over a month ago, Lorenzi granted him a loan of less than 10 million dollars, which was secured by shares of the issued company. This development was not brought to the attention of bondholders, who will have to decide later this week whether to demand immediate repayment of the bonds.
"We recognize the great importance of Cohan Properties' commitments to the bondholders, and we will support the board of directors in any step that improves corporate governance and management within the company," Lorenzi said. "Decama Finance has a financial interest in the company's success and the full repayment of the bonds in order to preserve the company's value, which creates a shared interest with the bondholders."
High Probability of Asset Realization Over Redemption
At least at this stage, sources close to the company estimate that the creditors will choose not to call the bonds for immediate repayment. This is because the ability to realize assets is assessed to be higher under the current management, whereas Lorenzi's ability to sell the pledged assets without the consent of the debt holders is limited.
Against this backdrop, Cohan Properties added Asaf Ravid last week as a consultant to the company's management. Together with Ran Ben Daniel, who was recently appointed as the company's CEO, the two will lead its ongoing management, work to improve cash flow, and execute the sale of assets pledged to the bondholders.
Ravid has experience in accompanying and realizing assets of BVI companies that have spiraled into crisis, and he has recently been leading the realization of assets for the summer camp company Cimed, which collapsed after its owners also improperly withdrew about 100 million shekels from its coffers just months after issuing bonds in Tel Aviv.
Amir Shriki Leaves Tel Aviv After Less Than a Year
Another foreign company trying to turn a new page after a publicized entanglement over the past year is the real estate firm Aya New York, owned by entrepreneur Amir Shriki.
This follows the signing last week of a memorandum of understanding for a refinancing deal totaling 104 million dollars, through which the company will early repay its debt to bondholders who invested in its Tel Aviv issuance.
The write-down comes less than a year after Aya joined the local stock exchange through a bond issuance amounting to 292 million shekels. Recently, Shriki and Aya fell into a publicized dispute with Value Base investment bank, which led the company's bond issuance in Tel Aviv. Value Base is suing Aya for 11 million shekels in underwriting fees to which it claims entitlement.
Following this, at the beginning of last month, it emerged that Aya had pledged revenues from properties mortgaged in favor of bondholders, in violation of the trust deed, which caused bond yields to spike. Following the announcement of the early repayment, these bonds are currently trading at a yield of about 11%.
Aya New York was incorporated as a BVI company to absorb five income-generating properties in Manhattan that it acquired in recent years, and since then it has carried out value-enhancement processes on them, according to the firm. "We arrived at the Israeli capital market with significant plans for the company's growth, and we appreciate the trust we received from the public. Today, we believe it is right for Aya to rely on US banking sources of funding, which we have successfully used in the past," Shriki stated. "We are working to complete the move quickly and respectfully, ensuring full repayment to the bondholders while continuing to focus on the growth and expansion of our operations."
Historical Context of Decama's Involvement
Consequently, estimates suggest that Cohan will now act to realize some of its assets to early repay its obligations to bondholders. Currently, the company holds about 35 commercial centers spread across roughly 19 US states with a total value of approximately 710 million dollars. Of these, 8 assets are pledged to bondholders with a total value of around 213 million dollars (roughly 650 million shekels).
Amid the ownership change, Cohan's bonds are currently trading at a yield to maturity of 14%, reflecting bond investors' concerns regarding the company's ability to meet its obligations.
Concurrently, the surprise ownership transfer to Lorenzi brings back a figure with a history in the local capital market, characterized by leveraged investments and entanglements with regulators and investors.
In 2018, Lorenzi acquired control of Gabbay Urban Renewal through Decama from the Gabbay Group, which at the time invested in European real estate and whose shares were traded on the Tel Aviv Stock Exchange. Under Lorenzi, the company changed its name to Decama Capital and began focusing on US securities investments with an emphasis on short-selling positions, which subsequently generated significant losses for the firm.
For instance, in early June 2021, he opened a short position on AMC cinema chain stock shortly before it became a "meme stock". Young retail investors who piled into the stock, as well as other social media meme stocks, drove its value up rapidly, inflicting heavy losses on investors like Lorenzi. In total, Decama recorded a loss of about 2.4 million dollars (roughly 7.8 million shekels) due to the failed investments.
Despite the failure, which led to lawsuits against him and the resignation of most board members, the scenario repeated a year later. Lorenzi executed a similar bet, this time against Cathie Wood's exchange-traded fund—the renowned investor heading ARK Invest—and against the shares of electric vehicle maker Tesla, controlled by Elon Musk. However, the bets against Wood and Musk also failed, and the company's securities portfolio continued to accumulate losses.
Sources close to Lorenzi now claim that the opened positions subsequently generated significant profits for the firm after Decama had already become a private company. In early 2023, Lorenzi delisted the company by buying out minority shares at a company valuation of only about 38 million shekels. Two years later, he was forced to pay a fine of 525,000 shekels as part of a settlement in an enforcement proceeding conducted by the Israel Securities Authority, part of which was paid by the company.
