HAP Investment Group has raised $6.8m from a private placement in Israel to help finance the development of an 800-unit tower in Jersey City, New Jersey. The New York-based investment and development company expects to complete another, similar deal as it puts together the capital stack for the project, which is expected to cost about $437m. “This is the first time a development company has done a private placement in Israel for a specific project [through an Israeli Securities Authority-approved prospectus,” said Nir Amsel, ceo of HAP ISRAEL and co-founder.
The Journal Square development site is close to PATH, Amtrak, Newark Airport and bus routes to New York and other widely traveled regional destination. “We think this a great up and coming neighborhood, with many projects under construction that will come online over the next five to 10 years,” said Eran Polack, ceo and co-founder. “When all of this is completed, I think Journal Square will be one of the best neighborhoods in New York and New Jersey.”
The company began work on the private placement, approved by the Israeli Securities Authority, in March and went through what Amsel described as an extremely thorough process of due diligence. “We worked very hard with the ISA, which accommodated our time frame and schedule. The ISA wanted this novel product to succeed but were also very scrutinous,” he added. The company sold 544 participation units, each valued at $12,500.
After launching the offering to clients and prospects, HAP observed a five-day waiting period before allocating to investors on a first come, first serve basis. Demand was stronger than expected, which Amsel believes is due to the location of the project as well as Israeli investor desire to have U.S. real estate investments. This meant that the placement was sold out in a few minutes, he said. “People believed in our deal and gave the project a real vote of confidence,” he added.
HAP, which now has a shelf registration in Israel, will be able to complete future deals more easily. “We will need debt and significant equity and we want to have as many good financing channels as we can,” Amsel said. “We want to keep leverage down and have a good partner base, which will allow us to raise more money as the project advances.” The firm hasn’t yet lined up a construction loan.
The company worked with Deloitte, which has completed a number of transactions for real estate companies with the Israeli Securities Authority, as well as Tel Aviv law firm Naschitz Brandes Amir. In some ways, the transaction is similar to crowdfunding because it allows smaller investors to tap into projects that were typically reserved for institutional investors. “Deals like this allow people with less money to earn returns that only wealthy people have been able to do,” Amsel said.