The transaction involves an initial payment of $225 million (all figures Cdn) for a 37 per cent share of ELAD Canada as well as two U.S. properties. It could ultimately be worth $608 million if Toronto-based Plaza Partners and its U.S. partner Argent exercise options to acquire all of ELAD Canada’s shares.
“We are very pleased with this opportunity as ELAD Canada continues to solidify its operations, including investment in income-producing properties and developing master-planned communities in Canada,” said ELAD Canada CEO Rafael Lazer in a Monday-morning release. “The transaction process is progressing well, and we look forward to working with the experienced groups at Plaza Partners and Argent Ventures.”
ELAD Canada and the company’s U.S. operation, ELAD Group, own and are developing several major projects in Canada and the United States. ELAD Group is not part of the transaction.
Background on ELAD Canada talks
RENX first reported the pending transaction last week, based on reports from parent company Delek Group Ltd. (TASE: DLEKG) in Israel. The firm, and its controlling unitholder billionaire Yitzhak Tshuva, are seeking to reduce their overall debt.
If all the options available in the complicated transaction are exercised, Plaza and Argent would pay $608 million for full control of ELAD Canada.
This initial transaction includes of 37 per cent of ELAD Canada shares and 100 per cent of ELAD’s rights to its San Michelle and Colonnade at Sawgrass assets in the United States.
Rights to portions of the Emerald City and Galleria projects are excluded from the transaction, the initial Israeli reports indicated. ELAD, in its statement Monday, confirmed “a certain financial asset that is not being acquired as part of the deal” but offered no further details.
The agreement grants the option for the investors to acquire the remaining 63 per cent of shares up to 30 months after the agreement is signed.
It also provides ELAD Group the option to force the acquisition of the remaining 63 per cent in several tranches, beginning 18 months following the signing of the agreement.
This includes up to $100 million contingent upon increasing construction rights and profits in ELAD’s ongoing Galleria shopping centre redevelopment and Lansing projects in Toronto. There is no time limit on this potential additional payment.
Elad’s Toronto, Montreal developments
In Toronto, ELAD Canada has spent a decade developing the massive Emerald City site at Highway 401 and the Don Valley Parkway/Highway 404 in Toronto, as well as the redevelopment of the former Galleria Shopping Mall property, now known as Galleria on the Park.
It also plans a multiple-tower condo development known as Lansing Square in North York.
In Montreal ELAD is currently developing the Harmonia Condos its master-planned community Cite Nature. It has also been involved in Nordelec in the city.
A spokesman for Plaza Partners, when contacted by RENX about the original reports, said the firm could not discuss the acquisition because talks were continuing and the deal had not been finalized.
Once the first phase of the transaction is complete, the buyers will also assume “the majority of the day-to-day management,” the release says. However, the company is expected to maintain its current operations, senior management and key personnel.
A binding agreement is expected to be signed within 30 days.
About the companies
Founded in 1992, ELAD Canada is currently headed by Lazar. The company and its fully owned subsidiary Agellan Commercial own and operate 7.4 million square feet of income-producing residential and commercial properties.
ELAD also has a construction pipeline of 4.4 million square feet and in excess of 6,000 residential units under development.
Through ELAD Group, which is based in New York, the firm employs more than 5,000 across the continent and has been engaged in major luxury projects such as the acquisition and restoration of New York’s famed Plaza Hotel.
It is also developing the luxury Plaza Hotel in Las Vegas.
Plaza Partners is a real estate development and management company focused on development operation of properties in the Greater Toronto Area. Plaza Partners is affiliated with Plazacorp Investments Ltd. (though Plazacorp is not involved in the acquisition).
Argent Ventures is an investment property development company based in New York City.