Hertz Investment Group has secured a $65 million financing package for its Brookhollow Central office campus in northwest Houston by tapping the Tel Aviv Stock Exchange.
The California-based REIT raised the cash through a bond sale and put it towards leasing costs and repaying existing debt on the complex.
In the company’s June 1 announcement, Hertz said it was looking to secure financing in both the US and Israeli capital markets, and “after comprehensive research and due diligence,” decided to complete the $65 million bond raise through the Tel Aviv Stock Exchange.
The three-tower Class-A office complex at 2900 N Loop W in Houston totals more than 800,000 square feet nestled within the Brookhollow business center — a huge commercial corridor where U.S 290 HOV meets Route 610. The towers stand between 12 and 14 stories high and include an auditorium-style conference facility, sundry shop, fitness center and deli.
“Our existing subsidiary in Israel provides additional options for capital that most of our competitors do not have,” says CFO Robert Licht. “These additional options allow us to execute our strategic plans more effectively.”
Hertz first acquired the three-building campus in 2018, right after the property lost major tenant Comerica Bank. Shortly after that, Hertz’s debt exceeded the value of its real estate assets, according to the company’s SEC filing from the first quarter of 2019. Compared to the net value of $1.5 billion for its 71 properties, Hertz’s reported $1.7 billion in outstanding debt from mortgages.
Its business model of acquiring properties at 70-80 percent occupancy, then pouring in money to attract new tenants, proved highly problematic as Covid-19 ravaged the commercial real estate market.
Today, Brookhollow Central is 62 percent leased, says Hertz — only a slight improvement from its 50 percent occupancy at the time of acquisition.
“Even though the real estate market in Houston has been challenging over the past two years, we’ve been able to outperform in our leasing efforts during this time,” said Zev Hertz, the chairman and CEO. “We weathered the storm for many reasons, mainly due to the property’s prime location, our focused on-site management, one-on-one relationships with our tenants and being anchored by solid, well-established companies.”