Creditor Takes Control of Troubled Real Estate Firm After Owner Misappropriated Funds

Natanel Lorentzi, a businessman and creditor, has unexpectedly taken control of Kohan Properties, a real estate company that raised bonds in Tel Aviv. This development follows revelations that the company's owner, Mike Kohan, had improperly used company funds for his private debts. Kohan Properties had raised approximately 412 million shekels from investors in Tel Aviv earlier this year through a bond issuance. Two months prior to the ownership change, it became known that Kohan had illegally withdrawn millions of dollars from the company's coffers to cover other business loans, despite assurances that such actions would not recur.

To repay the misappropriated funds, Kohan approached Lorentzi, an Israeli based in the UK who specializes in short-term lending through his company Dekama Finance. Lorentzi provided Kohan with a loan of less than $10 million, secured by the company's shares. This transfer of control was not disclosed to bondholders, who are set to decide later this week whether to demand immediate repayment of the bonds. Lorentzi stated that Dekama Finance has a vested interest in the company's success and the full repayment of the bonds to preserve the company's value, indicating a shared interest with bondholders.

Company insiders anticipate that creditors will likely opt against demanding immediate repayment, believing that the existing management is better positioned to liquidate assets. Lorentzi's ability to sell pledged assets without the consent of the debt holders is limited. Kohan Properties recently appointed Assaf Ravid as an advisor to its management, working alongside newly appointed CEO Ran Ben Daniel to oversee daily operations, improve cash flow, and sell assets pledged to bondholders. Ravid has experience managing the liquidation of assets for distressed BVI companies.

In a separate but related situation, real estate company Aya New York, founded by entrepreneur Amir Shariki, is also seeking a fresh start. Last week, the company signed a memorandum of understanding for a $104 million refinancing deal to prepay its debt to bondholders who purchased bonds in Tel Aviv. Aya New York joined the local stock exchange less than a year ago with a 292 million shekel bond issuance. Shariki and Aya were recently involved in a dispute with investment bank Value Base, which is suing Aya for an alleged underwriting fee of 11 million shekels. Aya had also pledged future earnings from assets already collateralized for bondholders, contrary to the trust deed, which caused bond yields to surge.

Kohan Properties currently owns approximately 35 commercial centers across 19 US states, valued at about $710 million. Of these, 8 properties worth approximately $213 million are pledged to bondholders. Despite the change in ownership, Kohan's bonds are currently trading at a yield to maturity of 14%, reflecting investor concerns about the company's ability to meet its obligations. Lorentzi has a history in the Israeli capital market, including leveraged investments and regulatory issues. In 2018, he acquired control of Gabai Urban Renewal, later renaming it Dekama Capital and focusing on short positions in US securities, which resulted in significant losses, including a $2.4 million loss on AMC stock and subsequent losses on bets against Cathie Wood's ARK fund and Tesla. Lorentzi's associates claim these positions later became profitable after Dekama went private. He delisted the company in early 2023 and later paid a 525,000 shekel fine as part of a settlement with the Israel Securities Authority.