Amos Luzon Buys Control of US Property Firm for $19.5 Million

Israeli businessman Amos Luzon's group has completed a deal to acquire a 60% stake in Kohan Properties for NIS 11.7 million (approximately $3.2 million). His partner, Alpha Gidron, controlled by Oren Halfon, is purchasing the remaining 40% for NIS 7.8 million ($2.1 million), bringing the total payment to NIS 19.5 million ($5.3 million).

This acquisition is for a company with reported assets of $736 million and equity of $277 million, a price significantly lower than its book value. The deal was made with Deka Finance, a British firm controlled by Natanel Lorenz, which had previously loaned $4 million to former controlling shareholder Mike Kohan. When Kohan defaulted, Deka foreclosed on his shares and is now selling them to Luzon and Halfon. The transaction was finalized on October 8, though Luzon's acquisition requires approval from his group's authorized bodies.

Kohan Properties, established in the British Virgin Islands, raised NIS 412 million ($112 million) in bonds in Tel Aviv in March. The company holds income-generating real estate in the U.S., primarily commercial centers, but faces significant liabilities to banks, lenders, and bondholders. In July, it was revealed that the former controlling shareholder allegedly misused approximately $9.6 million of company funds for personal debts. Further investigations uncovered additional financial irregularities, leading to the discovery of a $2.7 million debt and Kohan's removal from his positions.

The substantial discount in the acquisition price, compared to the company's equity, signals significant risks. Kohan Properties' equity is largely based on asset valuations, and the company faces serious financial challenges. While the company reported $49 million in revenue and $53.3 million in net profit for the first half of the year, a large portion of this profit stemmed from a $52.5 million revaluation of real estate assets. The operating profit before valuation changes was $17.3 million, but high net financing expenses of $16.6 million significantly reduced the remaining profit. The company also faces liquidity issues, with only $4.5 million in available cash at the end of June against current liabilities of $124.5 million.

Amos Luzon plans to improve the profitability of existing assets and potentially sell some of them, rather than immediately expanding the real estate portfolio. This strategy is similar to his successful acquisition of Dori Group in 2016, which was also in financial distress. However, the Kohan Properties deal faces a legal challenge from Mike Kohan, who disputes the share transfer, claiming procedural defects in the foreclosure. While Luzon's group has obtained a legal opinion suggesting the sale was valid, potential litigation remains a concern for bondholders, who are focused on the company's ability to repay its debt.