Amos Luzon Buys Control of US Property Firm for $3 Million

Businessman Amos Luzon's group has completed a deal to acquire a 60% stake in Kohan Properties for NIS 11.7 million (approximately $3 million). Luzon's partner, Alpha Gidron, controlled by Oren Halfon, is purchasing the remaining 40% for NIS 7.8 million, bringing the total payment to NIS 19.5 million. This acquisition is for a company with reported assets of $736 million and equity of $277 million, suggesting a significantly low purchase price.

The deal was made with Dekama Finance, a British firm controlled by Natanel Lorenzi. Dekama had previously loaned $4 million to Mike Kohan, the former controlling shareholder of Kohan Properties, with his shares pledged as collateral. When Kohan defaulted on the loan, Dekama seized the 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 through 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 obligations. Further investigations uncovered additional discrepancies, increasing the debt attributed to him.

By September, another debt of about $2.7 million was discovered, leading the board to remove Kohan from his presidential role and revoke his signing authority. Ran Ben Daniel took over management, and the company began formulating a plan for cash flow improvement and asset liquidation. In late September, Kohan's shares were transferred to Dekama following the collateral seizure.

The substantial difference between the company's book value and the acquisition price reflects considerable risk. Kohan Properties reported $736.3 million in assets and $459.3 million in liabilities at the end of June, resulting in $277 million in equity. However, the purchase price implies a company valuation of only $6.4 million. While the company reported a net profit of $53.3 million on revenues of $49 million in the first half of the year, a significant portion of this profit stemmed from a $52.5 million revaluation of real estate assets, particularly in Manhattan. The operating profit before revaluations was $17.3 million, but high net financing expenses of $16.6 million significantly reduced the actual profit. Liquidity is also a concern, with only $4.5 million in available cash at the end of June against current liabilities of $124.5 million.

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 reminiscent of his successful acquisition of Dori Group in 2016, which was also heavily indebted. However, the deal faces a legal challenge from Mike Kohan, who disputes the share transfer, citing alleged flaws in the collateral seizure process and the seller's authority. Luzon's group has obtained a legal opinion from British Virgin Islands lawyers stating the seller was authorized to transfer the shares free of third-party claims, but legal proceedings remain a possibility. For bondholders, the primary concern is Kohan Properties' ability to repay its debt, with bonds trading at double-digit yields reflecting investor apprehension.