Kohan Properties' Owner Misuses Bond Proceeds for Personal Loans, Triggering Investor Concerns

Kohan Properties, a British Virgin Islands-based real estate company that went public on the TASE in March, saw its bond prices plunge 17% today, pushing yields to 14%, reflecting investor doubts about its ability to repay 412 million shekels raised in its initial bond offering. The drop followed revelations that the company's controlling shareholder, Mike Kohan, used at least $9.6 million (approximately 30 million shekels) from the bond proceeds for personal purposes, specifically to repay loans on assets not owned by the company. Kohan Properties reported that Kohan has returned the funds and that the company is currently reviewing the details, having found additional transactions involving companies owned by Kohan and confirming that the amounts were reimbursed to the company.

This disclosure came after the Israel Securities Authority demanded clarifications about the identity and connections of a party that invested in a property Kohan Properties acquired. The inquiry revealed that this party is controlled by businessman Uri Eisenberg, son of Shlomo Eisenberg, a major shareholder in Yesras and Malam Team. Eisenberg’s company provided a $4.7 million loan in Q1 2024, reportedly to cure defaults with a senior lender on one of Kohan Properties’ assets. However, it was also discovered that the bond proceeds were used to fully repay a $7 million loan on the same asset. These details, including the loan, defaults, and repayment, were not disclosed in the company’s quarterly report or bond prospectus. Additionally, Kohan Properties entered into a consulting agreement with Eisenberg’s company for economic advisory services worth $1.87 million.

Mike Kohan, originally Mehran Kohansieh, is an Israeli-born Jewish businessman of Iranian descent residing in the U.S. He controls Kohan Retail Investment Group, which owns 35 income-producing properties valued at $710 million across 19 U.S. states, mostly shopping centers. Kohan established Kohan Properties in August 2023 in the BVI to raise debt via bond issuance in Israel and refinance expensive existing debts, some personally guaranteed. He transferred 17 properties to the company, eight of which were pledged as collateral for bondholders.

Kohan was previously known in Israel as a partner of Zohar Levy, expanding Summit’s U.S. operations in 2021, managing assets on Levy’s behalf until their partnership ended in 2024. This case is the second recent instance involving BVI companies that raised bonds in Tel Aviv and subsequently faced issues related to bond proceeds or company assets. In late May, it emerged that controlling shareholders of Simed, which raised 620 million shekels in December 2023, withdrew about 100 million shekels from its accounts and subsidiaries, causing the company to default on bond payments.