BONDS AND BONDS INTEREST PAYABLE

12 Months Ended

Dec. 31, 2018

Series Bonds Payable

BONDS AND BONDS INTEREST PAYABLE

NOTE 8. BONDS AND BONDS INTEREST PAYABLE

In August 2016 Southern Properties Capital LTD (“Southern”), a British Virgin Islands corporation was incorporated for the purpose of raising funds by issuing Bonds to be traded on the Tel Aviv Stock Exchange (“TASE”).  TCI transferred certain residential and commercial properties located in the United States to Southern, its wholly owned subsidiary. 

On February 13, 2017, Southern filed a final prospectus with the TASE for an offering and sale of nonconvertible Series A Bonds to be issued by Southern. The bonds are obligations of Southern.  During the year ended December 31, 2017 on three separate occasions Southern issued nonconvertible Series A Bonds with a total value of approximately NIS400 million New Israeli Shekels (“NIS”) or approximately $115 million dollars.  The Series A Bonds have a stated interest rate of 7.3%.  At March 31, 2018 the effective interest rate is 9.17%. The bonds require semi-annual equal installments on January 31 and July 31 of each year from 2019 to 2023 (inclusive). The interest will be repaid on January 31 and July 31 of each of the years 2018 to 2023 (inclusive), with the first payment commencing on July 31, 2017.

On January 25, 2018, interest payment of approximately NIS 14.6 million (or approximately $4.3 million) was paid to the Series A bond holders.

On February 15, 2018, Southern issued Series B bonds in the amount of NIS 137.7 million par value (approximately $39.2 million as of February 15, 2018). The Series B bonds are registered on the TASE. The bonds are reported in NIS and bear annual interest rate of 6.8%. Interest shall be repaid January 31 and July 31 of each of the years 2019 to 2025 (inclusive), first payment commencing on July 31, 2018. The principal shall be repaid in ten equal installments on January 31 and July 31 of each of the years from 2021 to 2025 (inclusive). With this issuance the Company incurred approximately $1.4 million of bond issuance cost. The effective interest rate is 7.99%.

On July 19, 2018, Southern closed a private placement of its Series B bonds in the amount of NIS 72.3 million (or approximately $19.8 million). The bonds are reported in NIS, are registered on the TASE, bear an annual interest rate of 6.8% and have an effective interest rate of 9.60%. Interest will be paid on January 31 and July 31 of each of the years 2019 and 2025 (inclusive). The principal will be repaid in ten equal installment on January 31 and July 31 of each of the years from 2021 to 2025 (inclusive). The Company incurred bonds issuance costs of approximately $1.9 million.

On July 26, 2018, interest payment of approximately NIS 18.9 million (or approximately $5.2 million) was paid to Series A and B bond holders.

In December 2018, the Company deposited $16.2 million with the bond Trustee for the upcoming January 2019 Series A and B bonds principal and interest payment.

The outstanding balance of these Bonds at December 31, 2018 and 2017 were as follows:

	December 31, 2018			December 31, 2017
Bonds (Series A)	$	106,686		$	115,336
Bonds (Series B)		36,740			—
Bonds (Series B expansion)		19,290			—
Less: deferred issuance expense, net		(8,179	)		(5,914	)
Accrued Interest		4,037			3,627
	$	158,574		$	113,049

The aggregate maturity of the bonds are as follows:

Year	December 31, 2018		December 31, 2017
2019	$	22,049	$	—
2020		22,049		23,067
2021		33,629		23,067
2022		33,629		23,067
2023		30,070		23,067
Thereafter		21,290		20,781
	$	162,716	$	113,049

The funds were used primarily for the acquisition and development of additional real estate operations in the United States. The funds were raised and will be repaid in NIS, however the funds raised have been converted to US dollars. The Company records unrealized gains or losses each quarter based upon the relative exchange values of the US dollar and the NIS; however, no gain or loss will be realized until a conversion from US dollars to NIS actually occurs in the future. The recorded unrealized gain or loss is reflected as a separate line item to highlight the fact that it is a non-cash transaction until such time as actual payment of principal and interest on the bonds is made. For the years ended December 31, 2018, and 2017, the Company recorded a gain on foreign currency transaction of approximately $12.4 million, and a loss of $4.5 million, respectively.