Everything You Need to Know About Israeli Investment Right Now
Matt Coyne March 30, 2011, 1:14 p.m.
Ever since the founding of the state of Israel, citizens of this tiny nation have made small financial investments in commercial real estate in the United States. Fifty years ago, these investors might have purchased a six-story walk-up apartment house on the Upper West Side. Today, new breeds of Israeli investors are aggressively pursuing commercial real estate on a much grander scale.
Last December, the Israel-American Chamber of Commerce hosted a half-day seminar, “Commercial Real Estate in the U.S.—Yes, No and How,” in Tel Aviv, chaired by investors from Israel and the U.S. Panelists included Jeffrey Goldberg, managing partner of the New York City-based Milestone Group; Eitan Bar Zeev, CEO of Big Centers; Uzi Levy of PBC (the IDB Group); and Gadi Ben Haim, head of real estate activity at Harel Insurance. It is very important to gain insight on the companies who participated as speakers at the seminar in Tel Aviv.
The Milestone Group is a Manhattan-based investment and management company with more than $2.5 billion of multifamily assets under management, representing in excess of 40,000 multifamily units.
Big Centers is a publicly traded company and a large owner of retail centers in Israel. The company owns malls in India and is developing a chain of shopping centers throughout Serbia. Over the past 18 months, it has joined hands with leading U.S. companies, including Kimco, to locate and purchase shopping centers in the U.S. The company has recently purchased ownership interests in 17 shopping centers in the U.S.
The IDB Group is Israel’s largest, leading diversified business group, with total assets of more than $30 billion. The publicly traded company is made up of several holding companies, including Property & Buildings Corp., one of Israel’s largest real estate corporations. It owns more than 1.1 million square meters of income-producing properties in Israel and approximately 600,000 square meters of hotels and income-producing properties worldwide.
Harel Insurance Company is owned by Harel Insurance Investments and Financial Services, one of Israel’s largest public companies, whose shares are traded on the Tel Aviv Stock Exchange. Harel Group is the third-largest insurance group in Israel. Harel Insurance has been a very active player securing commercial real estate in the U.S.
In December, Harel Insurance Investment and Finance Services signed an agreement for an investment of $28.5 million, together with SL Green and Jeff Sutton. The joint-venture partnership will develop a building featuring high-end retail space on the lower four floors and 23 floors of dormitories rented to Pace University. SL Green and Mr. Sutton will retain a 51 percent controlling interest in the properties, at 180-182 Broadway and 2 John Street.
In November, Harel acquired two office buildings in Houston, Texas, for $85.2 million.
In October, Harel Insurance and Gaia Real Estate Company announced it had partnered to invest in real estate in the U.S., including the tristate area. It announced the acquisition of several residential units in three separate transactions. The properties include a six-story elevator building with 48 residential units at 5 West 91st Street in Manhattan, constructed in 1974.
The entity also purchased a 20-story, 337,455-square-foot building with 265 residential units and ground-floor commercial space at 320 South Harrison Street in East Orange, N.J. The third property was 92 townhouse units in seven buildings located in Colchester, Conn.
Local investors are also joining forces with Israeli investors to acquire sites as well as distressed debt. Over the past 18 months, New York City-based investor Ziel Feldman, principal of HFZ Capital Group, has acquired distressed debt in Manhattan. Earlier in the year, HFZ and Israeli-based Acro Group won the tender for the $147 million construction loan from Anglo Irish Bank Corporation on the unsold condominiums at the 34-story residential tower conversion at 40 Broad Street. The Wall Street Journal reported that they paid approximately $80 million to acquire 65 percent of the Setai Wall Street, a property that has 159 residential condos.
Acro Group is an Israeli-based private group owned by Arbov Investments Ltd. and Virometal Investments Ltd. Acro specializes in initiating unique real estate projects of residential and business construction in Israel and the United States.
Last year, HFZ and Acro acquired distressed debt, and subsequently the ownership, in two New York properties. The company acquired the construction development at the corner of Second Avenue and East 51st Street where 150 apartments are scheduled to be completed. (This is the site of the crane accident of 2008.) Also, last year, the joint venture acquired the development site on West 40th Street between Fifth and Sixth avenues, across from Bryant Park.
Last month, Israeli developer Moshe Shuster, through his company Victor Homes, acquired a development site on 29th Street in Chelsea between 10th and 11th avenues. Mr. Shuster, no stranger to the New York City condo market, with a successful development a few years ago on 23rd Street between First and Second avenues, paid about $12 million for the site. According to Israeli publication Globes, Mr. Shuster plans to build a 12-story building with 65 condos, which can be increased to 100 after the building rights are increased.
In October 2009, Property & Building, a subsidiary of Nochi Dankner-controlled IDB Holding and its sister company, Koor Industries, purchased the HSBC tower at 452 Fifth Avenue for $330 million. In January, these Israeli investors traveled to Chicago to buy a commercial property for $121.5 million.
Last December, another Israeli publicly traded company, Aviv Arlon Global Ltd., closed on the purchase of a 170,000-square-foot shopping center in the Windy City. The company paid $17.5 million through BAI Century LLC, its joint venture with Bon Investments, through which they own other properties in the U.S.
A number of people have considered Jersey City the sixth borough. It was reported that Israel Phoenix Assurance Ltd. and Menorah Mivtachim Holding Ltd. were in advanced talks to purchase an office building there for $80 million.
In January 2010, Norfolk, Va.-based Harbor Group International purchased the 25-story, 1.1 million-square-foot office building at 4 New York Plaza in Lower Manhattan. In December, Harbor Group and two Israeli insurance companies, Midgdal Insurance and Financial Holdings Ltd. and Menorah Mivtachim Holdings, purchased the 24-story, 415,000-square-foot office building at 1412 Broadway. The joint venture, whose ownership includes Midgal with 33 percent, Menorah with 32 percent and Harbor Group with the rest, paid $150 million for the tower.
In November, Fishman Holdings’ real estate unit Darban Investments (traded on the Tel Aviv Stock Exchange) purchased a residential building under construction on Franklin Street in Tribeca for $21 million. When completed, the 18-story building will have a total of 84 apartments. In September, Darban purchased a 12-story building in Manhattan for $44.5 million.
Darban CEO Yigal Lavie was quoted in Globes saying, “Despite the crisis, we see great potential in Manhattan. New York is a city that is keeping its status as one of the great cities of the world. That’s why we’re focusing on deals at good prices with strong betterment potential. We’re examining other deals in New York, and we will continue to do so.”
Many people consider Miami a sister city of Manhattan. In February, Optibase Real Estate Miami, a wholly owned subsidiary of an Israeli-based real estate investment firm, paid $8.6 million to purchase 21 luxury condos at the Marquis Residences at 1100 Biscayne Boulevard. The seller was Leviev Boymelgreen Marquis Developers LLC. Earlier this year, another Israeli group, W Capital Group, closed on the purchase of an $8.7 million note, in which the note was secured by 32 residential and eight retail units in Coral Gables, Fla.
The stock market has its highs and lows, yet real estate continues to appreciate in value. With rising values in commercial real estate, expect foreign investors from around the world to continue to seek investment opportunities in the commercial real estate of the U.S. and especially in New York City.
Michael Stoler is a managing director at Madison Realty Capital and president of New York Real Estate TV LLC.