Israeli Investors Increasingly Turning to US Real Estate
Israel has become one of the largest foreign investors in US commercial real estate over the past few years, and considering the size and population of Israel, it is remarkable how common the country’s investments in America have become. In New York alone over the last decade, Israeli investors were the fourth-largest cross-border purchasers.
There have also been many American real-estate owners and developers coming to the Tel Aviv Stock Exchange to obtain Israeli institutional funding for their US projects through bond offerings. Indeed, more than $1 billion in such Israeli bonds have been issued since 2008.
Low interest rates and the reduction of available long-term government bonds issuances have led Israeli institutional investors to seek alternative investment options, and to increase their exposure to global investments. On average, large Israeli institutional investors allocate 7% of their managed funds to alternative assets; among these, a large percentage is allocated to real estate investments. Smaller institutional investors are also allocating a growing percentage of their funds to real estate investments.
Many of these Israeli institutions are investing into real-estate deals directly, which gives the investors more control over the successes or failures of the investment, and, structurally, places the investors much closer to the underlying real estate assets than by purchasing bonds on the Tel Aviv Stock Exchange. A vast majority of these investors are entering into income producing real estate assets, such as multifamily, office and retail.
Examples of recent published deals include the purchase of the Brill building in New York by Halman Aldubi in a deal worth $310 million; the purchase of two multifamily portfolios in Atlanta and Texas by Psagot Investment House for $182 million; and the purchase of three multifamily portfolios in North Carolina by Migdal Insurance for $167 million. Other notable deals are the partnership between Silverstein Properties, Menora, Psagot and Amitim Pension Funds for the acquisition of $400 million multifamily portfolios across the US, and the $52 million mezzanine loan provided by Harel Insurance and the Kushner family to JDS Development and the Chetrit Group for their new development project in Brooklyn.
In conclusion, we are seeing an increasing influx of Israeli institutional capital directly into United States real estate projects. Owners and developers may find Israeli capital to be a fresh alternative financing source. As these investors continue to gain knowledge and sophistication in these deals, they will become invaluable partners to the long-term successes of these projects.
Alon Harnoy is Managing Partner at Shiboleth LLP and Tomer Eblagon is Senior Vice President, Head of Americas at Rosario Capital.