Alto Private Investments properties 370.
(photo credit: Alto)
Alto Private Investments, an Israeli firm that promotes investment in offshore
income properties as an alternative to capital markets, expects to close its new
fund in May with a volume of NIS 100 million, The Jerusalem Post has
The fund, which is being sourced from private Israeli investors
who each contribute at least NIS 1m., made its first closure in February to the
tune of NIS 10m. Some 30 investors have already committed to the fund. Its total
asset value is expected to be about NIS 400m. upon final closure, if bank
leverage and local partner contributions reach the forecast 65
Alto’s concept was born out of the 2008 global financial crisis,
but remains relevant given ongoing global economic troubles, founder and
chairman Mody Kidon told the Post
. He said high-earning Israelis understood the
need to withdraw their money from the capital markets and invest it in real
estate, but often went down the path of investing in a limited number of
properties rather than spreading their risk.
This is where Alto stepped
in, according to Kidon, offering a way for institutional investors to spread
their risk across a range of income-producing real estate in the United States
and Western Europe. He said these investments create a constant and predictable
cash flow – as opposed to real estate development transactions – making them
ideal for those who seek to minimize risk and enjoy a relatively high current
The new fund intends to invest in five properties in the coming
year, having already acquired its first two: 40% of a retail complex located
midway along Manhattan’s Fulton Street, about 400 meters from the new World
Trade Center; and 65% of a commercial property on the main pedestrian shopping
street in the western German city of Gelsenkirchen.
As with its previous
funds, every transaction is carried out with local partners. Alto’s fund
managers and the local partners invest approximately 50% of the total
investments from their own money, ensuring a total match of interests between
investors and investment managers. According to the terms of the fund, money
calls from investors will only be made when making an investment and management
fees will be only collected on assets that are actually acquired.
a former Israel Air Force pilot who also works as business manager of the
Gitam/BBDO Group, said previous experience around the world indicates that
investment in income-yielding real estate has a low correlation with fluctuating
Alto has invested about NIS 260m. in eight properties
since its inception, with ownership divided among some 100 separate private
investors. It made its first exit in July 2011, realizing its rights on a
Chicago property that gave an average annual internal rate (IRR) of return of
20%. It realized an additional property in West Virginia three months later,
resulting in an average annual IRR of about 18%.
CEO Yaniv Melamud told
that Alto chose to invest in the US and Western Europe because of the
high stability of those markets. “We believe in the financial stability of these
countries, which are proving their robustness even in these turbulent times,” he
said. “We estimate that with the improvement in the global economy, it will be
possible to sell the fund’s assets with very attractive profits for our
In contrast to companies that focus on the residential
market, Alto prefers to focus on the world of commercial real estate, Melamud
said. He explained that it is far more worthwhile to lease properties to
companies like leading American drug retail chain Walgreens for a rental period
of 25 years than it is to deal with the coming and goings of short-term
“When it comes to commercial real estate abroad, all
responsibility for the upkeep of the asset lies with the tenant,” Melamud said.
“Residential real estate investment is very dependent on the situation in the
region and on its future development, not to mention the quality level of the
apartments themselves. Any change in unemployment levels immediately affects the
local housing market.
“On the other hand, when it comes to commercial
real estate leased to strong companies for the long term, everything is known in
advance. We are talking about transactions with the lowest risk and yields that
are even higher than those in the rental market,” he added.