Israel seventh largest foreign investor in US commercial real estate

Israeli investments represent a whopping 5 percent of foreign investment in the US commercial real estate market in 2012, according to law firm.

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November 19, 2013 17:41
2 minute read.
Down town San Diego, California.

Down town San Diego 370. (photo credit: REUTERS)

Israeli investments represent a whopping 5 percent of foreign investment in the US commercial real-estate market in 2012, making it America’s seventh-largest foreign investor in that sector, according to Greenberg Traurig, one of the largest law firms dealing with global real-estate investment.

“I think people feel that right at the moment, the US is probably the most stable real-estate market,” Robert Ivanhoe, the chairman of Greenberg Traurig’s global real-estate practice, said in an interview with The Jerusalem Post in the company’s Tel Aviv office on Sunday.

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Though an impressive showing, the level of investment from Israel has still not reached pre-financial- crisis levels. In 2007, Israel was the fourth-largest investor, representing 7.3% of foreign investment in the sector. In absolute terms, the level of investment in 2012 was still around half what it was five years ago.

Why does such a small country have so much money to invest? One big reasons is the large amount of money Israelis put in their pension funds, which in turn invest some of the money abroad.

“That’s really where it comes from,” Ivanhoe said. “In the [United] States, it’s nowhere near the level of per capita money [in pension funds] as here.” The US system of 401k retirement funds limits investment to exchange-traded funds and mutual funds.

That real-estate prices in Israel are so high already, meaning that investors do not expect them to yield very high returns, while US prices are just recovering from the housing-bubble burst, also increases Israeli investors’ appetite for American real estate.

Israelis tend to steer clear of the complicated funds and financial products that were at the heart of the 2008 financial crisis, he said.

“The Israeli investor wants to invest in a way that gets them as close to ownership of an asset as possible,” Ivanhoe said. Usually, they look for a strong local partner or operator with which to collaborate on the deals, he said.

One obstacle that remains in the way, Ivanhoe said, was the cumbersome Foreign Investment in Real Property Tax Act (FIRPTA), which imposes an incremental tax that can reach as high as 30 percent. Although intricacies of the law can help careful planners reduce that figure, there is a growing push to eliminate it altogether.

“There are a lot of people today in the real-estate industry pushing for that tax to be reduced, so we could attract more foreign capital,” he said.

“The attitude has changed dramatically on that.”


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