beersheba real estate 311.
(photo credit: Courtesy)
Six years and 12 Israel trips ago, I incorrectly thought that all Israeli
companies and individuals longed to invest in the United States, naively
believing that American investment was always an important part of any cogent
real-estate strategy. This analysis failed on many accounts, notably poor
currency- exchange rates, an overheated American realestate economy and other
international markets that were then more attractive to the Israeli investor
(e.g., Eastern Europe, China, Africa ).
That the market is now different
is clear, and one should question whether the more positive investment flow to
US real-estate investments is episodic or more permanent. I lean toward the
latter analysis – one that likely will drift toward stability and
In 2005, when the currency exchange was approximately NIS 4.25 to
the dollar, buying property in the US, be it in New York or Atlanta or Los
Angeles, was correctly deemed to be overpriced.
Now, with the currency
exchange near NIS 3.4 to one dollar, and with real property trading at much
lower prices, the thinking is that there is money to be made both on the asset
and potentially on the currency exchange. Israelis, in fact, see this every day
as Israeli real-estate prices are now quoted in shekels and not in
Equally important, the market six years ago was primarily
focused on yield, with little worry about safety, transferability or title
concerns. Investors, including Israelis, were intrigued with Eastern Europe,
especially Bulgaria, Ukraine and Georgia.
They were also fascinated with
India, the Far East and Africa. While some remain interested, there seems to be
a flight to better quality – and ultimately, a willingness to accept lower
This analysis is best reflected in the non-Israeli Middle East.
With political and economic uncertainty at every corner, many investors will
surely look to further diversify, investing more and more outside of the Middle
East, following the long-held Israeli strategy – except that Israeli investment
has generally been based on diversification. There is, after all, a significant
difference in losing your own money and losing legacy money and legacy
investments, The latter are often made in stable core assets in the US or
otherwise, and investors can afford to accept lower yields.
factors, among others, are helping certain segments of the American real-estate
market, notably multifamily (i.e., rental apartments) and retail, particularly
when dealing with credit tenants.
Many Americans, especially younger
ones, do not see ownership of residential property as a panacea and fully intend
to continue to rent, a strategy that is stimulating the apartment
Retailers, which are deemed to have good credit, are, for sure,
continuing to grow, with companies such as Target and Costco expanding their
overall square footage. Other retail tenants are doing the same – certainly
those in the value segment, the entertainment segment and (yes) the high-end
There is now significant interest in each of these areas, and,
with the banks still cautious to lend, international investors have entered the
market – more on the equity side than the debt side.
Until the US debt
market becomes more active, equity – Israeli or otherwise – will be welcome by
US property owners.
Needless to say, all markets are cyclical. However,
“safety” will be a silent partner in real-estate deals for some time. The market
of 2005 was much different, likely less technical, and similar to the US market
of the late 1980s, believing that everything would go up, logically or
otherwise. Current investment into the US (and other “stable” economies) will
likely continue to expand, particularly as the appetite for risk is
email@example.com Abe Schear is chairman of the Israel Practice
Team and the Inbound Foreign Business Team at Atlantabased law firm Arnall
Golden Gregory LLP.