The Harel Insurance and Finance Group is expanding its real estate portfolio through strategic sale and leaseback transactions.
Funds up to NIS 300 million will be invested in a fund managed by LCN which specializes in leaseback transactions and manages about 6.5 billion dollars AUM (assets under management). Most of the investments are expected to be made in western European countries.
Harel, which is consistently expanding its presence in the world's main real estate markets, recognizes the potential in the sale-and-leaseback strategy.
With leaseback, the seller of a real estate asset agrees to rent it from the buyer in a long-term contract which in Europe includes indexation. This strategy consists of investing in bonds, gives protection from inflation and a stable and high cash flow, and is therefore suitable even during turbulent times in the markets.
LCN's fund is expected to make 10-20 different investments, emphasizing sectoral and geographic diversification. LCN has extensive experience and a good familiarity with the target markets and the companies operating there, including examination of potential deals and ongoing monitoring of existing transactions.
It focuses on three main factors: Examining the tenant, the real estate, and if the property is suitable for the tenant's business. Each factor is rated by a detailed model. The entire deal is rated before and throughout the life of the investment.
This investment, which is part of Harel's investment strategy in real estate markets abroad, will be added to the group's real estate portfolio which currently stands at approximately NIS 18 billion.
What is the benefit of these investments?
These investments contribute to geographical and sectoral diversification, with the goal of generating a regular and stable return at a relatively low level of risk. Accordingly, the portfolio includes a wide variety of assets which allow long-term savers to enjoy a relatively stable, realistic return not directly linked to capital market indices.
The partnership with LCN is part of a chain of transactions carried out by Harel's real estate division over the past few years, which include leading international partners.
Itzik Twil, manager of the real estate and credit department at Harel, stated that investing via a sale and leaseback strategy is a hybrid credit/equity instrument with a proper return-risk equation.
Harel sees potential in these, which are implemented after underwriting and in-depth risk analysis and which generate a stable, high return mostly protected from inflation, with the advantage that most of the group's deals are off-market transactions.
Harel is the largest insurance and finance group in Israel, with over 80 years of experience in insurance and finance activities and more than 4,000,000 customers in various professions. Total assets managed by the group in insurance, including pension, provident and trust funds and financial services, is approximately NIS 350 billion.
LCN specializes in sale-and-leaseback transactions in the USA and Europe through dedicated funds for each separate region. LCN was founded in 2011 and has offices in New York, London, Amsterdam, Cologne and Luxembourg, and at the end of June 2022 was managing deals worth about 6.5 billion dollars.
Since its establishment, the group has carried out over 90 deals in three funds that invest in North America and three funds that invest in Europe, all of which are rated A/A and yield a stable and high-income flow. Company managers have experience in real estate, finance, and specifically in sale-and-leaseback deals.