South Africans take stake in new real estate fund

$42m. raised for fund, $25m. from Stonehage group signaling the largest ever investment by South African investors into Israeli real estate.

By SHARON WROBEL
Faire 2, a planned $50 million real estate fund invested 50-50 by foreign and Israeli investors, is hoping to capture the same success of the original Faire, an Israeli-American real estate fund that invests in real estate development in the Gush Dan region. "The Israeli real estate market is showing promising signs of recovery," said Shlomo Grofman, one of the founders of Faire. "In this climate of high demand, a shortage of housing across the country and growing interest from foreign Jewish investors around the globe, we saw the opportunity to launch another fund and to expand our activities and investment base. In addition to the US investors from the original fund, we have for the first time partnered up with South African investors." First American Israeli Real Estate, or Faire, was established by Zalman Shoval, a former Israeli ambassador to Washington whose family owns Bank of Jerusalem, and Shlomo Grofman, the former chairman of Africa Israel Investments. The founders of the Faire 2 fund, thus far, have raised about $42m., of which close to $25m. were raised from the Stonehage Group, a private wealth management company with $20 billion in assets that provides international financial services for 50% of the richest South African families. The remainder was raised by Israeli, American and Canadian investors, many of whom already are investors in the first fund. "This is one of the largest and most important investments ever by a group of South African investors into the Israeli real estate market," said Colin Schochat, executive director of Stonehage Israel. "Investing in the real estate market in Israel today is a safe bet, representing an attractive investment with a low risk on an expected annual return on investment of 10 percent." The new fund, established in April, is aimed at investment into real estate development for the residential market and will have a duration of seven years, although there is an option for an extension to 10 years, subject to annual approval from the investors once the seven years are completed. The original Faire fund invests in real estate development for the residential market and has 10 projects, which Grofman says "are going well." It has over $42m. under management and with leverage from banks, available financing of almost $300m. The fund has invested $75m. and yields an annual return on investment of 20%. Israeli investors include insurance companies Harel and the Ayalon Group. Those from the US include Ira Rennert, the owner of Renco Inc., which makes armored jeeps. Another investor is the Crown family, which owns General Dynamics, the maker of F15 and F16 combat aircraft.