Success of an Argentinian Jewish philanthropist

Billionaire Eduardo Elsztain’s first major investment in Israel is in Ganden, the company that controls IDB Holdings.

Argentinian-Jewish real estate mogul EDUARDO ELSZTAIN 370 (photo credit: Bloomberg)
Argentinian-Jewish real estate mogul EDUARDO ELSZTAIN 370
(photo credit: Bloomberg)
“I somehow managed to land a meeting with George Soros, a very rich man. We talked for an hour or so, and then he asked me how much money I thought I could handle. I told him I could manage $10 million, and he said ‘Okay, no problem!’”
That’s how Eduardo Sergio Elsztain, among the leading businessmen in Argentina and the Jewish world, described the moment – when he was a young man in 1990 – that changed his career.
“He knew when to sell and when to buy,” Soros, who is among the world’s most important investors, explained regarding his decision to invest $10m. in that first meeting in New York with a 30-year-old, inexperienced and completely unknown Argentinean Jew.
Today it is already clear that Soros’s intuition did not lead him astray. The decisive Elsztain, who inherited a stock foundation – while a student at Buenos Aires University – from his grandfather called IRSA, valued at $120,000, and turned it into an empire, kept his promise. And much more.
Since that fateful meeting with Soros, Elsztain’s leap from utter anonymity to Argentina’s business elite was relatively quick.
In four years, the kippa-wearing youngster from Buenos Aires managed to leverage his first investment from Soros to raise $110m. and acquire office buildings and shopping centers in Argentina, including the Alto Palermo Shopping Mall.
Today, the Alto Palermo – which specializes in acquiring shopping centers – is valued at about half-a-billion dollars, and in all of Argentina there is no self-respecting businessman who does not know IRSA and the name of the wealthiest Jewish businessman in the country today: Eduardo Sergio Elsztain.
ELSZTAIN TODAY stands atop Argentina’s largest business empire, the country’s leader in real estate and agriculture, which he built with his own two hands. His businesses include malls, hotels and many real estate properties, the largest beef and agriculture businesses in Argentina, gold mining businesses, banking businesses and private and public companies.
His holding company IFISA owns IRSA in the real-estate sector, Cresud in the agricultural sector, the Hipotecario bank and 68% of Astral Gold – among many others.
Elsztain recently made his first substantial investment in Israel, signing an investment deal in September 2012 totaling $100m. with Ganden, the private- holding company controlled by Israeli businessman Nochi Dankner.
Ganden controls the largest business group in Israel, IDB Holdings, whose portfolio includes a variety of leading companies, including Cellcom, Shufersal, Clal Insurance, Makhteshim Agan, PBC and Given Imaging. IDB also holds a 2.3% stake in the Swiss Bank Credit Suisse, ownership of the HSBC Tower in New York and other properties in the US, Europe and Asia.
Elsztain has known Dankner for a decade, though since the intensive negotiations the two have held over time in Tel Aviv, New York and Buenos Aires, their business relationship has also become a personal friendship.
Elsztain invested $25m. in Ganden in the first stage, amounting to 10% of the company. At the same time, he received an option through the end of February 2013 to expand his holding in Ganden to 30% with an investment of another $75m., to total $100m. The deal values Ganden at over one billion dollars.
Elsztain’s fulfilling the option would help Dankner and Ganden to direct serious capital toward the group’s parent company, IDB Holdings, which is in the midst of negotiations with its bond holders over plans to strengthen its financial status. Beyond that, if Elsztain exercises his options on Ganden and IDB resolves its problems with its debt holders, he could become – with Dankner’s partnership – one of the most important businessmen not only in Argentina, but in Israel too.
ELSZTAIN’S GRANDFATHER, Isaac Elsztain, founded IRSA in 1943. Isaac immigrated to Argentina from Russia in 1917, after the Russian Revolution, purchased some properties in Argentina, and during World War II, founded IRSA as a real-estate company. Since the major economic crisis in Argentina, in the 1980s, which put IRSA into financial difficulties that left it essentially inactive, the company has seen brighter days, and rose to become one of the prominent real estate firms in Argentina.
The company’s management change, from Elsztain’s grandfather to him, took place in the first half of the 1980s, right after Elsztain returned to Buenos Aires from a volunteer year in Israel. Eduardo, who was born on January 28, 1960, was just 21 in 1981 when his uncle, who managed IRSA, died, and his grandfather asked him to revive the company that had become a financial corpse, a task which was not easy in the context of the Argentinian economy. Elsztain required financial assistance from his Jewish-Argentinian friend, Marcelo Mindlin, in order to raise $120,00 to acquire IRSA shares.
Eduardo had to put in five years of hard work before the company began to turn a profit. In 1990, he received a significant push from Soros’s investment, a move that profited both of them greatly. He knew very well how to take advantage of this and the business opportunities during Argentina’s economic recovery in the 1990s.
At the start of the 2000s, he already led a flourishing company that owned hotels, offices and real estate properties throughout Argentina.
Today, IRSA’s portfolio includes commercial centers, office buildings, housing projects and land in high-demand areas.
In 2008, IRSA acquired Ilan Ben- Dov’s 35 percent share in The Lipstick Building in New York on 53rd Street and Third Avenue, at a value of $12.7m. In Argentina’s fiscal year 2011-2012, which ended in June, the company took in $396m. with clean profits of $68m.
The company is traded on stock exchanges in New York and Buenos Aires and its market worth is valued at $470m. Elsztain, who heads the company as both chairman and CEO, holds over half of its shares.
THE BUSINESS empire Elsztain built with his own hands did not end in real estate deals. A significant company that he has controlled (37% of the shares) and acted as chairman of since 1994 is Cresud, which is traded on NASDAQ. In Cresud, too, which is considered the largest agricultural producer in Argentina, Soros invested some $62m.
The market value of Cresud stands at over $480m. and it owns agricultural farms, more than 4.8 million dunams of land, flocks of cattle for beef and milk, and corn, wheat and soybean fields.
In 2011, Cresud took in $636m. and its clean profits were $95m. Elsztain acquired the company in 1994 for $25m., and by 1997 it already raised $92m. in capital through the NASDAQ.
With the capital, the company acquired more lands and herds.
Elsztain’s other major holdings include the Argentinian bank, Hipotecario, the Argentinian credit card company, Tarshop, and the gold exploration company in Australia and South America, Astral Gold. In the government- controlled bank, where he is one of the major players in the mortgage market, Elsztain’s IRSA controls 30% of the shares. Elsztain’s holding company, IFISA, owns 68% of Astral Gold, most of whose activities today are centered on gold mining in Chile.
ELSZTAIN DOES a great deal for the Argentinian Jewish community, which he has led as the president of Chabad.
He is known as a modest, pleasant man who shuns publicity.
In the past, he has also served as treasurer and “finance minister” of the World Jewish Congress.
Elsztain is considered one of the most significant investors in the Taglit- Birthright program, and he is the founder and life-blood of Hillel in Argentina.
He customarily wears a black kippa, is close to Rabbi Yoshiyahu Yosef Pinto from Ashdod, and on his visits to Israel, makes a point of visiting the graves of the righteous.
During the recent economic crisis in Argentina, Elsztain served as his country’s unofficial emissary in the Jewish world, and through his standing in the World Jewish Congress, handled Argentina’s business in international institutions to gather funding for his country’s economic recovery plan.
Today, he is a leader in Endeavor, an international nonprofit organization that supports entrepreneurs in emerging markets.
On his plans for the future, it is worthy to note his interview with Calcalist in 2011, when he was in Israel with the World Jewish Congress to discuss the future of the Jewish nation, far before he knew he would go into business with Nochi Dankner in a company controlling IDB.
“According to our strategy,” he told journalist Asaf Levy, “we will continue to invest in two primary areas: real estate and finance... Without revealing too much, I can tell you that our company is planning to expand its global activities and not focus on South America alone.”