Earlier this month, HMG, owned by Hanan Mor (70%) and Avi Maor (30%), bought two lots in Romania to build 1,500 apartments, an overall investment of NIS 650m.
By ELAZAR LEVIN, THE BUSINESS POSTHanan Mor 88 298(photo credit: Courtesy photo)
Hanan Mor Group is heading for Eastern Europe. Earlier this month, the company, owned by Hanan Mor (70%) and Avi Maor (30%), bought two lots in Romania to build 1,500 apartments, with an overall investment of NIS 650 million. The deals were signed several weeks after the company acquired lots to build about 1,000 apartments in Israel.
The company was founded in 1999 by Hanan Mor, 38, a reserve IDF helicopter pilot, and his partner, Avi Maor, 46, who was previously an outstanding basketball player. The company's owners live in Ness Ziona, where its offices are also located, and until recently that was also the center of its activity.
Thus far, the company has built 19 projects in the area, all residential, including about 1,000 apartments. As long as it built in Ness Ziona, it was unknown to the broader public. Two years ago, however, it began to expand, paying the Israeli Land Administration $8.2m. for lots on which to build 265 apartments in Talmei Menashe, near Beer Ya'akov. At the time, Mor also announced his intention "to be the highest quality private construction company in Israel, as well as one of the country's largest and leading companies."
Those words were perhaps considered to be somewhat pretentious, but in recent months and weeks Mor has acted quickly, maybe in order to prove that his prediction was correct. He bought a lot for 54 prestige apartments in Ness Ziona from contractor Tzvi Tzarfati for $5.4m., won an ILA tender in Lehavim in the Negev and bought 70 lots for cottages for $5.7m. He then reached a deal, according to which he would buy from contractor Yeshayahu Hahshori lots (in the clear and build method) for 425 apartments near Elite Junction in Ramat Gan, for $18m. At the same time, he is negotiating to buy an adjacent lot for 90 apartments for $11m., from the Amad Company. As if that were not enough, Mor has also concluded a deal to buy a 60-apartment lot in Yavne from Hahshori for $2m. It also has bought from contractor Arye Netanel 50% of a lot for 480 apartments in Talmei Menashe, for $8.7m., with Shikun Ovdim as its partner in the deal and in construction.
Simple arithmetic shows that in recently months the company has committed itself to purchasing lots for 940 apartments and cottages (including its 50% in the Talmei Menashe deal), with an overall investment of $51m. Are these financial outlays too much?
"According to the banks' requirements, I must present equity capital of 20-25%, in order to receive a bank loan for the balance. The transactions with Hahshori have not closed. Even if they do pan out, including the deal with Amad, we will have to come up with $10m.-12.5m. in equity for all of the deals," Hanan Mor said in an interview with the BizPost earlier this month. "About half a year ago, we raised NIS 40m., or about $9.5m., on the TASE in a bond issue. The remaining equity capital will come from our earnings on previous projects. For example, just now we finished building and marketing 64 cottages in Beit Dagan, with a profit in the millions of shekels."
Will the banks give you, all at once, tens of millions of dollars in loans, and more, to build all the projects?
"We will build all of the projects in phases. For example, the first project in Talmei Menashe is divided into 265 apartments, in eight buildings. We began putting up the building, we put up the required equity capital, not a large amount, and we received a loan for the balance from Bank Leumi. We have already sold 42 initial apartments. The money we receive from the sales will be used to finance construction and for repaying part of the bank loan. Only after we sell most of the apartments in the first building will we begin the second, and so on."
How will you finance the projects abroad, which require tens of millions of dollars more?
"There, the situation is even better. With a partner, we bought a lot for building 120 apartments in Poznan, Poland, with an overall investment of NIS 120m., which is about $22m. In Poland and in other countries we must come up with equity capital of just 20% for buying the lot, and these are inexpensive lots. The bank finances 100% of the investment in construction. In the two lots we just now bought in Romania, we invested several million shekels. The rest of the investment will be financed by local banks, and will be repaid from sales of the apartments. We anticipate gross earnings of about NIS 250m. from the two projects in Romania."
Still, you will need large sums to finance construction in Israel and continued business development.
"True. I can reveal that we are planning to raise NIS 100m., which is about $24m., in a combined issue of shares, bonds and options on the TASE. These funds will enable us to finance the current deals, as well as the ones next in line."
Previously, the Hanan Mor Group had another source of financing: It received a NIS 7.8m. bank guarantee from the Aora Company, in order to finance some of the equity capital required for purchasing the first lots in Talmei Menashe. Five months ago, the group repaid the bank guarantee and ended the deal with Aora.
Mor reveals that he intends to operate abroad as well. Although activity in Israel will indeed grow, business outside the country will grow at an even faster pace. He assesses that within a number of years the company's overseas activity will account for 80% of its overall business. The company is planning large-scale residential construction in Poland, Romania and an additional country in Eastern Europe.
According to its controlling shareholder, in the future the Hanan Mor Group will have three main spheres of activity: residential construction development in Israel, residential construction in Eastern Europe, and entering into transactions involving yielding assets across Europe. It will bring in a managing partner for the latter type of activity, and that is supposed to happen either this year or in 2008.
A small, efficient organization
"We are a small and efficient organization, 12 employees in all, including the owners. We operate using a method for quickly identifying opportunities and market trends, such as the lot for cottages that we bought in Lehavim, where we identified what we believed to be an excellent opportunity and a rapid rise in the value of the land. The real estate market in Israel is rising, among other things due to rapid growth and the low supply of apartments in the main areas of demand. We use advanced databases. [We recently] inaugurated a new Web site in which the user groups are exposed to classified information: Apartment buyers can get information about their projects and the pace of the construction's progress, the bank is exposed to financial data of each project, company managers receive real-time reporting about its precise financial and implementation state. The site includes detailed information on any project, home or neighborhood that we are building, on the pace of construction, and on income and expense cash flows. I can run the company from my laptop computer from anywhere in Israel or around the world."
The company recently hired the services of architect Ilan Pivko, to help it build 12 unique cottages in Ness Ziona. The company had hoped to sell each housing unit for $450,000, but it believes that Pivko's unique design and reputation will enable it to sell each unit for $550,000-600,000.
Still, the company's financial statements do not present a rosy picture but Hanan Mor says the figures do not surprise him, that he anticipated them and that he is not concerned. He says the reported loss stems from the accounting record method, which in effect leads to a delay in recording revenues from the sale of apartments. In fact, he says during the period of the loss the company showed revenues of NIS 22.5m. from the sale of apartments. The company, Mor says, sold apartments worth several times that amount, and with the progress of construction the earnings will be presented in next year's statements, and the picture will completely change.
The company is counting on another consideration: Its largest project, Talmei Menashe, where it is building, in part with Shikun Ovdim, about 750 apartments. Israel Railways is about to open a station nearby, and the assessment is that this will lead to a massive increase in sales of the apartments.
Hanan Mor Group is basing itself on another consideration as well.
"We are tracking the rising demand by Jewish foreign investors, who are buying increasing numbers of apartments in Israel. It is clear to us that this is a result of the renewed wave of anti-Semitism washing over Europe. Not all of the Jews seeking to buy themselves an apartment in Israel, as a safe haven, are millionaires. A large number of them are middle class people who will buy apartments in the $250,000-400,000 range, and those are precisely the apartments that we sell."
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