The market for expensive real estate in Israel is still strong, according to Shlomo Grofman, a well-known figure on the local business scene, as well as an expert in real estate. For more than 20 years, Grofman was the general manager of Africa Israel, one of Israel's leading real estate companies. In 2002, together with former Israeli ambassador to the US Zalman Shoval, he established the FAIRE Real Estate Fund, which invests in residential real estate. In a recent interview with The Jerusalem Post, Grofman spoke about his company and the effect of the worldwide sub-prime crisis on Israel. What kind of animal exactly is a real estate fund? Is it something akin to a VC Fund or a REIT fund? Neither the one or the other. A REIT fund invests in real estate that yields an income; they are rented out, and that is the profit of the investor. A VC fund invests in technology, and it is high-risk. We use the money put in by our investors to build residential real estate projects, or even non-residential real estate projects, which are then sold. We do not invest in rent-yielding property, and we are not a high-risk investment like a VC fund. We have two funds, for which we raised $100 million. Since we can get bank credits for 80 percent of the cost of our projects, it means that we have more than $900m. at our disposal. We are now in the process of raising a third fund. Fifty percent of our investors in the FAIRE 1 Fund were Israelis. In the second fund, only 25% were Israelis and the other 75% were from the USA, the UK, Canada, South Africa, Belgium, etc. But you do invest in high-risk projects. You have a residential project on Rehov Hayarkon in Tel Aviv, where you are offering two penthouses for $30m. each. Don't you call that risky? No, I do not. I presume you are referring to our project on 96 Hayarkon Street, and that is not a speculative or high-risk project. Every business venture has a certain degree of risk - there are no business ventures without risk - and believe me when I tell you that the amount of risk involved in this project is, in my view, minimal. This is a unique real estate project: a restored beautiful Bauhaus-style building opposite the sea - an unbeatable combination. It is meant for those who want an excellent location... [and] have the means and are willing to spend money on something that is unique. Please bear in mind that our most important prospective clients are affluent Jews in the Diaspora who want an apartment in Israel and are interested in an apartment with a sea view in a historical building, and in addition they receive all the services that the Dan Tel Aviv Hotel, which is just across the road and is one of Tel Aviv's most luxurious, has to offer. I refer to prospective buyers who live in an environment in which apartments of $75,000 per square meter are not uncommon. Does FAIRE invest in such expensive projects as a rule? No. Our business model is based on 'middle Israel for middle Israel,' which means we build residential projects in the central areas of the country for the middle classes. Since our inception in 2002, we have built about 1,500 apartments; they are located in Tel Aviv, Jerusalem, Kfar Saba, Hod Hasharon, Givatayim, etc. Our sales figures are excellent, our investors have had attractive returns and, all in all, it means that our business strategy has been successful. The world is in the midst of the financial crisis triggered by the sub-prime mortgages. Will this affect real estate in Israel? The current crisis that started with the sub-prime fiasco has [affected] real estate prices all over the world. It is now possible to buy real estate for rental purposes at prices that are lower by up to 20% from a year ago, and I believe prices will fall more. The current prices are hurting many, but for those companies or individuals with ready cash, it has created attractive investment opportunities. With regard to Israel, I do not think that it will affect prices, at least not to the extent they are being affected and falling overseas. The real estate industry in Israel is resistant to sharp falls in real estate prices, and demand from overseas Jews who want a foothold in Israel further bolsters prices.