Globes, Daphne Bramley Golan, 20.03.2020

In May 2018, Gornitzky & Co. Law Firm purchased five floors of offices in Delek Motors building on La Guardia Street in Tel Aviv for about NIS 80 million. On the lower floors of the project, which is being built by the Vitania company, two exhibition halls for vehicles, in low-rise buildings built and populated. Above one of the buildings, Vithanya builds a 36-story, 40,000-square-foot office tower.

The Gornitzky office acquired the 22-27 floors of the tower, covering an area of ​​1,260 square meters, and a total of 6,300 square meters. The deal also included an option to purchase two more floors in the future.The average price per floor of the project ranges around NIS 10,500-11,000 per square meter, so that the price paid by the Gornitzki firm reflects close to NIS 70 million for the five floors of offices, and another NIS 13 million for a parking floor.

Tel Aviv's Vitania Towers / Photo: Yashar Architects, PR

Although she purchased the office floors and did not rent them, Gornicki Firm is what is known as an "anchor tenant", one that attracts other tenants to the complex and increases its attractiveness. What makes a tenant in an office building an anchor?

1. Effective marketing factor

According to Yaron Shmay, owner of sgs, owner of Vitania's shareholding and marketing manager of the company, a first tenant can push the project forward and act as an effective marketing promoter."After the Gornitzky firm's deal, the level of interest went up and we marketed lots of land there. In the Vitania building on Maskit Street in Herzliya Pituach we rented a 6,000 square meter Apple, and this is also a classic example of a building that becomes branded because of a tenant."

Recently, ROOMS Network, a subsidiary of Fattal, also rented 4,850 square meters of office space on 32-34 floors of the settlement training tower in Bnei Brak. The complex is expected to open in a month. ROOMS leases the area from Avi Levy, former CEO of Melisron, Who purchased the property as part of a purchase group organized by Soprene and Weiss groups. The contract was signed for 25 years, with an option to extend, at a rental value estimated at NIS 2.8 million per year.

Yaron Shemi, Vittania / Photo: PR

ROOMS is also considered by the owners of the Suprin Group anchor tenant, which will attract potential tenants to the complex. Tzahi Suprin believes that a space company offers something that others do not offer: "This landlord guarantees coverage of all floor expenses and full operation, rather than dividing the floor and renting it to some tenants.

"For sub-tenants, job vacancies provide all possible services: for those who want to rent a single room or desk or just have the option of having a meeting. Once a building has such a service, it appeals to another audience: companies that need a temporary place to accommodate employees until an office is ready, or have already entered and want to Hire employees for another, time-limited project. So instead of hiring an entire office, they will hire work spaces. "

After what happened to Wework, do you still believe in the solidity of the field?

"It depends very much on who the company is doing in the common space and what its financial capabilities are. There was some bubble in the valuation they did in the world for Wework because it presented itself as a technology company, even though it was in the real estate and asset management business. From what we see, there is no decrease in demand for these areas.

"The building itself is negotiating with a technology company interested in respectable territory and one of their considerations is that they have a company that offers partner spaces that gives them flexibility to grow if needed. Companies want that flexibility."

2. Financial strength and long-term contract

The contribution of anchor tenants in office has several aspects, one of which is the tenant's financial strength. In this respect, the most attractive tenants are government offices for which the government housing administration conducts the transactions, along with banks and insurance companies or other reputable and high-ranking companies.Such tenants sign rental deals for many years and absolve tenants of problems of the pursuit of rental money.

According to the real estate appraiser Gil Ma'in, the managing director of the management and maintenance company, which manages about 2 million square meters of assets in Israel, thanks to financial strength, the capitalization coefficients (the ratio of the value of the property to the rent) are lower, so the value of these transactions increases respectively.

Eldad Perry / Photo: PR

"These are renters that you don't have to deal with or chase after paying management fees. You can leisurely manage them," adds Eldad Perry, chairman of the Perry Real Estate Group, which is building the Perry Place project at the entrance to Rehovot. The project includes, among other things, 40,000 office and commercial space, along with three towers of 750 student dormitories - 35 sq.m. micro apartments. The company has won the National Insurance Institute's tender for renting 4,700 to 6,000 sq.m. of offices in the tower, and now the contract between the parties in the draft phase.

3. Contribute to branding and traffic in commerce

Another aspect that Perry points out is that anchor tenants encourage the movement of people in the building and contribute to the revenue of the commercial sections on the ground floor of the building.According to Maayan, long-term leased assets also improve the reputation of the building and also brand it, and branding is the one that attracts more customers.

"Government renters usually come before the other entities. They have long-term work plans, agreements with employees and other aspects they need to check, and they start the two-year process in advance, do office-to-office competitions and close a deal before Form 4, unlike most renters who come after The population.

"In the first period, it is more difficult to populate the building because psychologically people are willing to pay after they see the building and what they receive. When you view a building that a large part of it occupies, it helps to get tenants."

Perry: "If you are near an anchor tenant, there are clients who will be looking for you. In the Bat Yam project, I am near the court and there is a demand for offices that provide legal services: not only lawyers, but also accountants dealing with actuarial claims, rabbinical claims, doctors who specialize in tort claims. And more. There are a lot of interfaces in the legal field. It gives the region a movement of character during the work day. "

Chen Lotan, a manager of rental properties at the Levinstein Group, says that "the location of the building dictates the anchor tenants. I have a property in Be'er Sheva near the courts, and because our tenant will be the long-term government, but also a high-tech company can be an anchor tenant; Google and Plaetica rent for five years + an option for another five years.

"High-tech companies are very important to be near a train station and restaurants and have no problem spending money on renovations in the beginning and then adjustment costs later. That's why big high-tech companies are willing to sign a long-term contract, but they have no problem deciding they go out in the middle and bring in a sub-tenant."

Chen Lotan, Levinstein / Photo: Levinstein

Another type of "star" hire exists in the medical field. For example, at the Iron 11 physician's house in Ramat Hachayal, near Assuta Hospital, which has 220 medical clinics and was set up through a Suprin acquisition group, the company boasts senior doctors who attract other tenants. "There are very respectable tenants who are anchor tenants, senior doctors who receive a large patient traffic," explains Tzachi Suprin. "Fertility specialist Prof. Shlomo Messiah is one of the clinicians who are an anchor."

Tel Aviv Soldier's Physician's Home / Photo: Asaf Pinchuk

According to Shmay from Vithanya, "Anchor tenant is really a serious marketing promoter and it is worth more than higher rents. In Gornitzki's case, this was a purchase deal, but it is definitely right to go for such a renter."

What the anchors earn: Discount on renovation and rental

Anchor tenants are expected to benefit twice: even at lower prices compared to the market being tenant, if the deal is signed before the end of construction, and also better payment terms for renovation. In addition to the tenant's financial security, the price is also determined by the extent of office space. "There is no lawful 5,000 square meters," Lotan explains.

Gil Maayin says that office buildings are delivered at the level of casing, and tenants receive internal renovations according to their needs for a monthly increase in rents. The contractor will have a greater incentive to increase the renovation budget for long-term anchor tenants, for a lower increase in rents.

According to Perry, "They usually rent a little cheaper. The return is derived from the level of risk: the stronger the renter you are willing to settle for the return. It makes no sense to rent at a high yield of 8% -9% as is the case here; there is no harm in the Western world. Can get an anchor tenant a return of 6% in the world that is considered fantastic. The bank's interest rate is zero. "

Soprin says, "It all depends on security. If an American company opens a representative in Israel and says, 'We want to rent the area,' and the sure thing I will get is a local company guarantee, it has a different meaning than a US company guarantee. For example, if I built a project where The price per square meter is NIS 100, a Triple Island renter will pay NIS 95 per square meter.