Calcalist, Amitay Gazit, 05.04.2020
"Corona crisis fund will very quickly realize the strategic plan, rental housing consisting of thousands of units across the country", says in an interview to Calcalist "Eran grapes, CEO of Living areas, the REIT fund company's regions, which issued shares, raising $ 400 million In February, just before the sky collapsed on the economy.
While senior construction industry executive in the weeks since the epidemic broke out in a fight for survival in an attempt to prevent a collapse, grapes identifies crisis is an exceptional opportunity for the fund. Living areas share since the IPO indeed dropped by about 20%, but this is a relatively modest decline in the rest of the real estate stocks, and traded at a weekend worth of 560 million.
"We are currently very fluid player. We recruited offering 400 million, and we will get to leverage an investment of billion. The goal is to increase activity in 1,000 apartments this money."
What kind of projects are you looking to buy?
"Before the crisis corona looked at auctions dedicated to establish areas for the rental of the government company apartment to rent and municipalities. But now, at a time when sources of credit and liquid money shortages, we see opportunity in the area of regular projects for housing. We believe that we can create partnerships with entrepreneurs in medium-sized or Little.
"We see an opportunity for entrepreneurs who want to also motivate project and show a significant sale. Contractors provide liquid money, and we purchased a building or two in a big project. The fund also knows how to build, and we will be partners in the project investment of equity ".
Excess return
Holding areas decreased following the IPO fund to 35.59%, with the main investor there are insurance companies, Phoenix, at the Tower, each with a 16% -14%. Fund four projects currently under planning and construction, among them a total of 900 apartments: project built in Ashdod, where all 112 apartments were rented, and in 2019 the Fund generated revenue of 6.9 million; And projects under construction - 216 housing units in Rishon Lezion cyclamens, 364 apartments in Or Yehuda Park and 217 student apartments for rent in Bat Yam.
Although the field of residential rental yield in Israel is about 3%, grapes convinced he could reach 5% yield from rental apartments compared to their market value.
"We are looking for excess returns rental market, where the yield is around 3%. We want to reach 5%, and therefore turn to projects in which we can produce Apartment relatively low cost. The uniqueness of Living is the fact that it REIT also know initiate, fund knows how to produce inventory herself living on her own. If the project is limited for rent, land price lower. beyond that, we have created another assumption that entrepreneurial profit stays with us, and that we set up the project in one fell swoop. We can create apartments at a discount of about 30% compared to the market price and thus produce excess returns. "
According to him, the state implemented economically viable model that will allow the conversion of ordinary residential projects, residential rent long term by increasing Rights and apartments in the project.
Is there a specific area in the country where you are looking to buy residential projects?
"Setting interest us high demand areas, but our vision is to hold thousands of apartments and therefore I do not exclude transactions periphery. We check transactions in the periphery far, however, are lower because some assumption that we know produce reaches the price of land is low compared to its cost in the same environment. Areas peripheral hard to produce this assumption. but if any benefits, we see a national diversified portfolio. "
Do not buy occupant price projects?
"I do not know to buy a complete project of occupant price that this regulatory format to another. I also examining whether it remains full of apartments that the developer failed to sell, and are not entitled to the free market. I can digest such a project if regulators allow me to call him rent."
Perseverance
In recent years, urban renewal projects of a significant share in the central region. Will you consider buying this kind of project?
"Finoi-binoi definition is an area that fits our worldview. We are looking for areas that develop in real estate and accordingly the socio-economic perspective, the price of apartments purchased as neighborhood will evolve.
"We have the stamina that allows to look five to ten years ahead. We know that to be a player who entered the initial stages of the project, where the vision of a new neighborhood more noticeable. For the entrepreneur will create an advantage if we buy the first buildings and allow that the movement of the projects ".