June 24, 2018

Electra Real Estate Housing Fund

Psagot and Leumi Employees Will Invest NIS 300 million in the Electra Real Estate Housing Fund

Eran Azran

The Psagot Investment House will invest $ 60 million in the fund. The provident fund of the Leumi employees will invest up to $ 20 million, in addition to the $ 43 million invested by the Leumi Group in Elect Real Estate's first housing fund

More Israeli money continues to flow into the US housing market. The Psagot Investment House, managed by Barak Surani, and the provident fund of the Leumi employees (2,204 -0.68%) will jointly invest up to $ 80 million (NIS 300 million) in the Electra Real Estate Housing Fund, as became known to The Marker. The investment will be made in the second fund of Electra Real Estate (895 + 1.72%), which is part of the Elco Group (6,605 -1.17%), controlled by the Salkind family.

 Psagot, through its provident and pension funds and the industrial funds, will invest about $ 60 million in the fund, while the provident fund of the Leumi employees, managed by Hamik Kobi, will invest up to $ 20 million; This in addition to the $ 43 million invested by the Leumi Group in Electra Real Estate's First Housing Fund.

 In February 2018, Electra Real Estate raised $ 215 million for the first fund, which invests in housing in southeastern United States, and then set up a second fund that is currently raising capital for its activities. Apart from Leumi, investors in the first fund included Hachshara Insurance, the IBI Investment House and eligible private investors ($ 120 million).

 To date, the first fund has already acquired 22 housing clusters in the southeastern United States, comprising about 7,500 housing units in total, with an investment of $ 215 million. In other words, the fund invested within a year all the capital that has been raised. The second fund is planned to raise a total of about $ 300 million (about NIS 1 billion). Of this amount, Electra Real Estate has already raised about $ 150 million from institutional investors and private investors

Electra Real Estate, managed by Gil Rushinek, currently manages approximately 20,000 housing units in about 62 housing clusters in the US, in accordance with the strategic plan presented by the company in January 2016, according to which the company will become the income-producing real estate arm of the Elco Group, focusing on the US housing market.

Electra Real Estate is actually the managing entity of the housing cluster funds, and is responsible for locating the properties and operating the compounds. Electra is a partner in the transactions with a relatively low capital rate (up to about 10%) and its profits are based on current management fees, current cash flow according to its share of the transaction, and success fees (Promote) upon exercising the properties at a profit.

 In contrast to Israel, the housing market in the US includes multi-family complexes - apartment complexes, where several tenants live.  The complex is owned by one entity, so that the houses cannot be sold separately.  We are dealing with one of the hottest areas in the American real estate market, which attracts to it investors from Israel, and these include companies specializing in the field, and institutional bodies connected to them.

 Among the Israeli entities operating in the field one should mention the Harbor Group, which has executed transactions worth hundreds of millions of dollars with Migdal, Clal, Menorah and the Amitim Pension Funds; Blue Atlantic, which is managed by former Israelis Gil Hermon and Oren Hon, which has already raised two funds totaling hundreds of millions of dollars, and carries out investments with Meitav Dash and Poalim Capital Markets; And Elite Street, owned by Yoni Sadeh, which has executed deals with insurance companies Menorah and Migdal. The Hagshama Fund, owned by Cofix founder Avi Katz, is also active in the field.

The investment in Electra Real Estate's Housing Fund is made as part of Psagot's non-negotiable investment portfolio, which manages one of Israel's largest non-negotiable portfolios. Ophir Naor, the manager of a non-negotiable investment group, explained that the investment should help achieve a high return on risk. He emphasized that the investment house is working to expand the portfolio of alternative assets and non-negotiable credit.

 The financial statements of Electra Real Estate show that the activity of the housing clusters (100%), which includes the company's direct investments and its investments of the housing fund, ended the first quarter of 2018 with an increase of 21.3% in revenues to approximately NIS 181 compared to NIS 149.2 million in the corresponding quarter of the previous year.

 The net operating income (NOI), which embodies revenues less current expenses, increased by 60% to about $ 32 million, compared to $ 20 million in the corresponding quarter of the previous year. The increase was mainly due to the continued expansion in the area of ​​housing and the acquisition of new properties, alongside an increase in income from existing properties

 The same property NOI in the properties owned by Electra Real Estate in the first quarter of 2018 compared with the same period in the previous year increased by 21% and amounted to $ 20.7 million, compared to $ 17 million in the same period last year.

 Electra was represented, for this transaction, by the law firm of Raveh Haber, while Psagot was represented by Adv. Winograd.

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