From the 25th floor of the Azrieli Square Tower in Tel Aviv EngelInvest Group chairman Jacob Engel considers investments worldwide. At time when other real estate developers are struggling and desperately seeking debt settlements, Engel is sitting on huge cash reserves after selling Lagna Holdings Ltd. (TASE;LGNA) to Shaya Boymelgreen's Azorim Investment, Development and Construction Ltd. (TASE: AZRM) for three years ago.
Engel looks good, his mood is cheery, and he's in excellent shape, and not just because he works out in his personal fitness room. He made one of Israel's more spectacular sales when he sold Lagna and its subsidiaries to Boymelgreen for NIS 430 million in 2006.
"The price was fair and reasonable at the time. Boymelgreen couldn’t have anticipated the crisis would happen, and he isn't the only one hurt in Eastern Europe. Lagna's current problems are due to investments made after I sold it. If the market were good, he could have succeeded, but the market crashed and most of the investments were lost," says Engel.
Lagna is the holding company of Engel Construction and Development Ltd., and its units Engel Europe Ltd. (TASE: ENGR1 ,ENGR5), Engel Resources and Development Ltd. (TASE:ENRS), which operates in Israel, Engel General Developers Ltd., which operates in the US, and Engel East Europe NV (AIM:EEE).
"Globes": What's your impression of Boymelgreen?
Jacob Engel: "Boymelgreen is a serious developer, and we felt that he understood. He had a history of great success with Lev Leviev in the US, and I was sure that he'd succeed with this purchase, too."
Engel is referring to Boymelgreen's joint venture with Leviev's Africa-Israel Investments Ltd. (TASE:AFIL; Pink Sheets:AFIVY), Leviev Boymelgreen, which has since been liquidated in an acrimonious break-up and its properties divided between them.
What company did you give Boymelgreen?
"Lagna was a very good company, in good shape, which had credibility and paid its debts on time. Were it not for the crisis, Boymelgreen would have continued with the company's success."
Following the sale of Lagna, Engel founded EngelInvest, a private international that mainly operates in Russia, India, and Vietnam. The company's projects amount to billions of dollars, with sales proceeds estimated at $7 billion. The company mainly builds malls, shopping centers, and residential projects in capital cities and cities of at least one million residents. The company also has copper and iron mining interests in Africa.
Jacob Engel was born in Zagreb, when it was part of Yugoslavia, and is now the capital of Croatia. He immigrated with his family to Israel when he was two years old. The family lived in Kfar Hassidim near Haifa, and his father worked as an engineer for Israel Electric Corporation.
Why have so many developers collapsed in Eastern Europe?
"One of the most important things in life is timing. I sold Lagna three years ago when I realized that we were at the peak. I didn’t know that such a crisis would come, but I definitely realized that we were at the peak, and it's smart to sell at a peak. Everyone thought that the market will continue to thrive and rise all the time. No one thought that it would collapse, including me, but I realized that we were at a peak and I didn’t think that there would be a further rise. The wisdom is to know when to sell."
You no longer operate in Eastern Europe?
"To the same extent, I saw that this was the time to enter Vietnam and India. The crisis helped us close deals and greatly deepen our activity in the past two years. We have a very skilled CEO Asia Division, Ronen Hermoni, who has navigated the ship quite nicely, as well as my very active involvement."
Ronen Hermoni is the son of Hezi Hermoni, the former controlling shareholder and CEO of Tadiran Communications, which he sold to Elbit Systems Ltd. (Nasdaq: ESLT; TASE: ESLT). Hezi Hermoni, now chairman of ZC Ronogil Investments Ltd., is very active in Asia, and his connections developed over 15 years in India helped EngelInvest. Ronogil and Engelinvest operate in India through Venosa Ltd. Another partner is banker David Brenner.
Engel plans to float Venosa when the markets recover. "We not only know when to build, but how to create added value for our projects, through an IPO on the Hong Kong or Singapore Stock Exchange," he says.
Venosa is building projects with 1.7 million square meters of space altogether in Mumbai, Goa, Hyderabad, Chandigarh, Ludhiana, and other cities. "We're working flat out in India and Vietnam to obtain building permits and begin construction," says Engel.
It's not an easy life, constantly flying to Asia.
"I visit the projects, but live a completely normal life. I have no private jets or yachts. I'm a family man. One of my hobbies is to go hiking with my wife in the mountains of Europe and South America."
What's your modus operandi?
"In contrast to many developers, who pay in cash for land and take a great risk if the market becomes problematic, most of our deals are combination deals, in which the landowners become partners. This greatly reduces our risk, although it also reduces our profit."
Who finances?
"Our shareholders' equity is fairly small. We're in contact with international financial institutions, which are very interested in funding projects. Funding will come from international institutions or Indian banks, which are beginning to provide financing after a year of halting credit.
"I've work with large international financial institutions, such as Lehman Brothers, Austria's Volksbank, Heitman LLC, and others. They're careful now; not every developer or every project, and not every country, gets funding. The credit crisis in Russia is still strong."
What's the global situation?
"There are signs of recovery, but not on the horizon. India and Vietnam are definitely in recovery, which is reflected by the interest of large financial institutions that want to give credit. I'm known in international markets, so it's fairly easy for me to raise credit."
What's the situation in Russia?
"We've frozen our activity in Russia because of the situation. We're waiting for the situation to clarify, and then we'll renew activity. We believe that that will happen soon."
Published by Globes [online], Israel business news - www.globes-online.com - on October 1, 2009
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