Adi Dana, CEO of Eldar Investments of the Eldar Group, objects to talk about a surplus of office space. "What surplus are they talking about? A large proportion of companies can no longer use old office buildings," he says. The company that he heads is currently building two office buildings in the business park under construction in Holon.
"An office building is like a machine, especially in 2019. An office is a very mechanical thing: power supply, elevators, air-conditioning, parking systems, and parking arrangements. All of these have to be planned from the beginning and built in the spirit of the time and in accordance with projected changes in the offices market. The level of cooling that a high-tech company needs for its computers is prodigious, so a high-tech company can't use an old building. Construction of 800,000 square meters of office space began last year in Israel. That sounds like a lot, but the demand for offices in modern buildings exists," he explains.
"Globes": Haven't shared works spaces and the trend towards working at home somewhat balanced the need for more offices?
Dana: "First of all, there is significant growth in business and in the population. Secondly, there is an essential need for a human work environment. Even a shared work space can't be cut off; it has to be in a business center. For example, when I select the location of my office, I make sure that it matches the location of my service providers: my architects, my lawyers, and my accountants."
The business park in Holon where Eldar Investments is constructing two office buildings is located on the future route of the light rail Green Line (although it is currently difficult to reach by public transportation). Leading real estate companies, including Azrieli Group Ltd. (TASE: AZRG) and Bayside Land Corp. Ltd.(Gav Yam) (TASE: BYSD1), have already established a presence in the park. Among the companies that will move their offices to the park are Bezeq Israeli Telecommunication Co. Ltd. (TASE: BEZQ), Sapiens International NV (Nasdaq: SPNS; TASE: SPNS), and investment house Halman Aldubi.
Eldar Investments' first building is Biznext, a 9,000-square meter office building that is already fully sold. Hadassah Fattal has already bought an office floor in the building for NIS 10 million. The second building, Eldar Tower, with 40,000 square meters, will be located right over the railway station, and access to it from the station will be via escalator. Eldar Investments is now in the midst of an enormous effort to market this building.
Eldar is building the two towers on the format of a buyer group. "The projects in the market today have very large volumes, and this has many consequences. You need a lot of equity, and construction time is much longer," Dana says.
"For example, take a 40-storey residential building," he adds. "The keys will be handed over only 6-7 years after marketing begins. This doesn't suit every buyer. On the other hand, investors joining the project in the framework of a buyer group are better equipped for it. They also want a premium on the investment, so they are willing to put up with a long construction time. If they buy an apartment in an ordinary project, they won't get such a premium.
"In Bat Yam, for example, we're building a project with a buyer group. Construction of projects by developers who began marketing at the same time as us hasn't begun, but we're already on the third floor. In ordinary developments, a developer has to finish the presale before he can build, and he has to commit to many stages that don't exist in a buyer group. A buyer group is a tool that provides a premium for the developer and a premium for the group members, if it is managed correctly."
What does this give the landowner?
"The landowner is looking for a buyer, and this increases demand. It's hard to sell a large piece of land. The supply of potential buyers is very limited."
The potential of the Tel Aviv Central Bus Station
Dana, 45, began as an accountant at KPMG Somekh Chaikin. In his last job there, he managed the Eastern Europe real estate desk. He later served as CEO of Airport City, and joined the Eldar group four years ago. The group, owned by Amir Shaltiel, develops and manages projects worth over NIS 1 billion in Israel and Europe, in residential, long-term rental, office, and commercial real estate. The group contains Eldar Real Estate Marketing, which markets residential projects; Metropolis, which deals in urban renewal in cooperation with Allied; and Eldar Investments, founded in 2013, which Dana says is designed "to maximize Eldar's marketing power for development activity."
Eldar Investments raised NIS 65 million in 2017 from Arbel Finance, founded and managed by Amir Hessel. Among other things, the company has constructed residential buildings in Ramat Gan, Kfar Saba, and Bat Yam on a buyer group format. Another of the group's activities is long-term rental housing projects on the Shomron site at the old Tel Aviv bus station. The company has three projects in the area: one on Levanda Street in a buyer group framework and two on Yesod Hamaala Street for long-term rentals with a combined total of 50 apartments.
"We fell in love with the place and the concept," Dana, a believer in the enormous upside of the site, says. "Five years from now, you won't recognize the area. 200 apartments are slated for construction just on Yesod Hamaala Street. It's a very trendy area, 10 minutes' walk from Rothschild Boulevard and a few minutes' walk from the La Guardia Junction. There is, of course, an urban building plan for the Shomron site, which will contain office and residential towers, and will change the entire area.
"People living in our buildings will walk a few minutes to get to work. It's a winning location. The urban building plan is well organized, and we took advantage of the Law for the Encouragement of Capital Investments in order to build rental housing here. The apartments will have 50 square meters each, a little graffiti, and a little aluminum. The population is already changing. Families, high-tech people, and students who will get a rent grant from the municipality are starting to arrive. Five years from now, the area will be like Levontin."
But it doesn't look as though rental housing becoming established here.
"In order to create a real rental housing market, you have to give developers some tax advantage on the sale of the property after several years of renting, because the return and the benefits (under the Law for the Encouragement of Capital Investment, H.M.) aren't enough in places where there's no upside. Nevertheless, more and more developers are going into rental housing."
NIS 250 million for apartments in Slovakia
Eldar Investments also operates in overseas residential housing. Through a company named My City, Eldar Investments sold 700 apartments in four projects in Budapest. It is now marketing a NIS 250 million residential housing project in Bratislava in Slovakia. Dana says, "The Slovak market is amazing. Slovakia was almost untouched by the crisis; unemployment there is only 4-5%. It is based on the high-tech, automobile, and finance industries, and is in the middle of a tourist boom. It borders Austria, Hungary, the Czech Republic, and Romania, so it is an important artery, which is why Amazon built a logistics center there. This is an excellent market to work in."
Published by Globes, Israel business news - en.globes.co.il - on July 15, 2019
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