Persakowski Sells Half Stake in Three Rental Projects to Migdal for $190 Million

Persakowski Investments and Construction has finalized a deal with Migdal Insurance and Finance to sell a 50% stake in three long-term rental housing projects for approximately 700 million shekels (about $190 million USD). The three projects collectively comprise around 800 housing units and are located in the Ben Shemen neighborhood of Lod, Be'er Ya'akov, and Ganei Azor in Ramat Gan.

The most advanced project is in Lod, featuring 286 completed rental units and 1,800 square meters of commercial space. Persakowski's share of the proceeds from this property is about 301 million shekels. The Be'er Ya'akov property, currently under advanced construction, will include 298 units and is valued at approximately 330 million shekels. The third project in Ramat Gan is still land designated for 195 units, with potential for expansion, and 700 square meters of commercial space, valued at about 66 million shekels.

This transaction structure allows Migdal to invest across different stages of rental property development, from an income-generating asset to a future project. For Persakowski, the deal provides immediate capital, with an estimated cash flow of 156 million shekels and a recognized profit of 111 million shekels. Persakowski will continue to manage all units in the projects, retaining management fees.

This model, where a developer provides land and operational expertise and an institutional investor provides capital, is common in Israel's institutional rental market. Migdal has previously invested in similar long-term rental projects. The company sees stable income potential from long leases, linked to rent increases, and high demand for housing in Israel.

The deal comes as Persakowski faces a slowdown in the housing market, having recently put hundreds of apartments up for public auction. This sale injects capital without relying on apartment sales pace. Despite market challenges, Persakowski's revenues increased significantly in 2023, with fourth-quarter profit doubling.