At the Calcalist and Migdal Future of Finance conference, Electra Real Estate CEO Amir Yaniv said the company’s business model can withstand higher interest rates because it focuses on operating improvements after buying properties. He said that if rates do not fall, he will accelerate purchases in the company’s fifth fund, calling the situation an opportunity.
Yaniv said Electra Real Estate manages $5 billion of investor capital and $9 billion in assets, including about 35,000 rental housing units in the United States. He said the company ranks 27th among the largest U.S. multifamily firms. Its investors fall into three groups, Israeli institutional investors, foreign institutions mainly from the U.S., East Asia and Gulf states, and qualified private investors.
He said foreign institutional money typically takes about two years of due diligence, but is worth the effort because it is “the big money” and tends to stay if the company performs. Yaniv also said private qualified investors are a rapidly growing segment and now account for 30% of the assets under management. In his words, “the world is going toward the new rich, who are only getting richer.”
Yaniv argued that real estate is the largest slice of alternative investments and said U.S. rental housing is the best place to invest. He said the U.S. rental market totals $7 trillion, about one-third of Americans rent, and most of them live in multifamily housing, especially ages 25 to 35. He described a typical multifamily property as about 300 units with amenities such as a gym and pool.
He said the model does not work as well in Israel because land is too expensive, mortgages cost more relative to apartments, and younger people there are less inclined to buy. He said Electra looks for strong locations, mainly in the U.S. Sun Belt, and for upside through underperforming or aging properties. The company buys, renovates, raises rents, cuts expenses, lifts operating profit by tens of percent, and then tries to sell.
