Real Estate Funds Buy 712 Apartments From Developers for $430 Million
Translated & summarized from Globes by baba
Real estate investment trusts (REITs) have purchased 712 apartments from Israeli developers for approximately 1.6 billion shekels since the start of 2024, as a slowdown in the housing market leaves contractors with unsold inventory. Major buyers include Abu Madurim, Megurit, and Azorim Living, acquiring units at discounts of 10-20%. The REITs are experiencing high demand for long-term rentals, with occupancy rates near 100%, while developers are motivated to sell to free up capital and manage inventory.
The story in 5 lines · by baba
- REITs acquired 712 apartments from developers for 1.6 billion shekels since early 2024.
- The housing market slowdown has led developers to sell units to REITs at discounts of 10-20%.
- Abu Madurim REIT is the most active, purchasing 248 apartments for 420 million shekels.
- REITs report high occupancy rates of 98-100% for their long-term rental properties.
- Developers are selling to REITs to free up capital and manage excess inventory.
Amid a housing market slowdown and a surplus of unsold apartments held by contractors in Israel, real estate investment trusts (REITs) specializing in long-term rentals have been acquiring large batches of units at a discount. Since the start of 2024, at least 15 such deals have been finalized, involving 712 apartments valued at approximately 1.6 billion shekels (about $430 million). The average price per apartment in these transactions, excluding one deal for apartments leased to Amidar in Kiryat Ata, was around 2.6 million shekels.
The most active REIT this year is Abu Madurim, led by entrepreneur Tzachi Abu, which purchased 248 apartments for 420 million shekels. Following closely is Megurit REIT, acquiring nearly 200 new apartments for close to 600 million shekels. Azorim Living, managed by Eran Anav, recently bought 80 apartments from the construction company Tzvi Tzarfati in the city of Azor for about 198 million shekels, representing a discount of around 15% from their fair market value. Rent It and Azorim Living have also been significant buyers.
While these transactions are substantial, they represent a small fraction of the total inventory held by developers. REITs report a high volume of inquiries from developers but emphasize that these are not fire sales. Sharon Tusiya-Cohen, founder and CEO of Rent It, described the sales market as stagnant, influenced by expectations of interest rate cuts, potential price drops, and the geopolitical situation. He noted that this stagnation in sales redirects demand to the rental market and leaves developers with excess inventory, prompting them to sell to REITs for a profit and to free up capital.
The discount offered to REITs varies, typically ranging from 10% to 20%, depending on restrictions on the apartments, such as those imposed by the "Apartment for Rent" program which can limit sales for 15-20 years. Some developers, like Almogim, have reported losses on these sales, while others, such as Tzvi Tzarfati, anticipate significant profits. Megurit's founder and chairman, Erez Rosenbuch, stated that his fund is now focusing on acquiring apartments closer to completion or immediately available, a shift from previous years when they concentrated on pre-sales.
REITs report strong demand for long-term rentals, with occupancy rates at 98%-100%. They differentiate themselves from private landlords through long-term contracts with fixed prices and professional management. While REITs can raise debt through bonds, bank credit, and institutional loans, their equity capital is also being raised continuously. Megurit's CEO, Uri Schuster, added that most inquiries come from large developers looking for strategic inventory management rather than distress sales.
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