Tel Aviv may turn into a bigger market than New York for ultra-Orthodox businessmen seeking capital. This week Tel Aviv investors learned of another bond offering here, of up to NIS 200 million, by Abraham Leser, owner of a real estate group.
According to sector sources here and in the Big Apple, a number of other ultra-Orthodox real estate developers are en route to Tel Aviv. It make sense, because for all the Zionist motives that such religious businessmen love to talk about, the shaky American economy is the real engine of the move.
U.S. real estate markets are suffering a serious retreat because of the subprime mortgage crisis and resulting credit crunch in the United States - and Tel Aviv is showing a lot more demand for bonds than New York.
Advertisement
Leser's private assets are estimated at NIS 500 million, on top of any money he will raise on the Tel Aviv Stock Exchange. Ratings agency Midroog has given the bond issue an A1 rating.
It's true that usually, it's the Israelis seeking capital in New York, not the reverse. However: "Recently we have received many requests from companies managed in the U.S. and controlled by private shareholders who have a connection with Israel," said Avital Bar-Dayan, senior vice president and head of the Corporate and Financial Institution Department at Midroog.
"This is to try to take advantage of the conditions in Israeli capital markets to raise funds to expand their activities in the U.S."
She said most of the firms have income-yielding properties in good locations and a low debt level on their assets.
Abraham Leser is a private real estate developer in New York. His associates describe him as "very assertive, but pleasant, and with a sharp eye for business." He is a graduate of an ultra-Orthodox college, wears black and is surrounded by similar businessmen; Leser is in the thick of the New York real estate and financial markets. He has built up his portfolio over decades in order to raise funds.
Leser says he wants to raise the money to take advantage of opportunities in the real estate market. He says a number of property developers are over-leveraged and will reach a situation where they will have to sell off assets quickly. Leser wants to be ready to buy at good prices.
"He has a large number of properties and he has no plans to sell any. In all the years he has been active in the business he has sold one or two properties," said one of his confidantes. His associates say he has leverage of 30% on his assets.
Leser is also very connected to Israel and the Jewish community, they say. He has nine children and family in Israel. It seems he is also active in Israeli real estate deals, but most of his business is concentrated in Brooklyn. He also does not intend to immigrate to Israel any time soon. "I want to be up to date. Once every two weeks I need to see every one of my properties," he has told his associates.
However, not very much is known about Leser, or how he made his money. He started small and knew how to take advantage of opportunities, say associates. For example, he recognized that the number of working mothers was growing, so he bought properties and converted them into day-care centers.
He also owns a company in Israel that employs ultra-Orthodox women who scan documents from their homes. They can support their families without having to visit the secular world.
Leser also made money off the asbestos crisis. When asbestos was discovered to be a health hazard, he bought a large number of properties with asbestos roofs at fire-sale prices, rehabilitated them by removing the asbestos, and improved them.
His associates are quick to distance him from another ultra-Orthodox real estate tycoon: Shaya Boymelgreen. "He isn't like him at all, not colorful and not embroiled [in disputes] like him. He has no ego," said one of his friends.
His first rule is to buy problematic income-yielding properties and better them. He has bought and renovated around 100 such properties in 30 year. His second rule is to rent out such properties on long-term contracts to high-quality clients. Most of his properties are rented out long-term to public bodies, banks or large businesses.
The Leser Group has 17 properties with 80,000 square meters, which generate revenues of $20 million a year. Sixteen of them are in Brooklyn where he lives. One is in the Bronx.
The amazing rise in New York real estate prices over the past decade has been a real bonanza for Leser. One example is a building on Livingston Street which he bought in 1995 for $10.25 million. It is now worth about $40 million - a 27% annual yield.
Most of his long-term contracts were signed in the 1990s and will end in the next two years. On the one hand, this is an opportunity to improve on his old contracts and update rental prices. Estimates are that Leser's rents average around $21 per square foot, while market prices are at around $27.5, a 23% gap. But the slowdown in the American economy and a huge boom in office-building space in Brooklyn may harm Leser's ability to renew rental contracts at higher prices.
"Leser believes that the crisis in the U.S. will create opportunities. He is issuing [the bonds] to have equity to buy assets the banks throw away," said one investor.
Haaretz.com, the online edition of Haaretz Newspaper in Israel, offers real-time breaking news, opinions and analysis from Israel and the Middle East. Haaretz.com provides extensive and in-depth coverage of Israel, the Jewish World and the Middle East, including defense, diplomacy, the Arab-Israeli conflict, the peace process, Israeli politics, Jerusalem affairs, international relations, Iran, Iraq, Syria, Lebanon, the Palestinian Authority, the West Bank and the Gaza Strip, the Israeli business world and Jewish life in Israel and the Diaspora.
