"I have a villa that belongs to one of Israel's wealthiest families. The family's son has become an event coordinator, it's his full-time job. The villa is in a class of its own; surrounded by trees and lawns, with tennis and basketball courts, a parking lot for hundreds of cars, its own generator, sophisticated garden lighting, and most importantly - distance from the neighbors."
This is how event producer Niv Almog describes one of his "better" event properties. The villa brings in about NIS 50,000 a month, and others bring in even more.
Almog says that demand came before the supply.
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"Israelis are always looking for new ideas, unique events," he says. "The property owners identified the potential and provided the supply."
These properties are both luxury villas and apartments throughout the country. To understand this picture fully, one has to realize that these are people who do not need the money, and who are already in the top one-thousandth bracket, who own villas in Israel's most sought-after locales - Savyon, Kfar Shmaryahu and Caesarea, and other swank neighborhoods from the North to Eilat. Almog will not name any names, but says they are all well-known Israeli personalities.
Why do they do it?
"It's not that they lack anything, but they all want more and more," says Almog. One of the families in Kfar Shmaryahu came to me when one of the children wanted to go to Thailand. One NIS 30,000 wedding at their villa financed a vacation for the entire family."
In addition to the enticing extra income, the property owners enjoy plenty of added benefits during the event.
"I rent out the garden, and no one enters the villa during the event. Meanwhile the owners are inside, enjoying perks like massages, fancy food, cigars and wines."
Prices start at tens of thousands of shekels for the simplest estates, and the sky's the limit. The price depends on the quality of the property, the duration of the event and the number of invitees. Factors that can raise the price are the isolation of the villa, the size of the lawns and pool and the quality of the sound system. The property that cost Almog the most is in Savyon, where he paid $10,000 a day for three days.
Gil Keren, an event producer for Israel's top party coordinators, relates that one family in Herzliya Pituah charged $17,000 for the use of an isolated beachfront villa. "The price was set by the property owners quite arbitrarily, but in general they start at $2,500 for one night.
Alongside the villa party market, there is also a demand for luxury apartments, which have been purchased by private investors and are used for small events, bachelor parties or for a bride and groom before and after their wedding.
The concept behind these events is clear - to feel like a millionaire for a day or to hold an event with a different kind of atmosphere than that offered by standard banquet halls.
"The spaces for rent are not as large as the banquet gardens and are good for events of up to 200 people," says Keren, "or for a dinner party for 20. They are unique, because they are urban, in unusual places, such as the luxury loft on Schocken Street in Tel Aviv, or the roof of a building on Lincoln Street."
Alon Kastiel, a real estate businessman and one of the pioneers in the private event industry, says that the yield from such properties can be phenomenal. Kastiel owned a fashionable loft on Schocken Street, which he sold about six months ago for $550,000. He had purchased it toward the end of 2006 and branded it as a luxury apartment for private and corporate events. "Events during the week would cost $1,000 a day, and $2,500 a day on weekends," he says. "There were an average of 4 events each week." These figures indicate average monthly revenues of close to $30,000, although bookings are not steady all year long. The busiest time is the six months between the spring and fall, when most weddings are held. During the rest of the year, most of the events are corporate, and are less frequent.
The seasonal nature of such rentals makes it difficult to estimate annual revenues, but assuming an average of $15,000 a month on an annual basis, the person who bought it for $550,000 would see an annual yield of 30%.
Kastiel knows of some villas in Caesarea that sold for relatively low sums of around $500,000. Of course these are not the fanciest ones in the best locations, but are still "a villa in Caesarea," and during the party season can bring in NIS 6,000 for a weekend event or NIS 3,000 for a week night.
"That is an excellent yield relative to the cost of the property."
These yields are very impressive, relative to the rental income from a regular apartment in Tel Aviv, which amount to 4%-5%, or from a split apartment whose rental income does not even reach a double digit figure. Still, prospective villa buyers must take into account that these are not passive investments, but rather such villas must be upgraded and marketed, and it takes time to build a clientele. The owner must also work with event producers and adapt the property to suit the needs of various events.
The low seasons and marketing required to generate demand and excitement surrounding a property are not the only challenges in renting out private properties. One of the main problems faced by such investors are the neighbors, who are not interested in the noise from weddings and similar events. Villas in isolated areas are therefore much more popular. "The problem with private properties is that you can never hold huge events with 500 guests or until the wee hours of the night, because of the noise. The neighbors might not mind one event, but beyond that they will not tolerate the nuisance," says Keren.
Almog says there are ways of coping with this problem.
"Events can be arranged so they don't bother the neighbors," he says. "I try not to hold weddings at night, but rather on Friday afternoons. I am on friendly terms with the neighbors of the properties, and if someone needs a little 'extra convincing,' I do that too."
Some residents of Caesarea declared war on the events industry, which has increased the noise and traffic to levels incompatible with the quiet of the area. Now the events have been toned down. Villas there are still rented out, but for less noisy affairs.
Another issue that hampers event properties is that they are not licensed banquet halls, and their owners must be proficient in a whole series of fire safety and other regulations, as well as business licensing laws. Kastiel mentions other problems that can reduce the profitability of such ventures. "Wear and tear can ruin luxury apartments," he says. "The need to repaint and refurbish can erode the yields. I used heavy duty furnishings for the loft on Schocken Street - solid wood tables, sofas with metal frames and black flooring - so that they would durable for all the parties.
"After the third event, every property owner should expect a visit from the municipal business licensing inspector, who will present a list of demands to meet safety regulations. According to the law, there has to be a staircase that is suitable for evacuating many people in an emergency. The stairs must be no more than 25 meters away from the furthest guest. When I bought the loft, I measured the distance from the emergency stairs to the farthest corner, and it was 23 meters. If it had been 26 meters, I would not have bought the place."
Kastiel also mentions the need to install sprinklers for fire safety and the importance of buying property insurance, "because if a calamity happens, the owner of the property can go into debt his whole life."
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