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How have the bright stars of 2007 fared? By Guy Liberman, Ranit Nahum Halevy, Raz Smolsky and Arik Mirovsky Tags: real estate, israel news A year ago, TheMarker marked 15 promising real estate entrepreneurs. A year later we can safely say, most did not do well. Last year The Thing was eastern European property, while the real estate markets of the U.S. and western Europe were considered unlikely to generate appealing returns. As for Israel - forget it, unless engaging in "exclusive" property. But looking back, we find no single formula for success. There is, however, a formula for flopping: leverage. Borrowing too much and expanding too much, indulging in over-optimism. Bad luck plays a part, too - "a gram of luck is better than a ton of gold," said Direct Capital's Arie Prashkovsky, who seems to have abandoned his company to frustrated bondholders demanding their money back. Direct Capital isn't the only company in dire straits. The 15 bright stars of yesteryear epitomize the blows that the real estate sector has suffered this year. Many are on the brink and even the ones that survive, are holding on grimly. Advertisement Aura Investments Founded: 1993. Real estate activities began in 2005. Founders: Boaz Mashauli and Yosef Zaliah. Area: Residential and shopping mall development projects in Romania and residential projects in Israel. Main projects: Chain of 7 malls in Romania, most under construction. Yield on bonds: 10%-80% Share's performance in last year: -75% Events this year: Last year, the company promised to open three malls in early 2008, but has so far opened only one - in Buzau. Two others are expected to open soon. The other malls are in various stages of construction. Over 80% of the space in the first three malls has been rented, and the rental prices have not been affected by the global economic crisis. Aura is building 4,000 housing units in Romania in eight residential projects. Most are due to be completed in 2011. The company's third-quarter financial report noted that construction has begun on two of the projects, while the other six await the approval of bank financing. This year, 10 apartments were sold in a project in Ploiesti, bringing to 28 the total number of apartments sold in the first stage of 102 apartments. In Piatra Neamt, eight apartments have been sold since the beginning of the year, for a total of 46 out of the 115 apartments being marketed in the first stage of that project. Property acquisitions and sales: This year, Aura purchased 17 dunams of land in Brasov, adjacent to a previously purchased 73-dunam tract. Aura plans to build a housing complex of over 1,600 units on the entire 90 dunams. In June, the company sold 6 dunams on the edge of the large tract for 2.5 million euros. Bottom line: The credit crunch caught Aura with large land reserves, a sheaf of loan applications and a large inventory of apartments. The company's future depends on the stability of the shopping mall industry in Romania. Arko Holdings Founded: 1970, as Oppenheimer Jerusalem Candy. Changed name in 2000 to Leader Tech and to Arko Holdings in 2006. Founders: Arie Kotler Areas: Finance, construction and real estate investment in the U.S. and Europe. Mainly, provides interim financing to property developers. Yield on bonds: 82% Stock's performance this year: -80% Developments this year: The company owns a 50-dunam site in Queens, New York, where it means to build 114 apartments, though as of its last report it hadn't managed to rezone the site for residential buildings yet. It also owns a building in Stuttgart. Arko loaned NIS 47 million to three companies in the U.S. and hasn't been getting repaid on schedule. Some of the projects there are delayed in completion and sales. Bottom line: Arko seems unable to take off. Its main assets aren't generating much income and repayments to it are in arrears. Its focus on foreign markets, mainly the U.S., is a risk factor. Adama Holding Founded: 2004, went public in 2008 Founders: David Flusberg, Dvir and Yitzhak Cohen-Hoshen Areas: Housing in Romania, Turkey and Ukraine Yield on bonds: 53% Developments this year: Bought land in Romania, Ukraine, where it's building 45 projects, of which 84% are residential. Company reportedly has assets of 400 million euros, shareholders equity of 213 million euros, and debt of NIS 128 million euros. It fired 30% of its workforce and has slowed down construction. It borrowed 15 million euros from Morgan Stanley this year, 26 million euros from Lehman Bros and $10 million from a U.S. pension fund. Adama wasn't affected by the collapse of the American investment banking sector, because it already got the money and used it. Bought 2.6 dunams in Brasov, Romania, 27 more dunams in Romania, 30 dunams in Bucharest. Sold 40 dunams in Croatia and bought half the rights to land in Kiev, Ukraine. Bottom line: Continued to briskly buy and sell, and raised money too. The value of its land dropped but its high shareholders equity could help it weather the bad times. Bonei Hatichon Founded: 1984. Founders: Aharon and Ami Peretz. Area: Residential property in Israel, development in Europe. Yield on bonds: 7-35% Stock's performance this year: -61% Developments this year: Working on 11 residential projects in Israel, and working on projects in Hungary and Romania. Apartment sales in Bat Yam and Petah Tikva were terrific in the first half of 2008, but have since wilted. Projects in Netanya and the Ashdod marina are not going well. Bonei Hatichon doesn't see itself starting construction in Hungary and Romania any time soon. During the year, Bonei Hatichon expanded its inventory of land, buying more in Israel for NIS 194 million (including development costs), including an area to build 99 apartments in Netanya and 300 in Talpiot, Jerusalem. An NIS 56 million land purchase deal in Poland fell through. Bonei Hatichon is doing an urban renewal project in Rishon Letzion, demolishing 120 apartments and building 530 in their stead. Bottom line: If not for the global economic crisis, Bonei Hatichon would have had a fantastic year. But now its fortunes depend on Israel's real estate market, which is in stagnation. Gindi Investments Founded: 2003 Founders: Manor Gindi (son of Moshe Gindi), Uri Levy, Eyal Friedman (Moshe's sons in law) Areas: Builds malls, housing in Israel, abroad. Yield on bonds: 10%-24% Developments this year: Said in third quarter report that had sold almost all the apartments in the Treetops project in Netanya, White in Rishon Letzion, and in its Ramat Aviv project. (But most of the sales were in 2007.) In fact this year Gindi has started to market only two new projects, Givat Shmuel and Netanya, and managed to sell only 16 apartments during the first 11 months of the year. In Budapest the company sold 112 apartments in the Eighth Quarter, but sales were weak in the Ninth Quarter and Eleventh Quarter. Both the company's shareholders equity and liquidity increased this year. Gindi bought land in Ramle for NIS 13.5 million to build hundreds of apartments by the mall it is building. It bought land for housing in Ramat Aviv for NIS 42 million and sold a mall in Givat Shmuel for NIS 140 million to Harel, a transaction begun in 2007. It sold a residential building on Pinsker Street, Tel Aviv, for NIS 17 million and a commercial property in Switzerland for SF 26 million. Bottom line: Focused mainly on selling assets to increase liquidity this year. Looks like a smart move given the times. New Horizon Founded: Well, it's the latest reincarnation of the stock market shell Unami. Founders: Ofek Group. Areas: Property development in eastern Europe. Yield on bonds: 31% Stock's performance this year: -35% Developments this year: Plans to build 3,800 apartments in five projects in Romania, three in Poland planned for 690 apartments, and one in Latvia with 400 apartments. New Horizon sold 50% of its east European operations to an Austrian company Immoeast for 9 million euros. Immoeast has to provide a credit line amounting to millions of euros for their joint operations. Construction in Romania has begun. The other projects remain in planning stages. Bottom line: Eastern Europe isn't a good place to do real estate business these days. Several of the company's decisions in the last year could help ease its plight, but it doesn't seem to have a steady source of cash flow. Revenues this year resulted mainly from selling 50% of its operations to the Viennese firm, from consultancy services, and rent from a building it owns in Poland. Olimpia Founded: 2000 Founders: Include Shalom Fisher and Matthew Bronfman. Area: Builds commercial, office and residential properties in Israel, eastern Europe, through Nanette and Olimpia Euro Construction. Yield on bonds: 104%-115% Stock's performance this year: -90% Developments this year: The year began with two giant deals: Olimpia agreed to pay NIS 486 million for land in Kiev, Ukraine, to build housing at an investment of NIS 4.4 billion. Then it bought 153 dunams of land in Budapest. In Israel, Olimpia bought 50% of the land owned by parent company Isralom for NIS 23 million, to build commercial space. It sold 90% of Park Olimpia in Kiryat Arie and 76% of the 72 apartments in Olimpia By the Park, also in Petah Tikva. But the credit rating agencies downgraded Olimpia by three notches because of its exposure to delicate markets and liquidity issues. Its eastern European sales are slow: It's sold only 2,509 apartments out of the 15,835 that it plans to build in 25 projects. Bottom line: Exposure to eastern Europe imperils its stability. Bookmark to del.icio.us   Army of martyrs Iran clerics enlist volunteers to fight 'Zionist regime' in Gaza. New anti-Semitism Greek paper: World Jewish plutocracy behind Gaza strife, global financial crisis.

Read & React Two Israelis die as rockets fired from Gaza hit south Responses: 126 Bradley Burston: Who speaks for Gazans, when they need it most? Responses: 90 Tom Segev: Trying to 'teach Hamas a lesson' is wrong Responses: 132 Amira Hass: 'Gaza strike is against all Palestinians' Responses: 78 Greek paper: World Jewish plutocracy behind Gaza strife, global financial crisis Responses: 45 Why hasn't Hamas responded to Gaza strikes with greater force? Responses: 26 More Headlines 01:33 Rockets fired from Gaza kill 2 Israelis within hour 01:59 Israel targets senior Hamas, Islamic Jihad commanders in fresh Gaza strikes 21:15 Barak: We'll use every resource to stop 'criminal' rocket fire from Gaza 20:20 Hezbollah: Defending Gaza means offering blood of martyrs 01:42 U.S.: Hamas must halt rocket fire at Israel, agree to lasting truce 23:09 Man hurt in Palestinian stabbing attack at West Bank settlement 23:23 WATCH: Israel's attack on Gaza from the missiles' point of view 16:50 IN PICTURES / Firestorm over Gaza 13:02 Top PA negotiator: No peace talks with Israel during Gaza assault 01:48 VIDEO / Egyptian paper: Hamas leaders partially responsible for Gaza assault 08:19 In response to Gaza raids, Hamas threatens to assassinate Livni, Barak 12:07 Gaza War Diary II - Who speaks for the Gazans? 15:41 Greek paper: World Jewish plutocracy behind Gaza strife, global financial crisis 12:28 Report: Captive IDF soldier Shalit wounded in Gaza air strikes 12:11 Iran clerics enlist volunteers to fight 'Zionist regime' in Gaza 07:41 Why hasn't Hamas responded to Gaza strikes with greater force? Previous Editions Select Day 29 dec 28 dec 26 dec 25 dec 24 dec 23 dec 22 dec 21 dec 19 dec 18 dec 17 dec 16 dec

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