Around a year ago, a new immigrant from France arrived in Herzliya Pituah, the brother of a well-known figure in the Jewish community of Paris. He purchased a 700-sq.-meter lot across from the Dan Accadia Hotel for $1.7 million, and razed the luxury villa that stood there. With the help of an architect and a contractor, he built a new and luxurious villa on the site for a total investment of $700,000. He then put the villa up for sale. Not long after, another French Jew was found who expressed interest in purchasing it. Following brief negotiations, the deal was closed for $3.5 million.

The new immigrant seller, who had just completed his first real estate deal ever with a net profit of $1.1 million, took the money and immediately began searching for the next property.

The invasion of aliens, coming from France, Britain, Belgium and the U.S., has been covered extensively in the press over the last year. Now the Israeli real estate market is preparing for the newest new thing, in the form of "foreign players." These are new immigrants who arrived here, looked around and could not help noticing the surging prices (in which they themselves played a substantial role), leading them to decide to join the party, as developers and intermediaries. "Every other French immigrant who contacts me these days is a developer just starting out," relates attorney Patrick Ben-Zimra, "and the rest are real estate agents."

	Advertisement

In the last five years, thousands of property owners and contractors in the cities along the coast have had realized the dream of a "rich uncle from abroad," who one fine day knocks on the door with an offer to buy their property for a price 20-80 percent higher than what a local buyer would be willing to pay for it. Sometimes the buyers were traditional American Jews with families, who had found their places in the local high-tech industry; others were Belgian Jews who were working in the diamond industry. Then there were well-to-do arrivals from England and France who had already accumulated a fortune and now had made the decision to purchase a second home, in Israel.

Alongside those groups were the "youngsters," aged 30-45 and financially established, who, for Zionist and other reasons, had moved to Israel. They hoped to find a source of income in Israel. Some of them managed to integrate into the local work force, others did not. Those who did not succeed were for the most part French.

"It's not easy for the French to integrate into Israel and find work," explains attorney Ben-Zimra. "Often, they still don't have the language, and so, employers are deterred from hiring them. On the other hand, they are interested in running their own business and fairly quickly identified real estate as a convenient way of making money fast." If we also add into the equation the strong European currency, the heavy tax burden in France, and the restrictions on transferring funds to and from that country, then it should be easier to grasp why this phenomenon flourished specifically among this group.

But the practice spread, to encompass not only immigrants from France, but also Jews arriving from England and the United States. They couldn't help but notice their brethren, who continue to arrive from abroad and seemed willing to pay almost any asking price, and occasionally even more.

At first they were "new agents," who offered to market Israeli developers' projects abroad (Neveh Tzedek Tower in Tel Aviv, or the new neighborhoods of Eilat, for example). Very quickly, however, these same young new immigrants began taking their first steps in the real estate business as small developers, in specific locations.

An industry source describes the market dynamic as follows: "Luxury property owners who have been alone in their home since their children left, in a 20-year-old, 400-sq. meter villa that needs some renovations, come and say: 'Find me a buyer and I'll take the money and move to a Tel Aviv penthouse.' At the same time, French buyers are coming and looking to purchase a private home for a million dollars, and then invest another $400,000 in renovating it, before reselling it, while riding the surge in the market."

Ori Tal, an agent with Remax on the Sea in Herzliya Pituah, relates that in that town, there are several individual developers, most of them French with no previous real estate experience, most of whose deals involve individual home upgrade deals, operating discreetly. They, notes realtor Gideon Oren of the Oren Properties real estate agency, are characterized, for example, by the purchase of an asset on a 400-sq.-meter lot for $700,000-800,000, and then its resale for around $1.4 million.

David Makhlouf, the Remax franchisee in Netanya, sees the same trend also in that city's popular beachfront strip and usually as a step that accompanies the buyers' construction of their new home: "French people or a group of English come and purchase lots for two to five residential units. They keep one or two units for themselves and sell the rest."

"A warm and deep connection to Israel can be expressed by the purchase of a home. But the purchase of a building? That's already a purely business transaction," says attorney Yaron Grupman, of the Grupman-Rahimi firm. "There are experienced real estate developers who have a well-developed sense for and deep understanding of real estate, and who focus on unique projects such as buildings earmarked for preservation, problematic assets with a high potential for upgrading, or old assets in south Tel Aviv, in the hope for an increase in their value."

So for example, around a month ago, another French developer purchased a large building of rental apartments in the vicinity of the old Tel Aviv Central Bus Station as a long-term investment. This developer expects that a reduction of the number of foreign workers in the area and an increased demand for rental apartments in Tel Aviv will in the future lead to an rise in the value of the property.

"The Israeli developer's outlook is aimed at getting as much building rights as possible for the money he invested," explains Grupman, "whereas the foreign developers already understand that luxury properties are a totally different game, in which the price paid is not a function of the market price, but of negotiation. Large apartments with a high level of finish in central Tel Aviv are a special and rare commodity for those not interested in living in a high-rise tower, and for a unique asset such as that, they are also willing to pay a lot more."

Noam Dzeldov, an owner of the Naot Shiran real estate agency, sees foreign development initiative among the English as well, primarily in Tel Aviv, be it with the purchase of old apartment buildings that have yet to undergo renovations or receive landmark status, or with the purchase of rooftop building rights.

For example, it was recently announced that a group of English investors purchased a landmark building in the heart of Tel Aviv for $7 million, with a plan to turn it into a luxury apartment project with prices ranging from $2-4 million per apartment. Around two years ago, it was French investors who purchased a building on Tel Aviv's Rothschild Boulevard for $3 million and this year sold the six apartments in it for a price of $1 million per apartment.

Another French developer purchased a residential building designated as a landmark at 1 Yehuda Halevi Street, renovated it and put its 12 apartments up for sale, keeping the penthouse apartment for personal use.

Who are the new foreign developers selling their properties to? In most cases, the developers are riding the wave of interest among markets in their countries of origin and offering the properties for sale via foreign agents, or through contact people in the community abroad. The sales process (and occasionally also the ensuing transfer of funds) takes place abroad, without the market in Israel being aware of it.

At the same time, notes Ori Tal, of Remax on the Sea in Herzliya, the developers in the luxury project field are not picky, and also offer their properties for sale through real estate agencies in Israel.

The new developers are extremely cautious during the initial contact with professionals in Israel. Some are assisted by local contact people who help them see a specific project through, and all use the services of a small group of lawyers, architects and building contractors, who are known to their more experienced friends, and the names are passed around among them. In the last few years, some private companies have been set up to appeal primarily to the French market and which help mediate with the banks to obtain mortgages or financing solutions for real estate investments. One such company is Blanc Bleu (Blue and White), which already has branches in Jerusalem, Tel Aviv, Ashdod and Netanya.

Recently, Makhlouf relates, a new trend has emerged: Foreign residents, impressed by the buildings built for them, approach the contractor and suggest a partnership to develop other specific projects in the area. "The contractors are becoming a small local partner who is an expert in the various arrangements, and together with the equity brought by the buyers, they are creating for themselves a sort of small business," adds Makhlouf.

"The people who live here have still not realized that the local real estate market has a thriving and parallel market among foreign residents," summarizes lawyer Ben-Zimra. "This market may operate discreetly, but it offers foreign residents professionals from almost every field and addresses their particular needs."