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BERLIN - October 2008. The global crisis is howling. Hardly auspicious timing for the biggest real estate fair in Germany, Munich's Expo Real 2008. There are five people on the "Foreign investment in Germany" panel, of whom two are Israelis - David Fattal, 51, founder of a hotel chain, and Yakir Gabay, 42, owner of Grand City Hotels & Resorts.

Also there is Andre Witschi, chairman at Germany's biggest hotel chain, Steigenberger, which now has Gabay breathing down its neck in second place. Another panelist is Igor Romanov, director at Azimut Hotels Company of Moscow, which is also investing widely in Germany. Fifth is Christopher Day, managing director of London's Christie + Co.

It isn't that the organizers of Expo Real, which boasted 42,000 visitors from 77 countries, have a weakness for Israelis.

The panel composition simply reflects the growing dominance of Israelis in the German real estate and tourism sectors. There are more than 120 Israeli-owned hotels in Germany, with combined revenues of NIS 3 billion a year. Israeli companies also invest heavily in other local properties, from commercial to housing to industrial.

During the last four years, Israeli investors - including tycoons such as Yitzhak Tshuva, Shari Arison and Eliezer Fishman - swarmed to Germany, predicting a boom like in London, New York or Madrid. Plenty of smaller investors have arrived, not buying whole streets but an apartment or hotel here or there.

"Poor but sexy," Berlin's social-democratic mayor Klaus Wowereit famously described the city to British businessmen last year. For businessmen, read that as "low prices and high sex appeal" - a bonanza for the taking.

It didn't work that way. Property prices in Berlin did start to climb from the bottom of the ladder, slowly and painfully, but stayed far in the rear of the levels reached in Britain, Spain or even eastern Europe. Yet with real estate markets collapsing everywhere else, Berlin prices, which hadn't gone far, are proving pretty resilient. Investors didn't make much, but they aren't losing their lederhosen, either.

The local press once said that Israelis were responsible for 10% of total real estate investment in Berlin. Some say more, some say less. But what's clear is that they're a local power, especially in hotels, an exploding growth industry after the "poor" divided city united and suddenly became an international tourist attraction.

The fall of the Wall and billions that the German government poured into restoring past glory to Berlin spurred tourism from 1.6 million visitors a year in the 1980s to 7.8 million a year, second in Europe only to London and Paris. Even in 2008, a terrible year economically, Berlin continued to boom thanks mainly to the influx of tourists.

Yakir Gabay was the first Israeli to identify the potential of Berlin's property markets. By age 40 he'd already run Bank Leumi's underwriting company Leumi & Co., Freddi Robinson's real estate company Resido, and the Gmul investment company. In 2004 he decided to make his own mark, in Europe.

Grand City Hotels & Resorts, which he founded, today owns and runs more than 70 hotels and has become the second biggest chain in Germany. It also owns residential and commercial property there and employs more than 100 at its Berlin headquarters. Gabay also runs hotels owned by his good buddy Teddy Saguy, who made headlines last week for an investment in Eliezer Fishman's company MirLand.

Saguy, who made his fortune with the online gambling company Playtech, owns the Mark chain of 20 three- to four-star hotels throughout Germany. He's the most liquid among the billionaires, carrying almost no debt on his assets, they say in the property business, adding that he's using his liquidity to snap up bargains in the bear market.

"He's brilliant, focused and very conservative in his investment policy. If he gave Gabay the keys in Europe, he had good reason," says one market animal.

David Fattal, who sat by Gabay on that Munich panel, is also big in Berlin. Gabay and Fattal have much in common: Both started on salary and are today self-made multimillionaires. Fattal began as a security guard at hotels and reached the top at Africa Israel; Gabay was an intern at the Israel Securities Authority and later an equity analyst and underwriter.

That's where their similarities end: Their strategies are pure opposites.

Gabay buys property, improves it and sells it for more. Hotels are just a vehicle to create value on property.

Fattal is a hotelier, a long-term player who aims to build a leading European brand. In late 2007 he set up a 100-million-euro fund to invest in hotels with Delek Real Estate, Migdal, Menorah and others. The fund now owns 30 Leonardo hotels and is on the lookout to buy more.

Fattal likes the spotlight. Gabay never even considered calling a press conference, let alone declare what he does or aims to do. He doesn't grant interviews and only reluctantly allowed TheMarker to chat with his top management team. It's getting harder to move without making headlines, he complains to friends.

In Europe, while Fattal ambitiously chose to forge his own brand - Leonardo - Gabay elected to win franchises from the French chain Accor.

Can little Leonardo prevail against the marketing machines of the global giants? Its CEO, Daniel Roger, explains that Accor has thousands of hotels and that joining a chain has a price - you pay the parent company royalties. Leonardo pays no such thing, and surveys have found good name recognition among the German public, Roger says.

Both Fattal and Gabay realize the importance of the Internet and are working on optimization. "All Grand City's important hotels appear on the first page of Google searches," Gabay's company says.

Another Israeli who made waves in Berlin was Adi Keizman, though his purchase in 2005 of the historic post-office building seems aimed more at public relations than profit. To this day he hasn't found a real business model for the thing, which is protected by stringent preservation directives. For the time being the Postfuhramt houses a gallery and designer fashions, among other things, which keep Keizman in the spotlight.

Four years later, Keizman and Shari Arison's company Housing & Construction own more than 3,200 apartments in Berlin and 200,000 square meters of office space.

In one of those turns of fate, Keizman's wife Ofra Strauss, scion of a yekke family, led the family's exit from Berlin in 1997. She and her father decided to close down Elite's Berlin coffee-production plant after losing NIS 100 million in five years. In fact, the Strauss group merged with Elite, creating the giant Strauss group, in large part because of the Berlin fiasco.

Strauss still loves to visit the city with her husband, far from paparazzi, however.

Rabin Savion, chief executive and co-founder of Keizman's company ADO Properties, says it was amazing that the Germans even sold the historic post office. But the German postal authority didn't plan to use it and didn't want to deal with leases, he explains. Keizman came, saw the building and closed the deal in nine days. That was quite a record for the plodding German postal authority, Savion says. They thought he was kidding. He wasn't.

"Buying the building was the easy part. After that we had to decide what to do with it," Savion adds. "We took a building that had stood empty for more than a decade and in half a year reopened it to a roar of applause."

Almost all the Israelis operating in Berlin started out as partners with Yakir Gabay, learned how he works, then went their own way. Even Fattal and Keizman started that way. Fattal went for hotels, Keizman for the post office and housing, while Gabay has shunned residential investments since mid-2006. It's too expensive, he tells colleagues.

Despite the shifting partnerships and churn of staffers, relations between the Israelis in Berlin remain chummy. On the surface at least, they are one big family, who rub shoulders at social occasions. "The market is big enough," Gabay tells his former partners. There's no need for fresh divisions in Berlin.