Be Smart, Work Hard - and Be Born Into the Right Family

Although he is making mega-deals in international real estate and shipping, Eyal Ofer is not as well known as the other members of his famous family. In an exclusive interview, he analyzes the U.S. financial crisis and offers tips on how to succeed in business without really trying.

In the past month, the economic sections of the press have been filled with quotes from businessmen and tycoons talking about the great opportunities created by the current financial crisis in the United States - a crisis that may eventually spread outside that country.

When Eyal Ofer analyzes the economic situation, it seems, he is not particularly concerned with calming down either the markets or his own bankers. That may be why his predictions are pessimistic. Ofer has never given interviews to the media - not in Israel, not in London, where he lives, and not in the U.S. or China, where he does business. The Ofer family does not like the media very much. As a one-time favor, he agreed to give us "only three minutes."

Why don't you give interviews?

Ofer: "I don't need to. It's better for me this way. I have no good reason to stand out in front. The activity I lead is not public, and other than the gossip angle, exposure has no value. I get a good table at restaurants even without having my picture in the paper. I'm good at business, not at talking."

Eyal Ofer, 57, is the oldest son of Sami Ofer and the nephew of Yuli Ofer. Sami Ofer's personal fortune is estimated at around $7 billion, making him the wealthiest Israeli in the world. Much of this fortune was amassed thanks to the amazing rise in value of the Israel Corporation, 52 percent of which Ofer and his sons control.

Israel Corp. is a holding company that controls Israel Chemicals Ltd. (ICL), the refineries in Haifa and Zim Integrated Shipping Ltd.; it also has holdings in Tower Semiconductor Ltd. About 10 years ago, Sami Ofer bought control of the corporation from Shaul Eisenberg for some $300 million. Today it is traded publicly at a value of some $7 billion, making the Ofer family's stock holdings worth some NIS 15 billion. Factoring in the devaluation of the dollar and the dividends that have been handed out, the family has earned 20 times the amount they invested.

Sami Ofer's family also holds 13 percent of the Mizrahi Tefahot bank, as well as private shipping and real estate businesses. The economic flourishing of China and India have made the last three years the best ever in the history of the shipping business.

While his brother, Idan, runs Israel Corp. and lives in Arsuf, the small millionaires' community not far from Kibbutz Ga'ash, Eyal is in charge of international shipping and real estate, and lives in London. He is very active in the U.S., especially in New York, as well as in Britain, Turkey and Eastern Europe. Among other things, he is a director at Royal Caribbean Ltd., in which the Ofer family owns 15.7 percent together with the Pritzker family. Royal Caribbean is currently traded at a value of $7.5 billion.

In 2004, Eyal Ofer was ranked 96 in a list of Britain's richest men published by a British weekly, with an estimated fortune of some 300 million pounds sterling. This is an undervaluation, of course, since Eyal and Idan are also heirs to their father's enormous business empire. Eyal was furious at the publication and demanded that the magazine remove his name from the list the following year.

"It is simply not relevant to anything," he explains. "I am not in competition with anyone. I am a private individual, and any attempt to include me in financial rankings is irrelevant. To me, money is a means of doing things, not a social ranking."

The deal that gave Eyal Ofer his international fame and made him an American real estate tycoon was the purchase of the Mayflower Hotel on Central Park West, near Manhattan's Columbus Circle. "It was an excellent project, but it is not ours anymore and there is no reason to talk about it," he says. "We sold all the apartments within 18 months. Ninety-eight percent of them were sold to New York residents."

In contrast, at Yitzhak Tshuva's flagship project in the city, the Plaza Hotel, many of the buyers were not Americans, but newly wealthy individuals from Russia and China.

'We made enough'

Eyal Ofer bought the Mayflower in the summer of 2004 through the private real estate firm Global Holdings, owned by his family. He paid $401 million. His partners in the deal were the Whitehall Company, controlled by investment giant Goldman Sachs, and the Zeckendorf family. As soon as they got control of the hotel, Ofer and his partners tore the Mayflower down and built in its stead a unique, luxurious residential building called 15 Central Park West. The project includes over 200 apartments located in two buildings - one 19 stories and the other 50 stories. All in all, it was a $1-billion investment. Ofer refuses to confirm or deny reports in the American press that sales reached $2 billion. "We made enough," he says.

Thanks to this project and to the other "Israeli" mega-deal - Tshuva's Plaza - Manhattan real estate prices continued to rise to unprecedented peaks, even though the U.S. housing market sunk in 2007 into its biggest recession in 16 years. It is estimated that sales in both buildings helped to drive up the average price of a Manhattan apartment by $500,000. Not since the days of the high-tech bubble in 2000 have luxury apartments played such a role in the Manhattan real estate market.

Ofer: "The real estate market in New York is strong, and it will continue to be strong, because it is a global market. The drop in the dollar also creates an opportunity for foreign buyers: Real estate in Manhattan is very cheap now compared to other currencies in the world. If a dollar can be bought now for NIS 3.5, there's already a 20- percent discount on the purchasing cost."

Don't you find it strange that the crisis in the markets is not dragging down prices or creating new opportunities in real estate?

"The value of certain assets may have dropped, but unless you are in serious debt, you just don't sell."

How is that?

"Suppose you have an apartment that you bought for $1 million, and now it is worth $700,000. So what do you do - sell? Of course not. You wait for the value to rise to $1.5 million."

But don't the banks push debtors to sell off assets?

"They don't push, and that's what holds the real estate market up. They also keep assets whose owners are insolvent from entering the market, which prevents market shocks. And in general, there is a great deal of money around, waiting for business opportunities - so that even if an asset is put up for sale because of bankruptcy, there are enough takers. The vacuum is filled immediately, which keeps prices high."

Still, one can assume that banks today are less eager than before to fund new projects.

"True, it is harder to get funding today, but when the right project comes along, the banks have the money. For example, our project near the United Nations building in central Manhattan."

The project in question is an area near the UN on which a 40-story tower is to be built. There is also property near Broadway that Ofer and his three partners in the Mayflower deal recently purchased. Ofer is proud of the fact that the new project will be designed by world-famous British architect Norman Foster. Another mega-deal Ofer and his partners put together involved the purchase of the headquarters of Altria (the parent company of tobacco giant Philip Morris) in November 2007 for an exorbitant $525 million. The building is located at 120 Park Avenue.

Ofer believes that the impact of the U.S. economic crisis on the rest of the world is very limited: "The world is flourishing. Brazil is growing and so are Eastern Europe and the Persian Gulf countries." He claims that the recession in the U.S. is not a genuine one, and adds: "America is not Europe."

Meaning?

"The American perception is faster and more flexible, and therefore better. Americans identify a problem, and make changes and experiments to prevent damage. The Europeans are slower, they are still thinking about whether to cut interest rates."

You are investing a great deal in Europe.

"True, but in developing Europe, not in dying Europe."

In other words, not in Western Europe.

"No."

But perhaps now it is actually the U.S. that is dragging the entire world into a recession.

"The U.S. economy is the strongest and most influential in the world, but the world economy no longer depends on it. The fact that the U.S. is experiencing a cyclical crisis and is currently in decline makes it a factor that will no longer have real impact on the whole world. The world today is different from what we were used to."

Please explain.

"In the past, three factors influenced the world economy: the U.S., Europe and Japan. Now it is no longer the case. There are changes taking place in different regimes around the world, and India, China, Malaysia, Vietnam, Brazil, Argentina, Russia and the East European countries are becoming much more influential. These parts of the world are productive, and they supply the U.S. with goods. The changes in the global economy have created a bigger field, in which the entire world does not depend on the U.S. There are growing markets in the world now, with their own balances, their own governments; they are less affected by what is happening in the U.S. I visited Japan, and they did not know what I was talking about when I asked about the subprime crisis and how they were coping with it. We've got so much left to do in the world. What's happening in the U.S. is relevant, but it does not affect us as much as it used to."

Emotional matters

What do you think about the intervention of the Federal Reserve in the crisis?

"It won't hurt, and might even help."

Doesn't it interfere with the freedom of the market?

"There is currently a sentimental moment of declines in the market, to which everyone is drawn. When people all lose their confidence at once, it is a matter of emotion, and you need something with a soothing effect. Things can change as soon as a ray of light appears, and then everyone will get their confidence back."

So it seems as though the financial market is bringing down the real economy.

"In the finance market there is indeed a kind of catastrophe we have not seen in a long time, but it has nothing to do with the developing nations, consumer economies or industry, which continue to look active. There, things are far less dependent on Wall Street. Still, the money market causes a certain slowing down there, because the world needs money to fund growth. But the situation has to straighten out eventually."

If the crisis is felt in the real estate market, is it affecting your projects, too?

"The banks' liquidity has dried up. This affects the value of many public companies, and it will affect the world apartment market. In my projects it isn't felt."

So have we hit the bottom, or will the market decline further?

"I believe that it will decline further."

So there are no opportunities right now?

"The Bear Stearns investment bank got a purchase offer for $2 a share, but soon afterward the shares were traded at $6 - in other words, there was an opportunity here for various institutions to make a lot of money. We have to remember that there was a time when the bank was traded at $170 a share. I believe that there will be more opportunities of this kind."

Which countries might benefit from the crisis?

"The countries that are the largest energy producers are sitting on a fortune, and for them this is a real opportunity. Anyone with cash can make use of the opportunities, because the banks don't have any."

Is the crisis affecting your shipping business?

"The shipping business will be affected by the crisis, but it is not tied to it. Shipping works according to supply and demand of ships that are present in the market, on the water. Even in bad days, when there are not enough ships, transportation costs are still very high."

Word is that the shipping market is not in great shape now.

"The market is suffering, but not too much."

Where can the best investment opportunities in real estate be found today?

"In Eastern Europe, parts of India, some regions of China and South America."

Two tycoons

When Tshuva's Plaza apartments and Ofer's Central Park West apartments were put up for sale, the New York press began to compare them. They reported that the two tycoons were engaged in a competition that turned them into opponents. The stories included some mutual mud-slinging, with unflattering comments attributed - anonymously, of course - to top executives on each project.

In 2003, Tshuva had actually planned to buy the Mayflower Hotel. The property was not up for sale at the time, but he conducted secret negotiations with the Greek shipping family that owned it. After the price had been set at some $350 million, the family informed Tshuva that it had decided to open the sale up for bidding. Tshuva entered the race, but then a new contender bid $401 million - and won. That contender was Eyal Ofer.

Despite the alleged personal conflict between them that was reported in the business press, the two Israeli entrepreneurs later met in the lobby of the Plaza, trading smiles and embraces.

"There is no competition, because the apartments in both projects have been sold out anyway," Ofer explains. "It's the least important thing, it's really meaningless. I don't understand this fixation. Tshuva and I are great friends."

Still, these are two luxury buildings in New York.

"They are two buildings with different characters. Ours is purely residential, and the Plaza is combined with a hotel."

But Tshuva also wanted the Mayflower.

"Not just him. There were eight other bidders."

Did you also want to buy the Plaza?

"The Plaza wasn't even considered."

Did Tshuva make a good deal?

"Yes, it was a good deal. He is an exceptional entrepreneur. In the end, he was lucky to lose the Mayflower, because if he had won then, he would not have bought the Plaza."

Is there any competition between Israeli entrepreneurs working abroad?

"No, the markets are large enough. There is enough space, so there is no need to step on each other's toes. Even if Kardan real estate is building 20,000 housing units in China, there is still room for everyone."

What characterizes the Israeli entrepreneur?

"Unlike American and European entrepreneurs, we have balls: The Israeli is an entrepreneur in his very soul, looking for opportunities, looking for value. Israelis have a great deal of energy, chutzpah, courage and curiosity. When an Israeli hears that some place is cheap - that's where he goes."

Like Nohi Dankner, Yitzhak Tshuva and Lev Leviev?

"Yes, among others. These are people who put all of these qualities to use and succeeded as a result."

Tshuva and Dankner have gambled on a giant project in Las Vegas, $7-$8 billion. Would you consider going there, too?

"No, everyone is there already - what do I have to look for there?"

What kind of entrepreneur are you? What drives you?

"I operate by seeing, observing and studying. I take risks, but I try to gamble as little as possible. I want to create value. I'm not after money - what motivates me is the interest, the creating, the challenge."

Ofer is discreet about the identity of the "New Yorkers" who bought apartments from him, but the newspapers are packed with stories about the buyers at 15 Central Park West. They include Goldman Sachs CEO and chairman Lloyd Blankfein, who bought a penthouse for $45 million. Another financial tycoon who became Ofer's client is Sandy Weill, former CEO of the financial and banking giant Citigroup and one of Wall Street's most prominent figures; Forbes Magazine estimated his worth at $2 billion. Weill bought a penthouse for $43 million. Other no-less-famous buyers include singer Sting and actor Denzel Washington, who paid $20 million each. Apartments were also sold to car-racing star Jeff Gordon, to sitcom writer and producer Norman Lear, and to the Zeckendorf brothers - Ofer's partners in his New York real estate ventures.

One of the most famous apartments on Central Park West belongs to hedge fund manager Daniel Loeb, who bought a three-story, 1,000-square-meter place for $45 million. Loeb's apartment has eight bedrooms, 10 bathrooms, an enormous living room, two powder rooms, a private screening room, a library and a 75-square- meter terrace.

Forty-five million dollars for an apartment - isn't that over the top?

"Someone once asked me what a certain apartment was worth. I told him that it was worth the price that had been paid for it. I can give you the same answer about the $45 million apartment - if that's what someone was willing to pay, that's the real value of the place."

The MGM building on Fifth Avenue, across from the Plaza, was recently put up for sale for $3 billion and became the talk of New York's real estate market. This time Ofer decided to stay out of the game - not because of the enormous size of the deal, but because of its profit potential. "I'm not a contender," he says.

Why? Doesn't it look to you like an excellent deal?

"It is an excellent deal for those willing to pay the price. I don't think it's possible to make a profit here."

Not involved

Eyal Ofer divides his time between New York, London and Israel. His wife and four children live in a villa in West London. He comes to Israel about eight times a year - "not enough," he claims. Perhaps that is why he recently bought Nissan Khakshouri's villa in Herzliya Pituah for $16 million. Compared to his relatives, Eyal Ofer is less well-known in the Israeli business community and has only a small circle of Israeli friends. A few months ago, his son got married in Israel.

The Ofer family operates in Israel's real estate market through Ofer Brothers Properties, which owns office buildings, commercial properties and hotels. Among other things, in December 2007 the company purchased a 15-percent share in the Habas Group for NIS 83 million. Habas is building two projects in Tel Aviv: the Yoo Towers at Zameret Park and the tower at 1 Rothschild Blvd. Some members of the family have already bought apartments in the Rothschild project.

What do you think of Israel's real estate market?

"I believe that the Israeli economy is strong today. There is an influx of Jews from abroad that has not yet exhausted itself, and this raises the demand for apartments. I believe in the luxury apartment market in Israel, and in the apartment market generally."

At this point in the conversation, the man who does not like to give interviews feels he has talked a bit more than he should, and subtly signals that the meeting is over (he simply gets up from his chair).

Wait, just one more little thing: What kind of advice can you give to those who want to succeed in business?

(Ofer sits down.) "You need to be born to my parents."

Besides the fortune they made, did they push you to go into business?

"I grew up in a home where there was strict education toward good work, dedication and decency. I knew from a young age that I would be a businessman."

How close are you?

"Everyone speaks to everyone, but there is less time for social gatherings because we are in different parts of the world. In any case, we maintain a high level of communication. I will be in Israel before Passover."

What else do you need in order to succeed in business?

"You need to have luck and brains. You also need to work hard and stay honest. And, of course, there's the masbaha."

The masbaha is a string of 33 silver beads, which Ofer takes with him everywhere. He even fingers it throughout the interview. Ofer knows which ethnic groups use which kind of masbaha; it is a topic he can discuss for hours.

Why do you have this masbaha?

"Because it's good for the health. I bought it in Greece 30 years ago, and it's been with me since then."

You play with it all the time?

"Yes, it soothes the nerves in the fingertips and has medicinal qualities."

How much does a masbaha like that cost?

"It can be between $12 and $5,000."

How much was yours?

"$12."

Would you be willing to sell it?

"Ah ... So you want to be Eyal Ofer?"