“Everyone talks about interest rates. No one is immune to the impact of changing interest rates in the real estate world. But our model is operational. In other words, we aggressively improve the properties we acquire, and even if interest rates rise significantly along the way, we will be able to overcome it,” said Amir Yaniv, CEO of Electra Real Estate, speaking at Calcalist and Migdal’s Financial Future Conference. “We are currently raising Fund No. 5, and if interest rates do not come down, I will step on the gas and increase acquisitions because, from my perspective, this is an opportunity.”
Yaniv added that Electra manages “$5 billion of investors capital and $9 billion in assets. That is an enormous responsibility. The company manages about 35,000 rental housing units in the U.S. and ranks 27th among the largest multifamily companies in the United States.”
“Our investors are divided into three groups. First are the Israeli institutional investors, who demand that we deliver results every single time. Alongside them are foreign institutional investors, primarily from the U.S., East Asia, and the Gulf states. Receiving an investment from a foreign institutional investor comes only after a two-year process of thorough due diligence. But that’s where the big money is. As long as you do a good job, they stay with you. The final segment is accredited private investors. This is a rapidly growing market and currently accounts for 30% of our assets under management. That is where the world is heading, the investments of the new wealthy, who are only becoming wealthier.”
Why turn to real estate investments specifically at this time?
“Every investment firm in the world manages both alternative and tradable assets. Within alternative investments, real estate is the most significant segment. I believe U.S. rental housing is the place to be. Why choose Electra? We compete with the best players in the world, but the numbers speak for themselves, and everyone compares historical returns. We have 30 years of activity and dozens of exits behind us.”
The U.S. market is enormous. Where are you positioned within it?
“The market is worth $7 trillion. It is not an endless market, but we are a significant player in the sector, ranking 27th among companies that acquire and manage multifamily properties. One-third of Americans live in rental housing, and most of them live in multifamily properties. It is a highly sought-after product among people aged 25 to 35. Typically, it consists of a complex of around 300 housing units with a gated perimeter and amenities such as a gym, a swimming pool, and other shared facilities.”
Why doesn’t the multifamily model work in Israel?
“In Israel, it is more complicated because of land costs. In the U.S., that is not a major factor. In addition, mortgages are relatively more expensive compared to housing costs, and the desire to own a home at a young age is less pronounced.”
What determines whether you enter a deal?
“We look for an excellent location, primarily in the Sun Belt, and value-add potential, either with an underperforming manager or in a property that has aged. We acquire the asset and begin renovations. After the renovation, we start raising rents. We also improve efficiency and reduce expenses. After increasing operating profit by dozens of percentage points, we look to sell the property.”
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