After years of icy geopolitical relations, there appears to be a thaw underway between the U.S. government and Israel. American officials are even offering to help broker formal diplomatic relations between Israel and Saudi Arabia. Whether there is potential for a breakthrough on such a controversial and difficult issue is unclear. What is clear, however, is that Israeli investors have not lost their interest in U.S. commercial real estate.
Israeli investment companies were involved in the acquisition of 89 U.S. properties in 2022 with a total value of nearly $1.5 billion. The volume spent by Israeli firms was down 5% from 2021 but still accounted for 4.2% of all cross-border investments into the U.S., according to MSCI Real Assets. And this level of activity moved Israel up to the No. 8 position among foreign investment sources into the states. The Middle East nation and longtime U.S. ally ranked 10th in 2021.
The most active Israeli commercial real estate company was Faropoint Investments, which acquired 51 U.S. properties last year, the highest number among all foreign buyers, MSCI reported. The dollar volume for these deals, however, was only good enough for 16th place on MSCI’s ranking. The Tel Aviv-based company, which has its North American headquarters in Hoboken, New Jersey (as well as other offices around the U.S.), specializes in Class B last-mile industrial properties. In 2021, Faropoint went on a major shopping spree, spending more than $700 million to acquire 148 buildings totaling nearly 9 million square feet. Most of these assets were categorized as Class B industrial.
The dealmaking continued in 2022, with Faropoint spending $59 million to acquire six warehouses in the Dallas-Fort Worth metroplex. The company also announced plans to invest $200 million in Florida during the year, including the $33 million purchase of 350,000 square feet of industrial space in Tampa and Jacksonville. Other areas of expansion for Faropoint include Chicago, Oakland, Washington, D.C., Baltimore and northern New Jersey.
Faropoint also was one of the most prolific sellers of U.S. properties last year, MSCI reported. The firm disposed of 85 properties, the second most among foreign companies. The value of these assets placed Faropoint at No. 17 on MSCI’s list of the top 20 cross-border sellers. One of Faropoint’s largest sales included a portfolio of 109 last-mile logistics facilities, which went to a private investor for $481 million. The buildings total about 6.8 million square feet and are concentrated in Atlanta, Houston, Memphis and Philadelphia.
Another major Israeli cross-border player is Migdal Insurance Co. Ltd. Israel’s largest insurance firm has been involved in various real estate sectors, including renewable power production. In February 2022, Migdal announced an expansion of its strategic partnership with Doral Renewables LLC by committing to invest an additional $75 million in the second phase of the Mammoth Solar project in northwest Indiana. Later in the year, Migdal was part of a separate agreement with Doral and Apollo Global Management to sell up to $500 million in convertible notes that will help to fund more renewable energy and storage projects.
Last year, Migdal also joined a strategic venture with White Oak Partners and BentallGreenOak to acquire high-quality, contemporary multifamily communities in suburban areas of large secondary U.S. cities. With these and other continued commitments to the U.S. commercial property market, it appears that major Israeli real estate and financial firms have not let differences between Washington, D.C., and Jerusalem impact where they buy property. ●