In an interview with Chiportal, Elhanan Rosenheim, CEO of Profimex, which has been investing in real estate abroad for over 20 years, says: “When I see the headlines and publications that” now is the time to invest “I can only say to investors” be careful ” It is very important to invest with companies that have gone through previous global economic crises and have demonstrated a commitment to the interests of their investors. “Unfortunately, just like in previous crises, there will be companies that will disappear with the money of the investors who trusted them.” Here is the full interview with Elhanan Rosenheim:
1. How did the corona crisis affect the field of financial investments, how do you invest in a time of crisis?
A crisis market is the best time for investments, for investment managers who know how to choose and manage investments professionally and expertly, especially those who have gone through previous global economic crises and gained experience in managing investments during a crisis.
This is a challenging period in which our first duty is to take care of the interests of our investors in the active investments, and at the same time, to be aware and ready for the opportunities that the new situation presents us.
In our case, we arrived at the corona crisis ready, not because we knew there would be a health crisis on such a large scale, but because we had learned a great deal from the global financial crisis of 2008, and since then we have been operating differently and tailored. This is in addition to the fact that we knew that we are in a long period of economic growth – the longest in modern history. Therefore, in recent years we have acted with more conservatism and caution, understanding that we are facing a change of trend.
In order to be successful in investing in a crisis market, you need a great deal of experience and professional knowledge. Deep familiarity with the types of assets and investment areas. When I see the headlines and publications that “now is the time to invest” I can only go back and tell investors to “be careful”. True, now is the time to invest, but you need to know how and where, and only with a professional and reliable body. It is very important to invest with companies that have gone through previous global economic crises and have demonstrated a commitment to the interests of their investors. Unfortunately, just like in previous crises, there will be companies that will disappear with the money investors have put their trust in.
2. Are real estate investments abroad still worthwhile?
Over 50% of the world’s wealth is invested in real estate, and that does not include the private homes in which we live. If in the past we talked about the three main investment channels: stocks, bonds and alternative investments, in recent decades the main division is stocks, bonds, real estate and alternative investments. Real estate must be in every investment portfolio of an investor who wants to spread his investments in non-correlative assets, in order to protect his assets. The essential difference between investing in the capital market and private equity investments is the knowledge and experience of the investment managers and familiarity with the fundamental components of the investment – it is always critical. But it is precisely in times of economic crisis that it is much more important and studies show that experienced managers, who knew how to steer investments to a safe shore in times of crisis, manage to yield a significant excess annual return from managers who do not have this experience.
So not only is the investment now worthwhile. If it is done with straightforward executives, for whom the interests of investors are important (rather than the commissions they incur for themselves), this period – I believe – will yield them particularly high returns as we were able to yield to our investors after the 2008 global crisis.
3. In light of the expected cut in office space, is it right today to purchase offices?
Many of us have become accustomed to working from home recently and yet, in a US study on the preference for working from home, only 15% of respondents preferred to continue working from home. It’s too early to eulogize the office industry! It will change, but not disappear. It should be remembered that in the last two decades the space for the employee office has been drastically reduced thanks to technology and the transition to open space. Today, due to the demands of social distance, the trend is reversing and the area per worker is actually increasing. At Profimex’s offices, we separated employees who sat too close, so we converted some of our meeting rooms into employee offices. Social distance obliges us to actually increase the office space.
I believe there will be a big problem with office properties in the big cities, which can be reached by public transport, especially high-rise office buildings. These assets, in a rough estimate, have lost about 40% of their value in recent weeks. But it is precisely office buildings in the periphery, which can be reached by private car, with several floors where climbing stairs is an option, will be greatly improved and their value may even increase.
4. In which sectors are the following investment opportunities located?
An unequivocal answer about sectors, I fear that may be misleading. Even in the sectors we are in and they are almost “immune” to economic crises, and are particularly immune to the corona crisis, such as investments in logistics structures, in which we have been investing since 2002, this still does not mean that it is impossible to lose. One must carefully examine the fundamentals of the investment, build and manage the investment properly.
In the last decade, we have had a trend of realizing many investments we had in shopping and commercial centers and transferring the center of gravity to investing in logistics centers. We have seen these trends in the real estate market, and our investors have been very pleased with this decision.
We have been investing in Multifamily since 2002 (public housing files), in the global crisis of 2008 we did not lose any such investment. Today investing in this sector seems like a good investment, but even in this market there will be investors who will lose a lot of money. Multifamily is not synonymous with successful investments, there are many parameters for success in this type of investment as well.
Since the outbreak of the corona crisis, we have already invested in two life science property investments. This is a growing sector that I believe will show its strength especially at this time.
5. How do you find suitable investment destinations and who decides where to invest
Finding the investment goals and investments we choose begins long before the deal itself is on the agenda. We examine a relationship with a long-term partner, before we consider one investment or another. Over the past 22 years, we have reviewed over 1,000 real estate companies but we have strategic cooperation agreements with only 17 of them. The testing process takes us between 6-9 months. Our strategic partners examine close to ten thousand investments a year. Only investments approved by our partners’ investment committee reach our investment committee, and we will join them, along with local partners of our partners, some of whom are institutional entities from around the world. This is only if all members of the committee approve it unanimously. In addition to the fact that any committee member can invalidate an investment decision, five members of the investment committee and Profimex executives invest their money in each of the investments the company makes.
The interview sponsored by Profimex to be held on August 10 and 11 on webinars on “Global real estate investments in times of crisis“. Participation is free but pre-registration is required. More details and registration In this link.
