Foreign Investment Fund to Acquire $1B in U.S. Retail Properties

February 11, 2010
By Barbra Murray, Contributing Editor

Courtesy Flickr Creative Commons user wearitdotcom

Elbit Plaza USA L.P., a joint venture of Tel Aviv-based Elbit Imaging Ltd. and Amsterdam-based Plaza Centers N.V., have entered into an agreement with New York City-headquartered NCH Capital Inc.’s Eastgate Property L.L.C. subsidiary to form a real estate fund that will target retail properties across the continental United States. Elbit and Eastgate have committed to contributing $100 million each to the new investment vehicle and are seeking other investors in Israel and the pan-European area to increase capital commitments to a total $400 million, which will allow for leveraged buying power of as much as $1 billion.

Elbit Plaza will engage in direct acquisitions, as well as the establishment of joint ventures with top real estate players, and will focus on a range of retail property types. “We like malls, but we also like neighborhood centers and grocery-anchored shopping centers,” Alex Berman, CEO of Elbit Plaza, told CPE.

With an estimated $1 billion to play with, Elbit Plaza could snap up a lot of debt-laden or low occupancy properties, although there is competition for such assets. New investment funds have been popping up for the last several months with hopes of capitalizing on the distressed market, but the widely expected onslaught of bargain basement deals in the retail sector never quite materialized. According to a recent report by Marcus & Millichap Real Estate Services, foreclosures and REOs comprise a mere 2 percent of retail CMBS outstanding.

However, for the fund, it’s not all about distressed assets. It’s more about first-rate assets. “We’re looking for higher-end, good quality properties,” Berman said. “Our strategy isn’t about timing the market; it’s very difficult to time the bottom. But prices are better now and we think the long-term viability of the U.S. market is very good.”

Elbit Plaza plans to make investments over the next 18 to 24 months, and is already on the hunt. “With the equity commitment from Elbit Imaging and Eastgate, we don’t have to wait to close the fund,” Berman said.