Clal US CEO Tamir Kazaz is Enthusiastic About Multifamily on New Jersey’s Gold Coast and Beyond
- Jun 02, 2014
Clal US is a wholly owned subsidiary of Clal Insurance, a publicly traded insurance company, pension fund manager, and one of Israel’s largest financial institutions with over $40 billion in assets under management. Clal US opened its Manhattan office in May 2013 with several hundred million dollars in funding toward real estate acquisitions in the U.S. After the purchase of 49 percent of One South Wacker, a 40-story commercial skyscraper in Chicago with 1.2 million square feet of office space, Clal US acquired Infinity Apartments, its first multifamily asset in the U.S. Located on Old River Road in Edgewater, N.J., Infinity Apartments was purchased for $48 million through a joint venture with Waterton Associates LLC, a multifamily investor and operator. Infinity Apartments is a new construction Class-A mid-rise community with 100 one- and two-bedroom units. The six-story multifamily building contains a two-story parking garage and 5,600-square-feet of commercial space. Amenities include a state-of-the-art fitness center, steam room and sauna, business center and resident meeting rooms. Apartments boast custom cabinetry, granite countertops and private balconies with views of the Manhattan skyline. Waterton Residential, Waterton Associates LLC’s property management division, is overseeing the initial lease up, which is being led by The Marketing Directors. MHN recently interviewed Clal US CEO Tamir Kazaz about this investment and his overall strategy for Clal US in the years ahead.
MHN: Why did you pick Edgewater, N.J. for the site of your first U.S. multifamily investment?
Kazaz: Clal is an insurance company listed in the Tel Aviv stock exchange and one of the largest institutional investors in Israel. Several months ago we opened an office in New York in order to look for real estate opportunities for Clal in the U.S. As a strategy we decided to look for multifamily projects in the Northeast, primarily around New York City, such as the New York metro and New Jersey Gold Coast. We like the opportunity in Edgewater because it’s new construction—a new product that was built in a very high-end quality—and we like the location of this specific building in Edgewater. It’s not on the main street; it’s on Old River Road. It’s a quiet location, it has good views of the city, good proximity to the bus station to the city and to the ferry, and we think it’s a very stable market with high occupancy. The market in Edgewater is 95-96 percent occupancy. And we think that rents still have upside in Edgewater, if you compare it to other places in the Gold Coast like Hoboken and Jersey City.
This just happened to be the first multifamily deal in the U.S. It could [just as easily] have been Jersey City. But Edgewater is the first deal that we closed on. We do have another multifamily deal under contract in the Northeast that will be closed on later this year. Our first deal in the U.S. was actually an office building in downtown Chicago, which we purchased about a year ago, which is 1.2 million square feet. But we changed our focus, and now we are more into the multifamily business vs. office.
MHN: So you do plan to grow your multifamily portfolio in the New York City/tri-state area. Where do you see your portfolio one year from now, and five years from now?
Kazaz: Yes, our focus is in the New York metro area. Everything which is a reasonable commute to the city and where rents are reasonable—and with high demand; so we’re looking at New Jersey specifically on the Gold Coast, Manhattan and all the other boroughs of New York, we’re looking at the northern neighborhoods in New York City—as well as in Westchester County including White Plains and New Rochelle—and in Connecticut. We’re also looking in the D.C. area and at other gateway cities primarily Chicago where we did our first office deal. We like Chicago and we like multifamily there as well. I hope that within a year from today we’re going to have between 1,000 and 1,500 Class A units in our portfolio. And hopefully within four to five years we’ll have between 4,000 and 5,000 apartments in our multifamily portfolio. Again, we’re also looking at office, but we spend less time on the office market. Multifamily is really the focus for us.
MHN: Why and when did you make the decision to focus on multifamily? Is it because you see it as a more stable investment these days?
Kazaz: When we opened the office here for Clal, we looked at what kinds of investment do we want to do in real estate in the U.S. What kind of risk are we willing to take? We came to the conclusion that multifamily is a more stable business with annual growth that will give us protection against inflation. And with strong occupancy in the New York Metro and gateway cities, we thought this was the right risk appetite for us. So we made a decision about six or seven months ago that multifamily is where we want to be focused.
MHN: So you’re focusing on Class A new construction for these multifamily investments.
Kazaz: Correct. Class A new construction or gut renovated buildings that also offer significant amenities to the tenants and that are reasonable in rent. That’s why at this point in time we’re looking around Manhattan, and not in Manhattan, because we’re looking for more affordable rents—not affordable units, but more affordable rents.
MHN: Tell us how you came to Clal and what you were doing before.
Kazaz: I come from the finance world. I spent many years at KPMG and about six years ago I joined the New York City real estate developer Africa Israel Investments. It’s a public company on the Tel Aviv stock exchange, and they have been very active developers in New York City. I joined them just when the crisis started, at the end of 2008, to help with the repositioning and restructuring of the company here in the U.S. The company has a significant real estate portfolio in the U.S. primarily in New York and Miami. For the past five years, until I joined Clal, I managed Africa Israel’s portfolio during very difficult times. This is where I got my real estate experience. I joined Clal seven months ago.
MHN: So it sounds like they got somebody really great.
Kazaz: I hope so. Time will tell.
MHN: What similarities and/or differences do you see between the multifamily product, design and operations here in the U.S. and in other parts of the world such as Israel?
Kazaz: An excellent question. Clal is an Israeli institution and the concept of multifamily rental buildings is almost non-existent in Israel where people mainly own apartments rather than renting. We like the concept of multifamily because of the stability, the rent growth and strong demand. I’m not familiar about multifamily in [other parts of the world like] Europe, but I know Clal is an institutional investor and the U.S. is the only place where we are going into the multifamily business. In other places around the world we are more on the commercial side of real estate.
MHN: Interesting. And in terms of how the product looks, do you see your parent company making any aesthetic changes to the U.S. housing product?
Kazaz: We’re interested in buying new product, new design with significant amenities. Our intention is not to do any design changes. Obviously there is value-add to create in future buildings we will buy for repositioning by putting in a new gym, putting in a new laundry. Obviously we will do these things for the benefit of the tenants. But we (at least for the multifamily buildings we own now) have no intention to do any change of design. We like the way they are. We think they provide significant state-of-the-art amenities. We have no plans to do any changes.
MHN: Is there anything else you’d like to add?
Kazaz: We are a long-term investor and so our intention is really to go into deals for the long term. We are looking for new Class A product in urban locations primarily.