ON THE ROAD TO RECOVERY

First Fidelity's Robert Kadoori offers some tips for Israeli real estate investors in the US.
Erez Wollberg, Globes, March 28, 2010

Three years after the US sub-prime crisis started building up towards the global economic crisis, nobody doubts the potentially explosive link between the real estate and finance sectors. The First Fidelity Companies based in the US, which provides capital market solutions for commercial real estate, straddles the two sectors. So First Fidelity director Robert Kadoori, who was in Israel for the "Globes" Real Estate Conference 2010 in Tel Aviv, is well placed to observe the relationship between finance and real estate.

Kadoori specializes in acquisitions, structured financing, equity purchases and sales of medium and large debts for investors and real estate companies. First Fidelity is involved in a wide range of assets including hotels, offices, stores, apartments, and mixed use projects.

Globes: Is there currently a market for funding real estate in the US?

Kadoori: Financing of debt is available today only for assets with a healthy cash flow - and that's all. If you have a partly occupied building, in the past you could receive intermediary bridging finance. But now that is not available. The debt market is only available for working assets. For the potential investor that means that they may only be able to acquire an asset with cash, or almost all cash, and the investor must be prepared to conclude the deal quickly. The moment when the 'healthiness' of the property improves, only then is it possible to get financing or a substantial part of the investment. We see the crisis in liquidity in a mixed way. It is more difficult to do deals, but at the same time that makes assets cheaper."

Global perspective

Kadoori's job is to organize financing or assets for investments for his clients.

Globes: Where do you get your information from, and when is it best to buy?

Kadoori: Good question. If we have an entrepreneur in the US that identifies an opportunity to purchase distressed assets that are being sold by a bank, and he needs cash, we will bring the clients to invest as active partners in the joint venture. We have a broad range of notable relations with many well known contracting companies managing assets, so that when there are attractive opportunities our advantage for the foreign investor is our deep familiarity with the market.

"Many investors will team up with a contractor or company operating a specific property, which buys them only a narrow angle of perspective on the market. We have a more global perspective on opportunities in a country. If that is attractive for investors, we put them in touch with the entrepreneur."

Globes: Where are the biggest opportunities?

Kadoori Hotels were greatly harmed because they were leveraged. The model of a hotel's economic condition can change overnight because they are leased for the minimum unit of one night. When economics is in a downturn they are the first to be hit, in contrast to offices, retail or residential assets. You must remember that when a hotel forecloses it must still be managed. There are massive managerial inputs, and generally in such a situation hotels are being sub-managed, and this might attract the eye of investors. Therefore, we see very attractive opportunities in the hotel sector that can change direction under experienced investors who manage them properly through a partner who is responsible for operations."

On his own background, Kadoori says, "As you can guess from my name, I am from an Iraqi Jewish family that immigrated to Ramat Gan in 1950."

His wife Norma teaches Hebrew at a private school in Atlanta. "She's also half Iraqi, so we eat well."
Kadoori's Jewish connection is expressed in support for Jewish institutions of higher learning in Atlanta. "We have a wonderful community of 125,000 people," he says.

Kadoori also serves as chairman of the Real Estate Subcommittee of the American-Israel Chamber of Commerce Southeast Region.

"The chamber does not only serve for commerce. It oils the market between US businesspeople, and has improved much and has gained successes in high-tech, biotech and cleantech," Kadoori says, "We are opening new programs for Israelis looking for assets for sale, because there is an appetite for assets at low prices and there are investors looking for the right time to enter the market, including Israeli investors. We bring value for Israelis because we provide a wide range of opportunities from the assets point of view. We provide advice, due diligence examination services, and access to financing.

"We give real estate services based on pre-defined criteria - we are the eyes and ears of investors in a broad geographical area spreading across many types of assets."

Regarding recovery Kadoori says, "Washington DC and New York have the potential to recover the most quickly but you must remember they are saturated with investors so it might be challenging to invest there at a low cost. There is no one market that stands out over others. Residential properties in low socio-economic areas are artificially supported by cheap government financing through national mortgage agencies - Fannie Mae, Freddy Mac and Ginnie Mae.

"However, because of the opportunities for a rise in value that the market embodies today, it attracts a good deal of attention from investors, so that it is difficult to know if you are doing a good deal."

Atlanta ROI*